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Pension changes could cost 11m Britons thousands of pounds

Companies could slash pension promises to 11 million employees, potentially knocking thousands of pounds off the incomes of people in retirement, if proposals in a government consultation paper are approved.

Unions are likely to react furiously to the proposals, which would allow companies to save £90bn by providing annual increases in their retired employees’ pensions based on the consumer price index, rather than the retail price index.

As CPI is generally lower than RPI, the impact on pensioners is likely to be significant over time. Analysis by advisers Hargreaves Lansdown suggests that for every £1,000 in pension income in 1988, under RPI it had increased to £2,586 this year, but only £2,105 under CPI.

The changes are flagged a green paper issued by the pensions minister, Richard Harrington. It cites estimates from pensions consultancy Hymans Robertson that a shift to CPI would “take away about £20,000 in benefits over an average DB (defined benefit) scheme member’s life”.

Currently, 75% of pension schemes in Britain increase payouts to members each year using RPI rather than CPI, and usually the scheme rules and legislation prevent companies from lowering their promises.

But the paper asks: “Should the government consider a statutory override to allow schemes to move to a different index, provided that protection against inflation is maintained?”

In some circumstances, where a company is facing significant financial challenges, it could suspend pension increases altogether, the paper adds.

“Allowing all schemes to move from RPI to CPI would have [a] significant impact on members’ benefits. CPI has been lower than RPI in 22 years out of the last 27 (and nine years out of the past 10) up to 2015, and so [it] would in all likelihood represent a reduction in members’ benefits,” the paper acknowledges.

The change would affect 11 million people in defined benefit schemes, also known as final salary schemes, where the level of pension in retirement is a proportion of the person’s salary. Most private companies have closed these schemes, replacing them with pensions where the payout is entirely dependent on the performance of stock and bond markets.

Harrington said: “We all have a responsibility to ensure the system works in the interests of everyone – employers, schemes and scheme members. This green paper sets out the evidence we have available about the key challenges facing DB pension schemes and highlights a number of options that have been suggested to us to improve confidence in the system.”

But the former pensions minister Steve Webb, the director of policy at pensions company Royal London, said: “The most worrying proposal is to allow certain schemes to ‘suspend’ annual pension increases if money is tight. With rising inflation, annual indexation is an important part of protecting the living standards of the retired population.

“There is a significant risk that relaxing standards on inflation protection with the best of intentions for exceptional cases could be exploited and lead to millions of retired people being at risk of cuts in their real living standards.”

Tim Sharp, a pensions expert at the TUC, said: “Pension reforms should be judged on whether they improve workers’ standard of living in retirement. It is hard to see how measures that transfer wealth from pension savers to shareholders would achieve this.

“We shouldn’t cut members out of decisions to water down pensions, which are, of course, deferred pay.”

The paper makes it clear that the shift from RPI to CPI is only under discussion and, in a surprise rebuke to the pensions industry, says Britain’s final salary schemes are more affordable than widely believed.

It notes that deficits in pension schemes have narrowed from a peak of £400bn to £196bn and “the evidence that DB schemes are unaffordable is far from being conclusive and should be considered with caution”.

Companies that complain they cannot afford their pension schemes seem to be able to pay out large dividends to shareholders, the paper notes. “In 2015, FTSE 100 companies paid about five times as much in dividends as they did in contributions to their DB pension schemes,” it says.

“The 56 FTSE 100 companies with a DB pension scheme deficit paid 25% more in dividends (£53bn) relative to their deficit (£42bn). Therefore, in theory, these companies have the ability to immediately repair their pension scheme deficits were they to feed their dividends into deficit repair contributions (DRCs).”[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

Government urged to scrap ‘unfair’ tax raid on older pension savers

Older savers who return to work after dipping into their pensions will see their ability to save hampered by an “unfair” tax raid which the Government is facing pressure to scrap.

From April the Treasury is planning to reduce savings limits for over 55s who have already used the pension freedoms to access their money from £10,000 a year to £4,000.

