Three Million Savers With ‘Final Salary’ Pensions Have 50% Chance of Losing up to a Fifth of Their Income

New pension scheme rules challengedThree million workers with final salary pensions have a 50 per cent chance of losing up to fifth of their income because their employers have made unaffordable promises, a recent report has warned. Could you be one of them?
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Treasury Banked £1.6bn in Tax From Pensions. Could You Be Paying Too Much Tax on Your Pension Withdrawals?

hmrc.jpgA quirk in the income tax system means HMRC is wrongly overcharging people who make use of new rules to draw cash from pensions.

Recent figures show the Treasury banked £1.6bn in tax from the first year of the pension freedoms (April 2015-16), nearly double its initial estimate of £910m. The discrepancy could be explained by a low ratio of people reclaiming overpaid tax, compared to those who have made withdrawals, experts suggest. Learn more

Firm Targeting Nest Eggs of UK Expats Faces SEC Probe

Securities and Exchange Commission; SECBloomberg reports that an international financial advisory company has charged upfront commissions for years on investments to UK expats, even though its SEC registration didn’t allow such commissions.

There were a lot of charges. In addition to an annual management fee, the company would charge a fee on the pension transfer that could be as high as 7%, spread over several years (known in the industry as an ‘indemnity commission’), three former employees said. Clients who transferred pensions would have to decide how to invest the money, giving salesmen another chance to earn commissions.

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UK Pension Transfers Hit With 25% Tax Charge

QROPS Tax Charge

British expats living abroad and foreign nationals based in the UK face being stung by a new 25 per cent tax charge if they move their pensions out of the UK.

New rules, which came into effect on 9 March, 2017 after being announced in the 2017 UK Spring Budget, will see the charge levied when retirement funds are transferred outside the UK, unless they meet strict criteria.

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FTSE 100 Pension Costs to Double Without ‘Drastic Action’, Retail Sector Pension Black Hole Widens by £6bn to Match Annual Profit

royal-dutch-shell-pension-deficitThe UK’s 100 largest listed companies face seeing their defined benefit pension costs double over the next three years unless “drastic action” is taken, according to JLT Employee Benefits.

In March this year, JLT put the combined FTSE 100 deficit at £87bn. It said only 29 companies disclosed a pension surplus in their most recent annual reports, while 59 companies disclosed pension deficits.

Royal Dutch Shell had the biggest pension liability, at £57bn, while 15 other companies had liabilities of more than £10bn.

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Weekly Market Update

News this past week

  • Global bond yields rise in volatile environment
  • Mixed US data ahead of Fed meeting
  • Sterling falls after Chancellor’s comments
  • European markets retreat as industrial production declines
  • Reports of oil surplus sends prices lower

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Sterling Plunges as Bank of England Cuts Interest Rates For First Time Since 2009, Pension Funding Gap Widens

BoE cuts interest ratesThe Bank of England has unveiled a fourpronged stimulus package designed to boost the economy and prevent a recession following the vote to leave the European Union.

Sterling tumbled and UK gilt yields dropped to fresh lows after the Bank surprised markets by restarting its money printing programme to buy government and corporate debt alongside the first interest rate cut in seven years.

Subsequently, the deficit of defined benefit or “final salary” pensions, which pay out an income linked to an employee’s final salary, jumped GBP70billion as a direct consequence of the decision to reduce interest rates by 0.25%.

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