From April 2015, savers over 55 will be given the option of taking a number of smaller lump sums. This is why it will benefit you.

From next year savers will have freedom to do as much or as little as they want with their pension, George Osborne said before the publication of the taxation of pensions bill. But what do these freedoms mean in practice?

What is the main change?

Savers have always had the freedom to take 25% of their pension in a tax-free lump sum, but have then generally been herded into buying an annuity with all of the rest of the money. But from April 2015, savers over the age of 55 will be given the option of taking a number of smaller lump sums, instead of one single big lump sum, and in each case, 25% of the sum will be tax-free. However, as pension advisers are saying, this change was widely anticipated as an essential part of the new pension freedoms, and was actually already in place in the form of “phased retirement” or “vesting” under the old system.

Continue reading (The Guardian) →

Up to 200,000 people are set to cash in their pension pots all in one go next year, according to new research.

From April 2015, all those over the age of 55 will have the freedom to take all their savings out of their pension fund, if they wish.

As many as 12% of those with pension savings will do so, says the investment adviser Hargreaves Lansdown.

In response, the Treasury insisted that people should be free to do what they like with their pensions.

If the estimates prove accurate, the government could be in line for a tax windfall of up to £1.6bn.

But the research also showed widespread ignorance on how much tax is payable on such withdrawals.

Only just over a third of those questioned in a survey knew how much tax would be deducted if they cashed in a medium-sized pension pot.

Those with larger savings were even less likely to know what their tax bill would be.

More than 1,000 adults with defined-contribution scheme pensions were questioned by Ipsos Mori for the research.

Continue reading (BBC News) →

Increasing numbers of the estimated 4.7 million British expats are taking their pensions out of the UK, according to two financial advisory firms

Increasing numbers of pensioners who’ve found a place in the sun have opted to move their pensions overseas with them.

Wealth management specialists the deVere Group saw a 15 per cent increase in the number of clients transferring pensions into a Qualifying Recognised Overseas Pension Schemes (QROPS) last year.

QROPS, which were established in 2006, are HM Revenue & Customs-recognised pension schemes based in selected jurisdictions outside the UK. Around 10,000 expats move their pensions each year.

“The 15 per cent growth in our QROPS business to the year ending December 2013 reflects the sustained upward trend in the QROPS sector more generally,” said Nigel Green, the deVere Group founder and chief executive.

“I would attribute this to the growing public awareness of the mounting problems of the UK pension system. There is a growing public perception that there are fewer incentives to keep retirement funds in the UK due to the scrapping of some key age-related benefits, among other factors; and because, as clients frequently tell us, pension pots have in recent years become easy targets for stealthy and not-so stealthy government raids.”

Continue reading (The Telegraph) →

2015 is expected to be a big year when it comes to UK pensions. The UK government have proposed changes to the system, which is designed to give those coming into retirement more access to their pension, and hopefully add more spending power into the UK economy. How this will work in practice is still to be clear but we are starting to get a better picture from the UK government, UK pensions industry and the offshore pensions industry and in particular QROPS.

What are the benefits which have been proposed by the Government:

i) From April 2015 a pension holder can decide how they will take their pension, and how much they will take (this refers to contribution / defined contribution schemes rather than final salary / defined benefit schemes). The individual would be taxed at their current marginal rate in the UK, in most cases 20% as an expatriate.

ii) If an individual wants to access capital from a final salary / defined benefit scheme then they will have the option to transfer out of that scheme into another scheme before taking income from it.

iii) People can pass on their pensions to others without paying any tax. The caveat to this is that the member must pass away before the age of 75 to allow them to pass their remaining pension assets tax free. If the scheme member dies after the age of 75 they can then pass on the income from the scheme at the family member’s marginal rate of tax. If the member passes the pension on as a lump sum and they are over 75 then the pension will still attract a 55% death tax.
There are many interesting questions which come out of the above points, especially for expatriates. We are happy to answer any other questions which you may have. Please get in touch through our website.

Firstly the question of income tax needs to be looked at for an expatriate living in Thailand. Are you happy to pay at least 20% of your pension income to the British Government when you pay virtually zero tax on income if you are placed into the right pension structure through an offshore scheme?