The change will put workers earning more than £40,000 a year at risk of receiving shock tax bills if they spend as little as £1 their pension and then continue to save 10pc of their salary, calculations show.

Last night experts urged Phillip Hammond to abandon the move which, they warned, would fly in the face of a separate Government push for working age people to care for elderly relatives.

Last month David Mowat, care minister, said Britain’s ageing population meant parents needed to be as responsible for the care of their elderly mothers and fathers as their own children.

Tom McPhail, head of pensions policy at Britain’s largest pension firm, Hargreaves Lansdown, said: “This will come as a nasty shock to people hoping to take a career break or cut down hours to care for a elderly relative. If they use pension savings to support themselves, they face being heavily penalised.

“The Government that has lost sight of the importance of putting individuals first. This will inconvenience and disproportionately penalises millions of ordinary savers and its barely going to save the government any money. It must be scrapped.”

Tom Selby, senior analyst at AJ Bell, another pension firm, said: “Given that most people won’t be aware of these plans there is a significant risk large numbers will accidentally overpay into a pension and be hit with an unexpected tax charge.

“The Government needs to accept the current rules are not fit for purpose. It should shelve this unfair cut in pension savings incentives and go back to the drawing board.”

Last year the Treasury announced plans to scale back the amount people drawing from their pension are allowed to continue saving over fears that many would abuse the system by claiming tax on it twice.

This tax trick, commonly referred to as “recycling”, is a loophole which was created by the pension freedoms, which were introduced in 2015.

HMRC data reveals that since the new flexibilities were introduced over half a million savers have used the pension freedoms, with millions more expected to do so over the coming years.

Under current plans people who have already used the pension freedoms will be able to save up to £4,000 a year and still claim tax relief at their marginal rate. Savings above the limit will not receive tax relief.

The Treasury is currently consulting on the finer details of how the policy will work with the deadline for feedback on February 15.

In the consultation document the Treasury said: “We believe that an allowance of £4,000 is fair and reasonable and should allow people who need to access their pension savings to rebuild them if they subsequently have opportunity to do so.

“Importantly, however, it limits the extent to which pension savings can be recycled to take advantage of tax relief, which is not within the spirit of the pension tax system. The government does not consider that earners aged 55+ should be able to enjoy double pension tax relief i.e. relief on recycled pension savings.”

The best way to make pensions sustainable is to reduce the tax burden on saving

The Government consultation paper published yesterday on “defined benefit” (DB) pensions does its best to sound reassuring and even positive. There is no crisis in such final salary schemes, it soothes, suggesting that most companies can easily afford to meet the mounting costs of paying those pensions. Yet these assurances are undermined by the facts: many companies have closed their final salary schemes to new entrants, meaning that, in the words of the Office for National Statistics, “for the younger generation, the option of joining a DB scheme is much reduced”.

Now those who were fortunate enough to enrol in such schemes could see cuts in the value of pension payments they had thought were guaranteed. It may be the case that, in some circumstances, it makes sense to allow an employer to reduce pension payments below the rate of inflation, to ease the pressure on a company’s finances. But such measures should be an absolute last resort and must be policed tightly to ensure they are not abused.

More importantly, any such changes to final salary rules cannot be done in isolation. What is needed is a wider overhaul of the rules on pension saving, to encourage and reward that saving. The best way for the Government to do that is reduce the burden of tax it puts on pensions. Lifetime and annual caps on pension saving unfairly penalise the most thrifty and thus deter savings. Pension funds themselves are also burdened: Gordon Brown’s infamous decision to tax the dividends they receive from shares still costs them tens of billions of pounds a year, money that would otherwise go to pensioners. Today’s Conservative Government should give thought to easing those burdens.

A proper debate about ending the Bank of England’s quantitative easing programme – which hurts pension funds’ bond investments – is also long overdue.

