Pension Release News from Grove
by Michael Ormond on July 31, 2009
Under new European Union capital rules, UK pensions could be hit with 10-20 percent devaluation.
The Financial Times has reported that Legal & General have foreseen a huge drop in the value of UK pensions.
It seems that Solvency II, which should regulate requirements for insurance firms, cannot go through in its current state as this could ultimately betray savers and lose them anything from 10-20% of their pensions.
Solvency II rules should go through in 2012 and will ensure that assurers have to be more aggressive in marking out ‘annuity liabilities to the market, increasing the volatility of their balance sheets and making them increase capital levels’.
European firms will bear the brunt of increased costs under the new rules for running UK annuity businesses and these costs are more than likely to be passed onto the pensioners. This means that pensioners will then expect lower incomes or less risky investments will be made, which again will hit incomes.
Regulators and politicians (including Alistair Darling) agree and foresee the same problems.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on July 30, 2009
There are growing concerns for the state of UK pensions.
It has been clear for a number of months now that the UK public sector pension schemes are in a mess and according to figures heading towards a £50 billion deficit.
With this huge deficit looming, there is a real concern regarding the UK population, especially with recent statistics showing that only 50% of the UK population are actually making adequate payments to their pensions to support them in later life.
In addition to the issues regarding payment into pension schemes, it seems as though the number of UK pensioners is growing and will continue to do so for quite some time. This will only mean that more pressure is placed on state pensions, which is already in a pretty poor state. Again, this will have more of a knock on effect for pensioners, who are already reported to have a low standard of living.
It seems that reduced investment returns are playing a large part in the pension problem but that the main culprit has to be the tax system. With the UK governments plan to reduce tax incentives to higher earners who contribute to pension schemes and having already introduced a host of tax charges to all pension fund assets, UK state pensions are not looking good.
With UK pensions the way that they are, it is going to take a long time to turn thing around.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on July 29, 2009
According to figures the UK has the fourth poorest pensioners in the EU.
Statistics from the European Commission have revealed that we have the poorest over 65s, behind countries like Romania.
The figures have revealed that many of the UKs pensioners are living on incomes that are far below the national average and Age Concern and Help the Aged have lobbied ministers to help.
The Department for Work and Pensions has fought back, saying that even those really bad off pensioners, are living better off than pensioners in other countries. According to a spokesperson, in 1997, the income of pensioners was well below the European average, but today UK pensioners enjoy an income that is 10% higher than EU average.
In 1997 it is claimed that 1 in 3 UK over 65s were living in poverty, which was the same percentage as those in Lithuania.
According to the figures, most leading European countries pensioners were either living below or slightly above the EU average of 19%.
Age Concern and Help the Aged are deeply troubled by these figures, knowing that although things have improved slightly, things seem to have now drastically stalled.
The stall has been partly blamed on the introduction of means testing for benefits. It seems that the forms are confusing and long winded putting off those who need the benefits. In addition, it seems that many are just too proud to claim benefits.
The charities have also discovered that one in five people aged 60 and over have been skipping meals to save money, whilst two-fifths couldn’t even afford the bare essentials.
2.5 million Pensioners are living in poverty and because of Labour’s complicated means testing, many will stay in poverty. This is then only exacerbated by an increase in council tax and the current state of the UK economy.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on July 20, 2009
It seems that even the computing giant IBM are have problems with their final salary scheme UK pensions.
At the beginning of the month IBM announced that it was starting a 60 day consultation with final salary UK pension scheme holders.
The 500 members will meet with IBM to hear what the company intends to do to enhance the current defined benefit payments and then close the scheme permanently.
If the proposed plans are agreed to, then the schemes will be closed to new and existing members.
IBM isn’t the only company facing issues with their pension schemes and many people believe that Gordon Brown’s leading as Chancellor of the Exchequer has been our downfall.
Gordon Brown reduced tax benefits to pensions in order to increase government income. There were warnings, but the Government proceeded and subsequently a significant amount of money has been taken out of the pensions sector.
