Pension Release News from Grove FP Ltd
by Michael Ormond on May 22, 2009
A group of expat pensioners are suing the government after having their pension benefits frozen.
It seems that the government has decided to freeze the state pensions of some retired pensioners who have decided to re-locate to sunnier climbs for retirement. This will mean that they will not receive the same inflationary rises that others with state pensions in the UK will.
The case goes before The Grand Chamber of the European Court of Human Rights on September 2nd, following a previous attempt in a lower court of the ECHR that was rejected. Thankfully for them, their referral was granted and they have this second hearing.
According to a website that represents the interests of British ex-pat pensioners, says that around half of all UK expatriate pensioners are affected.
The ex-pat state pensions of those living in France and Germany will not be affected as these two Governments have agreed to boost the pensions of German and French pensioners living in the UK. Countries that do not have the same ties will not have such agreements.
According to the chairman of the Canadian Alliance of British Pensioners, it is nothing to do with ties and everything to do with saving money. He states that the Canadian Government has agreed to boost the pensions of their own nationals living in the UK – so why is Britain not doing the same?
Seven of the 12 most popular destinations for British expats to retire to, will have their pensions frozen. This list includes New Zealand, South Africa, Dubai, Australia, Singapore, Hong Kong and of course, Canada.
The 13 who are going to the Court of Human Rights argue that they are being discriminated against as the British pensioners living in the USA, Philippines and Israel will see boosts to their pensions.
The case is known as Carson and Others v United Kingdom, after Annette Carson who took the original case to the House of Lords in 2005. Her pension was frozen in 2000 at £67.50 a week, whereas if she had been able to take advantage of inflation, she would be on £82.05 a week.
As pensions hit an all time low in the opinion polls, this case will just be the beginning of many to hit the headlines.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on May 20, 2009
There could be a damaging impact on pension retirement funds if pension tax for higher earners is cut.
From April 2011, Alistair Darling said that the government would gradually cut tax relief on pension contributions for people earning more than £150,000 from 40% to 20%. But this has caused the Association of British Insurers to warn of the potential negative effects on pension saving levels and public trust and confidence in the schemes.
The ABI have also warned that this will make several pensions very complicated to understand going against the ‘A-Day’ regulations introduced to streamline pensions and make the tax regime simpler.
Although only a small number of high earners should be affected, the ABI have warned that the Government could be seen to be breaching the principle under which people have saved and receive tax relief. Overall there would be less in the way of savings and more people looking for help financially after retirement.
Many corporate pensions are already feeling the pinch and there are concerns that changes to pension tax relief will put more company pensions under pressure. Senior Executives may decide that because they can no longer fully benefit from company pension schemes that they will pull out of these pensions and be less likely to offer such high value schemes to those on average wages.
Time is running out for some schemes and so the Government is going to have to think fast to avoid public uproar regarding pensions.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on May 19, 2009
BT has underestimated its pension fund deficit and will be looking at a figure of around £11 billion, which is more than double their initial estimated figure.
The deficit is calculated to be 50% higher than its actual market value and is down to BT being ‘a badly-run hedge fund, which just happens to own a phone company’ according to an independent pensions consultant.
BT is likely to underestimate their pension deficit between 5 and 7 billion pounds and will have to consider doubling their contributions in coming years.
BT published their calculations based on less stringent testing than that of the International Accounting Standards Board and at the end of 2008 recorded a figure of 2.4 billion pounds, which now appears to be way out. It is expected that even when BT print their final deficit that this will also fall short of the actual figure. BT have been using a much higher rate of return on investments to access how much will be available for corporate pensions – which is going to land them in hot water.
BT has been using a discount rate of 6.4% (basing itself on the iBox AA Corporate Bond Yield), whereas experts believe that they should be looking at a more realistic 2.5% and increase liabilities by £5.8 billion. It also seems that BT have totally underestimated the life expectancy of many of those who hold pensions and so are being urged to increase the term by two years, adding a further £2.8 billion to the deficit.
Although companies reveal predicted pension deficit figures annually, they only have to report actuary deficits every three years. With this in mind BT may have to double annual pension contributions to as much as £560 million, because of an agreement that they made, where if three-year investment returns are less than 3.2% they would have to increase offerings.