And to be politically sustainable, any changes in the rules for private sector pension schemes must be accompanied by greater reform in the public sector. The gap in pension provision between private and public employees is now intolerably wide: talk of a “pensions apartheid” is growing. A situation where some workers retire in comfort, while others with comparable (or even greater) talent, experience and effort struggle, would be socially divisive and deeply unfair. If tough choices are needed on pensions, public sector workers must take their fair share of the pain.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

Teresa May has vowed to stop Private Pension Abuse

Following the recent collapse of construction firm Caillion, Teresa May has vowed to stop Private Pension Abuse.

Following the recent collapse of construction firm Caillion, Teresa May has vowed to stop Private Pension Abuse. The reaction from the Prime Minister comes after news that Carillion, could leave a £580 million deficit in its pension scheme. 28,000 members of Carillion’s 13 Pension schemes are facing cuts to their retirement funds.

The company employed 43,000 staff worldwide, with 20,000 of those in the UK. It was responsible for large contracts including supplying maintenance services for Network Rail and half of UK Prisons.

The recent government initiative seeks to stamp out the problem of executives trying to line their own pockets at the cost of worker’s pensions. Writing in the Observer, Teresa May said “tough new rules” will be introduced to tackle the behaviour of “executives who try to line their own pockets by putting their workers’ pensions at risk – an unacceptable abuse that we will end.”

Other actions being considered for the White Paper in March, would give regulators the power to block or place conditions on any takeovers that might put pension schemes at risk. They would also be able to request information on how companies run their Pension schemes.
The Prime Minister went on to write “The state also has a role to play when things go wrong and companies fail, as Carillion did last week. Not by bailing out the directors with a blank cheque – it will be the shareholders of Carillion, not taxpayers, who pay the price for the company’s collapse – but by stepping in and supporting those affected.”

Talks to save the company are in progress, but it is unknown whether parts of the company can be bought or taken over. The official receiver has been appointed and is seeking to maintain operational continuity.
Senior Pension adviser at Fix My Pension, Andrew Colyer-Worsell said “Many people from Carillion will find themselves in an uncertain situation regarding their pension. It’s important to act fast and seek Independent Pension advice.”

MPs across two government departments are demanding more answers from The Pensions Regulator (TPR) on its role in protecting the Carillion pension schemes during the company’s collapse.

TPR is being asked to give more details on its internal investigation to determine if it should have used its anti-avoidance powers in the case, to provide a record of the meetings it had with the company and the minutes of those events, among other questions.

According to Frank Field, chair of the work and pensions committee, TPR “has been sniffing around the company since 2008, clearly to no effect”.

He said: “While TPR was busy sniffing around, the company collapsed with a near billion-pound pension deficit. There is not a hope now of TPR salvaging anything that could put a dent in that deficit.

“We look forward to TPR explaining what difference it would have made for pensioners if it had sat on its hands this whole time.”

The defined benefit (DB) pension schemes of Carillion, one of the UK government’s biggest contractors, are all either in the retirement fund of last resort, the Pension Protection Fund (PPF), or will soon enter it.

Carillion has 13 final salary schemes in the UK with more than 28,500 members, and a deficit of £587m at the end of July, according to the company’s results.

After unsuccessful talks with its lenders and the UK government, Carillion made an application on 15 January to the High Court for compulsory liquidation.

Carillion, which employs about 43,000 people, has been struggling for several months, issuing a profit warning last year that sank its share price – which has fallen from more than £2 a year ago to about 14.2p just before it went into administration.

Rachel Reeves, chair of BEIS committee, argued that the MPs joint inquiry is “exposing a tale of regulators who monitor rather than act, who are adept at closing the gate after the horse has bolted”.

She said: “Our session with the Financial Reporting Council highlighted a regulator failing to act when alarm bells are ringing and unable to intervene before the company fails.

“TPR needs to set out exactly what action it took to attempt to safeguard the thousands of Carillion pensions and why it failed to ensure Carillion directors filled the gaping pension deficit as they paid out dividends to shareholders.”

FRC announced earlier this week that it is conducting an investigation into KPMG’s audit of the financial statements of Carillion.

MPs have also written to Robin Ellison, chairman of trustees of six of Carillion’s pension schemes, after he appeared in Parliament this week.