Secondly there are real and valid questions hanging over the Defined Benefit Scheme transfer. The government suggests that there are 18 million such schemes in the UK, if everyone took the option to transfer then the funds available would diminish very quickly and pension companies and insurers would simply not be able to pay. We are seeing already how this should play out, as “unfunded” civil service schemes will not be available for transfer after the new year. The cutoff date is still not clear. An unfunded scheme is basically one where the company is paying current retirees income from money coming in from current employees. If you find yourself in such a scheme then your future income will be paid by the workers of the future, you are paying for the retirees. Our last article covered this, and if you have a teachers / army / NHS pension then it is important to have this looked at before the end of the year.

Finally, critics have questioned whether people could end up struggling financially if they spend all their money after retiring. Earlier this year Steve Webb, the pensions’ minister, said that he would be “relaxed” if pensioners chose to buy a Lamborghini with their life savings. Everyone will have a different view on this but the QROPS industry would be in agreement that the idea of a pension (onshore or offshore) is that is able to provide an income for life of the individual, and then provide for their family upon death. To suggest that an individual spends their pension on luxuries and then lives off a meagre state pension is rather short sighted.

If you have any questions on the above points, or would like clarification on how the changes will affect your pension, we are available through our website or through Inspire.

Please click to speak to one of our local advisors.

Alternatively click for your free QROPS information pack.

Chancellor tells savers they can withdraw ‘as much or as little as they want’ from their pension

Workers will be able to use their pension pots like bank accounts from the age of 55 and withdraw thousands of pounds to save, invest or spend as they wish on holidays or other purchases.

George Osborne, the Chancellor, said that people would be able to take advantage of the Government’s flagship pension reforms to access “as much or as little as they want” from their savings.

Under the reforms those approaching retirement and pensioners will be able to dip into the retirement funds whenever they want. The first 25 per cent withdrawn will not be taxed, while the rest will be taxed at the individual’s marginal rate.

The move builds on the pension reforms Mr Osborne announced in his Budget, under which he scrapped rules that force most Britons to use their pension savings to buy an annuity.

At the time, ministers emphasised that pensioners would be able to draw down the entirety of their pension pots to save, invest in property or even buy a Lamborghini.

Continue reading (The Telegraph) →

If you worked in the UK civil service, armed forces, teacher or NHS and are not yet taking your pension then your options for securing your future pension will no longer exist. From April 2015 the UK Government will no longer allow any transfers into offshore pension schemes (QROPS) as your schemes are classed as unfunded. This means that today’s pensioners are being funded by the current workforce, and your future pension will be funded by the future workforce. This, according to the UK is “to protect current and future tax payers”.

Workers in the NHS and the armed forces who are looking to move their pension overseas at retirement have very little time left to make the change after the government announced a ban on pension transfers for unfunded defined benefit (DB) schemes. By shutting the door on offshore pension transfers they are ensuring that they do not have to borrow money today, to pay out future pension holders and they can take future payments from future income. This is not the way the pension system was designed, it should be that an investment pot of capital sits behind each pension, but the way they have been managed, and the recent recession ensures that this is no longer the case.

We have been able since 2006 to take advantage of government policies of allowing pension holders who live abroad, to take ownership and control of their pensions through QROPS (Qualified Recognised Overseas Pension Scheme). Many of our clients in Thailand and around the world have taken advantage of this policy, which means that their pension is 100% owned by them, to give their family the FULL benefit of their UK pension, as well as increased income during their retirement. This window of opportunity is about to close, and we believe that any requests for valuations which are not made before the end of 2014 may become locked in the system when the transfers stop in April 2015. When the window closes that means that the scheme WILL HAVE TO REMAIN with the UK Government system. There are risks of pension incomes falling further, and retirement ages increasing, and the pension holders will no longer have control over this. It is vital that people are informed about the changes, as the government will not be notifying individuals personally, and it is important that you know your rights, and ensure you can take necessary steps to control your pensions.