BT have been in talks with trustees and unions for some more to ensure that pension schemes are sustainable for the future – but we shall have to see what their actual deficit figure is.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on May 18, 2009
There is still much debate over whether the economy is getting itself back on track or whether we are in fact still in the midst of a darkening depression and many people are concerned about their pension funds.
In light of the concern voiced by the British public, actuaries and pension advisors have had to confirm that in order to safeguard significant personal pension funds, people will have to work beyond the standard retirement age.
There is also the potential for an increased deficit in local government and UK government pension schemes, with the current shortfall estimated at around £80billion. The figure, however big, will be expected to be funded by the tax payer at a detriment to personal pensions and non-public service pension schemes. Because the FTSE 100 has been constantly rising and falling, many blue chip company pension schemes and pension funds have shut the door to new entrants and final salary schemes.
Over the past 10 years the UK pension scene has been changing due to taxation issues, the recession, an increase in living and the demise of investment markets. Because of these factors, many people will not be able to afford their personal pensions and will therefore have no choice but to put more pressure on state pensions.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on
The new UK’s national pension scheme is under the threat of being delayed beyond 2012 due to a lack of employer take up, which will result in costs going up.
The research, carried out by Punter Southall Financial Managment, who specialise in employee benefit consultation and pension administration services, believe that the scheme will not be right for big companies. In particular the report states that there will be no economies of scale and fees will therefore increase for the smaller firms involved.
Eight out of 10 firms who have defined contributions already in place, were planning on continuing with the existing company pension schemes after the start of the new schemes in 2012 and only 2% were looking to offer the new personal pension accounts.
Despite the findings by Punter Southall, the Personal Accounts Delivery Authority (PADA), who are managing the scheme, have said that there is no possibility of a delay in launching the new schemes or increased costs.
The PADA are expecting to deal with thousands of employers and millions of employees, which they say will be enough to keep costs down and create enough economies of scale.
The plan is that the new schemes will merely compliment existing provisions but Punter Southall aren’t so convinced and it seems that neither are the larger employers.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on April 30, 2009
It may sound like a funny notion, but the way that you get pension tax relief is down to how much you earn and the type of scheme that you belong to.
For example, if you are a basic rate tax payer, contributing to a personal pension plan £800 out of your already taxed income, the Government will kindly add a further £200, paid directly into your pension scheme. This means you are effectively getting back the tax that you originally paid so the total £1,000 goes into your pension.
If you are on a higher rate tax bracket, you will get the same but you can also claim a further £200 in tax relief by filling in a self assessment form. This is then refunded to you as an adjustment in your tax code, so effectively you end up paying less tax.
If your employer pays your pension directly into a defined benefit or final salary scheme before your salary is taxed then this means that there is no tax relief on your pension contribution. This means that your income tax is based on your salary minus the contribution. This is particularly helpful to those whose salary only takes them just over into a higher taxed salary bracket.
Just a bit of interesting information about your pension scheme that you might not have yet realised.
However, all of this is now going to significantly change for high earners as a result of the changes made in this budget (2009).
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on
Whitbread’s company pensions schemes, which is reported to have ballooned to more than £500million, has had to defer £40million of the planned top up payments.
Despite the company’s pre-tax profits for the year (up to February 26th) being up by 12% to £228 million, Whitbread have asked to take a pension holiday. The move was thrashed out with trustees representing the 43,000 pension scheme members and was seen as the best measure for protecting the company from difficult trading conditions.
Whitbread has said that they will be reinstating pension payments in 3 years time and has promised a figure of £525million to top-up the deficit between 2012 and 2019.
The company says that they have held their dividend policy and rescheduled the pension fund deferral as well as cutting over £100 million from their capital expenditure to ensure that the company can stay afloat in these uncertain times.
The cuts were announced just as Whitbread revealed its fund deficit to have grown from £33m to £233m, in just a year. In addition, the much larger figure of £388m was disclosed as a more realistic value of the deficit. It is estimated that the 52% that is invested in equities, has ballooned to £500m. This is the equivalent to around one third of the share value of the entire company.