Besides requesting minutes of meetings and several documents mentioned during the hearing, the committees want to clarify if the trustees signed the company’s recovery plans, which included a deferral of pension contributions, since he gave conflicting statements, according to the letter.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

In a market update issued today (1 February), Royal Mail said that this will consist of a DB cash balance scheme and an improved defined contribution (DC) plan.

“The ongoing annual cash cost of pensions will continue to be around £400m,” the company said.

CDC schemes differ from defined benefit pensions in the sense they do not guarantee certain incomes in retirement.

Instead, CDC have a target amount they will pay out, based on a long term, mixed risk investment plan.

These schemes also differ from the traditional DC plans, since they do not produce individual pension pots.

Instead they invest savings in a larger collective pot, which provides an income to individuals during their retirement.

The Pension Schemes Act 2015 created by the coalition government defined CDC as a distinct pension category, but secondary legislation to bring them into effect was never introduced.

According to the Communication Workers Union (CWU), which represents members of the Royal Mail scheme, the new pension arrangement will cover the company’s 80,000 DB members as well as its 40,000 DC members, and will combine a cash balance DB scheme with a CDC plan.

Under the cash balance plan, Royal Mail will contribute 13.6 per cent of pensionable pay towards members’ retirement lump sums, and a further 2 per cent for other member benefits, including death in service and ill-health.

Members will continue to contribute 6 per cent of pensionable pay towards their retirement lump sums, and workers in the DC plan with a minimum of five years’ service will have the option of joining the DB cash scheme.

Royal Mail and the CWU will lobby government to make the necessary legislative and regulatory changes so a CDC scheme can be established, the company said.

Terry Pullinger, CWU’s deputy general secretary, said previously that the union will wait a year to see some advances in this area.

He said: “If nothing has changed within a year, or we can’t see it coming into the horizon, then we have to take a judgement to see if whether our dispute is actually resolved or not.”

FTAdviser reported last month that the government believes now isn’t the time to introduce the concept of CDC schemes in the UK, as the market “needs time and space to adjust to other reforms underway,” said minister for pensions and financial inclusion Guy Opperman.

According to Tom McPhail, head of policy at Hargreaves Lansdown, if an employee is going to lose its final salary pension scheme, “this is a pretty good way to do it”.

He said: “The ongoing employer contributions at £400m and 13.6 per cent of salary are very generous compared to the majority of DC schemes.

In the past decade, the banking industry has been a central focus of attention for regulators, academics and the general public. The 2007-08 financial crisis led to new regulations and institutions to keep things in check.

In contrast, the issues of the pension industry have tended to be swept deep under the carpet. Much the same way that people think about retirement saving – that it can wait for another day – we are now beginning to see how much of a mistake this is.

The pension industry is already in a deep financial crisis and could well be the trigger for another global financial and economic meltdown. This has largely been overlooked. Instead, it has been common to only discuss the pension industry in terms of the problems arising from ageing populations (which is, of course, ).

While the of many countries’ equity markets from the massive decline in 2007-09 may appear to look like good news for pension funds, it has not benefited the industry anywhere as near as much as you might expect. Many pension funds moved away from equity investments, increased the share of bonds in their portfolios and missed out on high returns. For example decreased their portfolios’ equity share from 61% in 2006 to 29% in 2017 and increased the bond share from 28% to 56% over the same period.

The net effect is that the pension industries in many countries are in a bad way. According to a , the 20 largest OECD countries alone have a US$78 trillion shortfall in funding pay-as-you-go and defined benefit public pensions’ obligations. This shortfall is far from trivial. It is equivalent to about 1.8 times the value of these countries’ collective national debt.

The funds are broken.

Private pensions are not any more sound. US private pensions, for example, have (across the board) only to meet their liabilities. That equates to a US$3 trillion shortfall. Given the importance of the US economy and its financial markets to the global financial structure, this should not be taken lightly.

The UK pension industry is in no better position. Its overall funding level was only 67.7% in March 2017, equivalent to a £736.2 billion deficit.