If you have one of these schemes, then you must first request a transfer value for the scheme, which will give us a better idea what your pension would give you if moved into an offshore scheme. Then we are able to evaluate if a transfer would be beneficial to you, compared with leaving the pension in the UK. An offshore scheme would give you 100% ownership of the pension, but not 100% access to the funds during your lifetime. This is to protect both HMRC, and yourself to ensure that you have an income for life. Upon your death you are able to pass 100% of the remaining funds to your next of kin with in most cases a zero inheritance tax liability.

The key change from your perspective is that unfunded schemes (this includes the Armed Forces Pension Scheme, the Principal Civil Service Pension Scheme, the NHS Pension Scheme and the Teachers’ Pensions Scheme) will no longer allow members to transfer their pension. If you have any questions on how this will affect you, or what options may be open to you please get in touch with us.

Government has announced a ban on transferring funds from public service pension schemes overseas

Workers in the NHS and the Armed Forces who are looking to move their pension overseas at retirement have very little time left to make the change after the Government announced a ban on pension transfers for unfunded defined benefit (DB) schemes.

The Chancellor confirmed in a document recently presented to Parliament that members of defined benefit pension schemes which are funded – where an investment fund sits behind the pensions in payment – will be able to transfer their pensions to a defined contribution (DC) scheme after taking advice.

However, those in unfunded schemes – where the contributions today go to pay pensioners directly tomorrow – will be banned from transferring their pensions “to protect the Exchequer and taxpayers”. The Armed Forces, civil service, NHS, firefighters, police and teachers all fall under the bracket of these “pay as you go” schemes.

Continue reading (The Telegraph) →

The new, tougher regulations and guidelines announced today for the UK’s pension transfer market are being hailed as “a landmark moment for consumers and the industry” by Nigel Green, the founder and chief executive of deVere Group.

The observations from Mr Green, are in response to the Treasury’s confirmation that only advisers operating within the Financial Conduct Authority’s (FCA) framework will be able to offer advice on transferring defined benefit (DB) pension schemes into Qualifying Recognised Overseas Pension Schemes (QROPS).

The move follows the publication of a review commissioned by the FCA that found “a risk of customers losing out on retirement income due to poor advice.”  The review looked at nearly 300 cases from bulk pension transfer advice exercises between 2008 and 2012.

Mr Green comments: “It is right and appropriate that those offering advice to the public on transferring UK pensions must be of a professional level that is expected by the UK regulatory body, the FCA.

“In addition, we champion the revised QROPS guidelines that insist that a client’s tax position and risk appetite, amongst other factors, are fully assessed; and that schemes that are substantially underfunded will have the right to refuse transfers.

Continue reading (deVere) →

Britain’s civil servants are urgently seeking advice on transferring their pensions out of the UK after UK Chancellor George Osborne launched an explosive budget 2014 bombshell on the industry.

According to the boss of, one of the world’s largest financial advisory firms, deVere Group has received a 20% surge in British civil servants looking to transfer their pensions out of the country after Osborne proposed to ban the activity later this year.

“Public sector workers will no longer be able to transfer their civil service pension schemes. The reason for this, it can be reasonably assumed, is that these schemes are alarmingly underfunded and the Treasury is concerned that it will burden with the debts,” said Nigel Green, the founder and chief executive of deVere Group.

“Whilst it is, in many respects, understandable that the government has taken this decision it is, of course, extremely worrying for the pension savers within schemes that are so enormously underfunded through no fault of their own.

Continue reading (International Business Times) →

The pension funding gap of Britain’s top companies has widened in the past year despite billions of pounds of corporate cash being injected into retirement schemes, a report said on Tuesday.

Pension consultants LCP said pension scheme deficits for companies in the UK’s FTSE 100 blue chip stock index grew to 43 billion pounds at June 30 compared with 42 billion a year before, as fund assets didn’t generate enough cash to cover obligations.

The finding is an illustration of the impact of repeated rounds of “quantitative easing”, under which the Bank of England has been buying back bonds to boost economic growth, contributing to a sharp drop in the yield on British government gilts – a staple investment for pension funds.

Pension funds have been left searching for higher-yielding investments such as real estate while they wait for gilt yields to turn higher.

Continue reading (Reuters) →