Final salary schemes now look to be in much jeopardy and it is thought that more will close and become a thing of the past. Many will be left with only money purchase arrangements and having to contend with annuity rates when they retire.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on July 19, 2009
It seems that American Express may set a trend and employees could see more companies stop making pension contributions (for the time being) in order to save money.
American Express made the surprising move to stop paying money into pension schemes as part of their bigger plan to cut costs. They are the first high profile company to introduce such a policy and are not going to be the last during the recession.
Pensions are the obvious target for businesses looking to cut their costs. They have been dwindling over the past few years, at the hand of Gordon Brown and now it seems that we are nearing closer to people looking at getting their own pension schemes.
New legislation being introduced in 2012 will mean that it will be compulsory for employers to contribute at least 3% to pension schemes. Employees can opt out of this scheme, which then means that an employer is not obliged to provide the pension scheme.
With company pension plans closing all the time, it looks as though employees will no longer be able to rely on their employer to help them save for their retirement. Although the move now will ultimately save jobs, it will mean that those who are affected will have to make pension provisions themselves.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on July 18, 2009
American Express has stopped making payments into its stakeholder pension schemes and therefore has effectively cut the pay of 6,000 staff.
As more and more companies announce changes to their stake holder pensions, American Express are the largest company to stop making pension payments.
The changes were made on July 1st and see American Express suspending payments of around 3% – 9% from employee salaries into stakeholder pensions.
An independent financial adviser said that this would effectively be a pay cut for all employees in the pension scheme and is likely to be a move copied by other companies avoiding financial problems.
Because pensions are like deferred payments, a reduction will mean pay cuts of around £3,600 a year for those earning £40,000. The payment freeze on pensions will continue for a max of 18 months to January 1st, 2011.
With this is mind the Government has pledged that from 2012, it will be illegal for companies to stop paying into their pension funds.
Staff at the American Express call centre were asked to comment, but said that they were unwilling to comment.
American Express have argued that this is just one of the cost cutting measurements that they have had to bring in.
American Express boomed between 2003-2007, but this year recorded a loss of 56% net income.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on July 16, 2009
The staff at Barclays are threatening to strike over the bank’s plans to close the gold plated final salary pension schemes to existing members.
Staff are up in arms about the pending decision to abolish the gold plated scheme and Unite – the union – said that there could be strikes in September.
Around 17,000 members of staff will be affected and see them switching to any future earnings under the ‘Afterwork’ scheme, which does not link retirement payments to salaries.
The ‘Afterwork’ scheme is a high street lenders defined contribution scheme and Unite’s members are said to be incensed at the plans revealed, with 92% of staff requesting an industrial action ballot.
Members of Unite will vote next month and strikes are possible for September. This worries Barclays as it would significantly affect the service that they provide to their customers.
The scheme closed in 1997 and last month John Varley, Barcalys’s chief executive, explained that this was due to the current arrangements being unsustainable and that the scheme already had a £2.2 billion deficit, that was only likely to worsen.
By moving staff to the ‘Afterwork’ scheme, the bank is likely to save £150 million a year but will leave final salary benefits to around 1,500 investment bankers – many of whom already earn top figures and get multi-million pound bonuses.
Unite have spoken out on behalf of employees, stating that the changes made to those holding gold plated final salary pensions were unacceptable and they were going to stand by their members. They have also said that they cannot stand by businesses who use the credit crunch as an excuse to forget about important terms and conditions already agreed on by employee and employer.
Many of those who have been long standing employees are feeling betrayed by Barclays and after a consultation with members it seems as though there is a lot of anger surrounding the pensions issue.
Unite has gone to Barclays with a list of viable alternatives to make cost savings, but has explained that it is essential to keep the existing scheme. However, Barclay’s have failed to meet with the union to discuss these points, which makes a strike by the 25,000 people that Unite represent all the more likely.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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