To put these figures in context, let us recall that the market capitalisation of the big banks before the financial crisis was small compared to the size of the pension fund deficits. For example, in 2007, the peak market capitalisation of the Royal Bank of Scotland and of Lloyds Banking Group were £64 billion and £33 billion respectively. Yet by the end of 2009 the British government had to inject to save the UK bank sector from collapsing.

A global problem

So why is pension underfunding a global problem, rather than one faced by individual providers or countries? The simple answer is the unprecedented scale of the deficits and the number of economically important countries caught up in the problem.

Scratch a little deeper and there are additional, compounding problems. The pension industry is complex – it is globally interconnected and is tied into very long-term obligations. Yet tackling the problem at a global level is hard because of the significant diversity in countries’ regulatory and political regimes.

Plus, the industry often faces much lighter regulation than the banking and the insurance sectors, although it also suffers from moral hazard and the ‘too-big-to-fail’ syndrome where it won’t have to pick up the pieces if things fall apart.

Making things worse, companies are opting to minimise their risks and are selling their pension obligations to insurance companies. Between 2014 and 2016, in the UK alone, were passed from companies to insurers. As this interconnectivity of the pension industry with the global insurance industry grows – the chance of a system-wide collapse increases.

The economic consequences of these sell-offs could be significant. When a company sells its pension obligations to an insurance company, it must pay substantial transfer fees – often exceeding 30% of the fund’s total value. This could otherwise be spent on things such as investment and research and development to improve productivity, which has already .

It is also not obvious what effect these transfers will have on people’s retirement income, as it is not clear how much regulatory protection they will have once sold off. For instance, the transfer of Barclays’ pension obligations of its 284,000 members to its high-risk division means that the pension assets . Given that the insurance market already faces huge problems of its own (such as ), this lumps a lot of pensions together with another at-risk industry.

So, this whole issue needs ratcheting up the global regulatory agenda. If regulators do not step in soon and firmly, it will once again be taxpayers who have to come to the rescue.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]As of April 2017, there were 23 listed QROP’s in Hong Kong. One delisted straight away and a further 2 delisted in October. All remaining 19 Hong Kong-based QROPS have been delisted by HMRCand are no longer included in the authority’s list of approved schemes.

As is usual, HMRC has given no reason for the deletion of the 19 Hong Kong QROPS. Similarly, the firms affected by the decision have made no comment yet regarding their products’ loss of status. Hong Kong based QROPS have been established in the offshore pensions marketplace since the start of the QROPS scheme in 2006, averaging between 10 and 26 products over the past 11 years. In April this year, 22 schemes were registered, with one deleted during the month and two more taken down in October, again with no explanation from HRMC.

What Does This Mean

If you have currently retired in China or currently have a QROP in Hongkong, your pension is still safe and will remain with your current provider. Your QROP provider will inform the HMRC of the value within the pension and charges may be applied.

For expats living in China and planning to transfer their funds to a QROPS, the delisting means they no longer qualify for an exemption. They must either pay a 25 percent transfer tax or switch the fund to a SIPP (self-invested personal pension).

By transferring to a SIPP, no tax charged is applied on the transfer, the same with a QROP. QROP’s are no longer suitable if you are living outside the European Union.

What is a SIPP (Self Invested Personal Pension)?

The basics

  • To help save for your retirement in a tax-efficient manner.
  • To enable you to transfer benefits in other registered pension schemes such as QROP’s to your SIPP.
  • To enable you to make your own investment decisions in conjunction with your Investment Manager or Financial Adviser. As well as, utilise a wide range of types of investments.
  • To give you choice over how and when you take your benefits.
  • To allow you to take regular or variable income from your fund while remaining invested.
  • To provide you with a tax-free lump sum.
  • To provide benefits for your dependents and other survivors on your death.

QROPS v SIPPs

Have you moved abroad or looking to move abroad? The question which remains with many expats, is a QROP or a SIPP suitable for my pension? I currently hold a QROP is this still suitable?