In a response to the recent announcement of the company’s pension deficit, a leisure analyst with Deutsche Bank cut his price by 6% although he still gave a purchase price in relation to stock, suggesting speculation over the debt that Whitbread has amounted.
As we already talked about, the Pensions Regulator has come down on firms warning that committing fraud or dodgy practises in relation to pensions will be dealt with severely and swiftly. In light of Whitbread’s revelation, will more companies be following suit?
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on
Berkshire County Council has made the decision to invest in hedge funds as part of a 17.5% allocation to alternative investments for assets.
The Council’s £1.05 pension fund has decided to allocate 7.5% to hedge funds alone, and halved listed equities in an attempt to generate more stable returns and diversify its portfolio.
The move into hedge funds is further proof that domestic pension funds are looking to ‘alternative asset classes’ despite not offering a lot of protection from the economic downturn that we are all witnessing (and recording a 19% loss in 2008).
The move has been echoed by West Midlands Pension Scheme which moved 8% of assets into different schemes including hedge funds.
The Berkshire Council Pension Fund looks after the company pension assets of local government employees in the Borough of Windsor and Maidenhead and is looking to Morgan Stanley and Neuberger Berman to run the commodities portfolios.
The listed equities have cut their exposure from 65% to 22.5%, with the overall goal being to reduce all risk to equity. This means that the scheme will not be entirely dependent on the returns from one particular asset investment, but will give the fund exposure to a diverse portfolio and encourage it to grow.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on April 29, 2009
It seems that many of the UK pensioners are facing greater financial hardships as they get older, a new study has revealed.
The report states that pensioners are suffering from the growing costs throughout retirement. It seems that during retirement, those in their 60’s are still active and require high levels of income, whereas those in their 70’s are less active, so their income needs drop. Then as they approach their 80’s and 90’s, more pensioners face disability, widowhood or the need for some sort of long term care. These factors are contributing to growing costs in later years, but pension income does not directly consider the health of pensioners in later years and the dependency on a pension.
The government has pledged to increase state pensions in line with rising earnings, but second pensions and private pensions are more likely to increase with inflation, which is lower.
The Pensions Policy Institution (PPI) has said that pensioners will need a range of assets with which to draw funds from in later life and to support additional living expenses.
Age Concern have voiced their opinion and have said that the government cannot ignore the ‘ageing society and the financial cost of people living longer’. Age Concern have said that the main problems are with a ‘crumbling social care system’ and the need for a cash injection of around £1 billion and a long hard look at radical and long term reforms.
Simon Webb, Liberal Democrat spokesman for pensions and work has stated that the basic state pension really is far too little for any of the millions of pensioners to live off. There are calls for more generous and universal pensions based on citizenship – which would apparently give pensioners enough to live on, regardless of age.
Another option for pensioners is early pension release of personal or company pension and re-investing the money in a higher interest account, providing financial security in later life.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on April 27, 2009
The recession is putting many pension schemes at risk of fraud, dishonest conduct or dodgy behaviour by employers, according to a recent statement from the Pensions Regulator.
The Pensions Regulator is now asking that trustees of schemes, advisors and members keep vigilant and report any untoward activities.
The Pensions Regulator knows that the vast majority of schemes are well run and have dedicated managers looking after them, so they are sure that any inappropriate behaviour will be caught.
The economic downturn has been sighted as the reason behind much of the fraudulent conduct, because it has accentuated the vulnerability of some schemes. The Pensions Regulator has asked that those involved in schemes remain alert to any potential action that could jeopardise member’s benefits.
Members are being warned to look for ‘inappropriate transfers of funds’ and not to be afraid of pointing the finger.
There has been a marginal increase in the number of ‘whistle blowing cases’ and again the recession has been fingered with the blame. In light of this, the Pensions Regulator warned employers that they should not see the recession as an excuse to cut pension contributions, especially if they were still paying shareholders dividends.
The Pensions Regulator went on to say that although instances of fraud are rare, they are nonetheless a real risk and so the members have been asked to use their ‘whistle blowing’ powers and be aware of employers abusing pension schemes.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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