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August 2014

Scribing this immediately after, what we are told was, the coldest August Bank Holiday on record, is perfect timing. Afterall, are we not constantly informed that pensions are full of ‘doom and gloom’? That said, I shall endeavour to find some silver linings in those clouds…

Cash and carry
HMRC has published a ‘policy impact document’ that claims, of the c. 400,000 retirees that will initially have the chance to access their pensions, around 130,000 would choose to do so. I do love the way these government departments work – implement the policy, then look at what impact it will have. Genius.

As we know the new rules, which allow 25% of a DC fund to be taken tax-free and the rest subject to income tax, kick in from April 2015. There are concerns that the desire to take money for short term gains e.g. holidays / cars / home improvements / lion taming courses will not only see those pension pots depleted considerably by tax, but leave the pensioner in penury later in their retirement.

I have been called cynical for suggesting that the move was for two reasons. One, to ‘buy’ the grey vote and two, to increase tax takings. To give you an idea of the financial rewards for HMRC, it is estimated that the tax revenue from this move will rise from £320m in 2015-16 to an eye-watering £1.2bn in 2018-19…cynical, moi?

Oh Brothers, where art thou?
Following the collapse of Lehman Brothers and a six-year pursuit by the Pensions Regulator, it was announced this month that the members would receive full benefits due to a settlement that sees the £184m buy-out of scheme liabilities.

Of course, this is fantastic news for nearly 2,500 members of the scheme, as well as TPR itself. The cheers from Brighton, however, would have been drowned out by those from East Croydon as the deal also protects the PPF from taking on the deficit.

The case was not without repercussions, a short-lived one being the ruling that a Financial Support Direction (FSD) issued by TPR had ‘super priority’ – meaning that it ranked ahead of other creditors including the Administrator / Liquidator – tell me, which Insolvency Practitioner would take on a case if they were not going to receive payment? Thankfully, that wrinkle in legislation was ironed out by the Supreme Court and common sense reigned in the land.

Charge of the investment brigade
A recent report tested providers of investment products for charges, on portfolios between £5,000 and £1m, to see if investors are being charged too much. Looking at SIPPs, which are likely to feature more heavily when compulsory annuities are abolished, show running costs between £60 and £120 for a £20k investment or between £196 and £1,125 for a £250k fund. We have always known in the industry that it pays to shop around, but getting that message over to the ‘person on the Clapham omnibus’ is not an easy task.

A brief look out of the window shows that the clouds have not dispersed and opening it tells me that the temperature has not increased. Looking more closely though, if I squint and wrinkle my nose, I do believe I can spy something glistening…

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Category : A month in the life of pensions — admin @ 1:03 pm November 28, 2014