Whilst many expats who have left the UK are fully aware of the QROP (qualifying recognised overseas pension), there is a further option of an International SIPP (self-invested personal pension).

Both options allow for pension transfers from the UK however, this is subject to the pension that you currently hold in the UK. If you are unsure of your current pension scheme, speak with an advisor who will correctly guide you on this.

The QROPs (qualified recognised overseas pension scheme) benefits

A QROPS scheme only needs to keep 70% of the original transfer pot as retirement income. This is an important statement. The 70% that must remain in the QROPS is based on the value of the UK scheme on the date of the transfer to the QROPS, not the current value. This gives an incentive for one to transfer to a QROPS as long as possible before retirement, provided they already have built up a big enough pension fund in a UK scheme to realise the benefits of doing so.

This is subject to your place of residence at the time of the transfer and you also need to consider if you will stay in this country. Following new rules by the UK government, it is not advisable to utilise a QROP if you live outside the European Union.

This benefit alone is one of the most popular reasons expats transfer their UK pension into a QROPS. Receive 30% of your fund as a tax-free lump sum. Please note that you can only take 30% PCLS if you have completed the required period outside the UK.

If you have a UK pension, these funds will incur an IHT charge of up to 55% when they are left to your beneficiaries. IHT does not apply to QROPS, so you can sure the money you have worked your entire life for can be passed onto your loved ones free from tax at source.

Inheritance Tax (IHT) is calculated on your entire, worldwide assets if you are domiciled British, even when you are resident overseas. If HMRC can establish Britain was the country you regarded as home at the time of your death, your UK pension would be subject to IHT.

QROPs give a wider choice compared to UK pension plans is in their scope of investments. A UK stakeholder pension scheme tends to have low fees, but that’s because the scheme only offers a limited very choice of unit trusts and investment funds.

QROPS offer the broadest possible selection of investments, allowing you, your financial advisor, or a discretionary manager to pick investments from a range of asset classes across the global market and maximise your growth prospects.

LIFETIME ALLOWANCE

In the UK, there is a maximum amount of money that an individual can invest in a pension and receive tax relief. This maximum limit is referred to by HMRC as the Lifetime Allowance (LTA). At the last Budget, the Chancellor reduced the Lifetime Allowance from £1,250,000 (2014-2015) to £1,000,000 (2015-2016*). This applies to the total value of all your pensions.

If your pension fund exceeds the allowance you could be hit with a 55% charge on the excess. While £1,000,000 may sound like a lot of money to most people, many people in defined benefit (final salary) schemes may be reaching this threshold without even knowing it.

The International SIPP (self-invested personal pension)

A Self Invested Personal Pension (SIPP) is a type of pension plan that is very flexible and allows you to take control of your own investment decisions when saving for your retirement. If you no longer live in the UK, an International SIPP allows you to transfer and consolidate benefits from a UK registered pension schemes easily and efficiently to your new country of residence, while still protecting you under UK regulations.

The benefits of an International SIPP are many. SIPP investments typically provide you with a much wider range of investment choice and flexibility, compared to a standard pension with its limited choice of funds typically overseen by the company’s own fund managers.

If you are a non-UK resident, then an International SIPP for expats gives you the ability to hold assets that are appropriate for international clients and also in other currencies, yet still meet the key UK Regulatory requirements.

An International SIPP gives you control of your pension, whereas most members of a company pension scheme have very little control and almost no idea where their pension money is invested. Also, with many of the UK’s largest companies closing their final salary schemes to all members, many members now have to look at taking their pensions into their own hands.

SIPP trustee fees are cheaper compared to a QROP on an annual basis, sometimes as low as a few hundred pounds per year. Access to funds and other collectives or shares is generally available via platforms or offshore life wrappers, allowing access to a whole range of assets at lower charges than individuals can achieve.

Many individuals have several small pensions that they often forget about or are not growing as they should. An international SIPP can consolidate all these pensions into one allowing for easier management and better control.

Members of an international SIPP can take income drawdown, meaning that an income can be taken from the fund (subject to certain limits) whilst leaving the remainder of the fund to grow in value. An annuity need not be purchased. The benefits taken each year can vary depending on your individual circumstances.

From a 26% loss to a 29% gain (turning offshore investment bonds around)

Some investments in your portfolio perform really well and others may not perform so well.

They probably garner your best results and have great profit margins.

But they could be sitting there wasting away, even though they’ve already proven their worth, if your other investments are underperforming.

But all hope is not lost if you look at your portfolio in a different way.

You can revive your entire portfolio with a few tweaks to yield the results you deserve.

By reworking underperforming investments, you’ll be breathing new life into your portfolio, and guaranteeing your long-term financial success.

Here’s how to give your finances a facelift, using 2 real life case studies of investors whose financial fortunes were transformed in just 12 months.

I’ll also show you how you can do the same…

How to transform your investment portfolio: from underperformance to outperformance in just 12 months

I’ve changed the names in these case studies, but every other detail is real…

Lisa

In October 2013 Lisa invested £514,314 in a Friends Provident International Reserve Offshore Bond.

In March 2016, she came to see us at AES because she was looking for a financial adviser to help her.

In just under 2 and a half years her fund’s value had fallen to £451,613, which represented a loss of £62,701, or minus 12%.

And the surrender value of her bond was just £413,134.

In terms of the investments within the bond, 48% of Lisas money was invested in collectives / funds, with 40% held in cash, and 12% invested in structured products.

She was paying just shy of 3% per annum in fund and products costs – however, she’d paid very high initial commission on the bond and the structured products she held and would pay more if she surrendered.

The salesperson who’d selected her investments had left Jennifer with a portfolio selection that was inappropriate, poorly diversified, expensive and sub-standard to other products on the market.

Understandably, Lisa couldn’t face losing a further £38,479 by surrendering.

The good news is, she didn’t have to.

Our recommendation was to switch to an investment portfolio that was in line with her own goals and objectives, and which would ultimately reduce her costs.

Our investment approach is asset-class investing to spread the risk, which is not based on speculation.

For Lisa, global diversification across asset classes, industry sectors and company types was achieved by investing in exchange traded funds (ETFs), and her total diversification was across 5,000+ global equities / shares.

Once we’d worked with her to define how much risk she was willing, able and needed to take, we moved 65% of her investment into lower-risk defensive assets, i.e. global fixed interest (government gilts and corporate bonds), and 35% was invested in higher-risk growth assets, i.e. global equities / shares including emerging market shares.

In terms of allocation to emerging markets, it was 4% (i.e. 12% of the equity / share strategy) which is consistent with global capital markets.

One year later, following her switch, Lisas portfolio was worth £548,717; it had gained £97,104 – or +21.5%. 

We re balance Lisa’s portfolio for her annually, and it’s continuing to go from strength to strength.

Kelvin

In April 2016, Kelvin came to see us for his initial meeting.

He too was looking for a financial adviser to help him with his investments.

He’d previously invested £390,138 in an offshore investment bond from Friends Provident International, incepting it in August 2013.

Since then, his fund’s value had fallen to £285,125.

That’s a loss of £101,238 – or minus 26% – in just over 2 and a half years.

65% of the value of Richard’s FPI Bond was invested in collectives / funds, 33% in structured products, and 2% was held in cash.

Like Lisa, Kelvin was paying just charges of 3% per annum in fund and products costs; however, he too had paid high initial commission on the bond and the structured products within it.

Despite using a different salesperson to Lisa to establish his bond and select his investments, Kelvins portfolio selection was equally as inappropriate, poorly diversified, expensive and sub-standard.

Understandably, Kelvin did not want to lose any further money, and chose not to surrender his bond.

Our recommendation was to switch to a portfolio in line with his own goals and objectives, which would reduce his costs.

We applied the same investment approach as in Lisa’s case.

One year later following his switch, Kelvins portfolio was worth £368,743; it had gained £83,618, or +29%.

You

We are confident that my team and I can transform your fortunes if you have badly performing investments.

We will work with you in the same way we did with Jennifer, Richard and hundreds of other similarly affected international investors.

If you have an offshore investment bond that’s losing you money, or costly investments wasting your money, we’ll give you the benefit of our professional opinion for free.

We’ll tell you:

  • What’s gone wrong,
  • What all your options are,
  • How much you’re spending and how much you can save,
  • How to get your asset allocation right,
  • And exactly what you need to do to start making more money.

You have absolutely nothing to lose, and potentially financial peace of mind for life to gain.

I look forward to helping you – and the sooner we start, the sooner you’ll see a positive transformation.

 How Do I Find My Pension?

I have been asked this question, more than once. Some clients are embarrassed to ask. Others have simply lost sight of their pension for one reason or another and have no idea how to track it (or them) down.

Why am I telling you this? Well, recently the UK Government announced that there is over £400 million of lost pensions sitting with various pension and insurance companies in the UK – left behind by former employees who have either moved abroad, are unaware that they had a pension (it’s more common than you would think), or simply have not kept track of their pension. In fact, figures show that four out of five people will lose track of at least one pension over the course of a lifetime.

How can this happen?
It is surprisingly easy for people to lose track of their pension(s). Firstly, because people frequently move around for work. As the former Minister for Pensions, Baroness Ros Altmann said:

“People have had on average 11 jobs during their working life which can mean they have as many work place pensions to keep track of…”

That’s a lot of paperwork to keep on top of and to be fair, most people will only really think of their pensions when they are close to retirement. Which brings me to the second point.

We can and do lose contact with the companies which administer our pensions. The most common reason for this is that pension and insurance companies have merged, and hence brand names have disappeared. For example, a company called Phoenix Life owns more than 100 old pension funds. Its list includes schemes from Royal & Sun Alliance, Scottish Mutual, Alba Life, Pearl Assurance, Britannia Life and Scottish Provident. This invariably leads to a lot of frustrated people looking for their money. It will perhaps surprise you that neither the Association of British Insurers nor the Financial Conduct Authority have a comprehensive list of which company owns which funds.

OK, how can I track down my pension?
Glad you asked. We can help with that, of course. We would need as much information from you as possible which, depending on the type of pension, would include:

Personal Pension

The name and address of the pension scheme (you may find that this has changed)
The bank, building society or insurance company that recommended or sold the scheme
Policy/NI Number
Work Pension

The company you worked for and if they have changed names/address since you left
Dates you worked there
When you started contributing to the scheme and when you finished
Employee/NI number
Obviously, the more information that you can provide, the easier it will be to locate your money. However, we will work with what you’ve got to explore all possible options.

Some companies are more efficient and responsive than others when it comes to handling enquiries on historic pensions, even when the original policy documentation is available. It can take years to locate and recover lost funds. You can fight the battle yourself; or we can pursue on your behalf until we get a satisfactory outcome.

Another reason to review your work pension(s) is that transfer values for defined benefit, or final salary, schemes are at record highs. Depending on the company, valuations are higher than most people anticipate. For example, a pension projected to pay £8,000 per year could have a transfer value of over £285,000, well in excess the average house value in the UK!

I’ve got my pension(s). What next?
Depending on your age and circumstances, transferring an existing pension into a new scheme may be beneficial, including if you have more than one pension. Consolidating existing arrangements removes the need to monitor numerous pensions and, perhaps more importantly, allows you to optimise returns from a single, personalised investment strategy, often with greater flexibility over the timing and amount of payments and in your preferred currency.

Ahead of any potential transfer, the first step is to determine whether a transfer is in your best interests. A responsible adviser will always complete a detailed and objective review of your current position and plans. A transfer may not be appropriate, for a variety of reasons – for example if it means the loss of valuable guaranteed benefits – so it is essential to consult only a suitably authorised, qualified and experienced adviser. A proper assessment will enable you to make an informed decision on whether a transfer is best for you.

If you do proceed with a transfer, as part of the exercise you should also expect ongoing advice on matters such as investment performance and outlook, together with guidance on the suitability of the scheme following, or ahead of, a change in your circumstances.

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