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Controversial pension plan shelved

Press Association — 2013-05-24T04:30:00+00:00

Filed under: Pensions

European plans to impose "damaging and reckless" new rules on pension scheme funding have been shelved.

Pensions Minister Steve Webb welcomed EU Commissioner Michel Barnier's decision to postpone plans to impose the rules, known as Solvency II, on defined benefit (DB) pension schemes.

Fears had been raised that the rules would add as much as £400 billion on to UK pension shortfalls.

The European Insurance and Occupational Pensions Authority (EIOPA) had been looking at rules to assess the solvency of pension funds, which providers said would ramp up their costs as more funding would need to be injected.
The Commissioner said he will not present proposals this autumn to bring in new capital requirements for occupational pensions, though he would focus on governance, transparency and reporting requirements.

The National Association of Pension Funds (NAPF) said the solvency rules will become a task for the next commissioner who will take office in November 2014.

Minister for Pensions Steve Webb said: "This is a welcome move by the commissioner, and is hopefully a sign he may eventually abandon his damaging and reckless plans altogether.

"Introducing Solvency II-style rules for defined benefit pension schemes would push up liabilities by up to £400 billion, harming businesses' ability to invest, grow and create jobs, and put more schemes at risk. The UK has been making the case against the plans for some time, with growing international agreement. The signs are we are winning the argument."

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James Walsh of NAPF said: "The great diversity of pension systems across the EU makes it very difficult to devise a 'one size fits all' system. We welcome Commissioner Barnier's sensible decision not to go ahead with new rules on pension scheme funding. This is good news for British pension schemes.

"The proposals could have increased UK defined benefit pension deficits by 50%, causing great damage to pension schemes and their sponsoring employers."

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Crow warns against pension attack

Press Association — 2013-05-23T02:30:00+00:00

Filed under: Pensions

Any attack on pensions of Transport for London (TfL) staff could lead to the biggest wave of industrial action on the Tube "for 30 years", a union leader has warned.

London Assembly Conservative member Gareth Bacon accused TfL of running "a gold-plated pension scheme" for its workforce, with contributions from the taxpayer six times higher than the contribution of TfL's average employee.

RMT transport union leader Bob Crow responded by saying his union would not tolerate any erosion of workers' rights and agreements.

Mr Crow added: "Any attack on pensions, passes or other hard-won conditions of service would be met with the biggest wave of industrial action on London Underground in 30 years."
Mr Bacon said that figures showed that TfL staff pensions had cost the taxpayer £1.6 billion in employer contributions over the period 2004 to 2011.

During this period, the amount contributed by TfL into workers' pension pots had risen by 54%.

He said that currently the fund was in deficit, so including deficit payments, the employer was contributing over six times the amount of employees.

Mr Bacon said: "With budgets so tight, and London's transport infrastructure so desperately in need of currently unfunded investment, it is time that the whole pay deal for TfL staff is reviewed.

Mr Crow said: "If members of the London Assembly think that they can play politics with our members' working conditions and benefits on London Underground then they should think again."

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Baby gap cuts £70,000 off pension

Press Association — 2013-05-22T04:30:00+00:00

Filed under: Pensions

A woman could wipe as much as £70,000 off her pension pot by taking a career break to have a baby, research has found.

One quarter of women (25%) are planning to take time out of their job at some point, with the main reason being to start a family, according to the report by Duncan Lawrie Private Bank.

But based on average salaries, a five-year career break could cause a woman to end up seeing her eventual pension fund shrink by £70,000 during a 40-year career, the study said.

One-fifth of women planning a career break said they had "no idea" how they were going to fund their time away from work.

The figures are based on a woman starting paying into a pension aged 25 and contributing 5% of her salary to a retirement fund each year.

Her starting salary would be £25,000, which would gradually increase over time.

After taking a career break aged in her early 30s, the woman would re-start her career on the same wage.

The survey of more than 2,000 people also found that 13% of men are planning to or are currently taking a career break - although more than half (53%) have already started setting money aside to cover the costs.

The main reason given for men taking time out was to travel or live abroad.

Richard Boyd, a chartered financial planner at the bank said: "For some, a pension might be one spinning plate too many to manage, but its importance cannot be underestimated. Those that do let the plate fall may live to regret their decision later down the line."

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Many retiring 'below poverty line'

Press Association — 2013-05-22T03:00:00+00:00

Filed under: Pensions

One in seven people planning to retire this year has no private pension to fall back on and many will be forced to get by in poverty, an insurer has warned.

Women who are set to retire in 2013 were nearly three times more likely than men to be relying on the state as their sole form of pension income, Prudential found. Some 14% of this year's retirees said they had no company or personal pension and their only form of pension income would come from the state.

The full basic state pension is currently set at £110.15 a week, but how much someone receives depends on how many years of contributions they have made.

Almost one quarter (23%) of women will be retiring this year without a private pension, compared with just 8% of men, according to the survey. Nearly one-fifth of those planning to retire this year will be living below the poverty line, Prudential's analysis suggested.

Some 18% of people surveyed will be living on less than £8,254 a year, which is the amount estimated by the Joseph Rowntree Foundation that a single pensioner in the UK needs to live on.

The state pension will account for an estimated 43% of the average retirement income for women in 2013, while the average man retiring this year will receive 30% of his income from the state. But Prudential found that almost one quarter (23%) of people retiring this year overestimated the amount the state pension paid by more than £600 a year.

One in 10 people surveyed had "no idea" how much the state pension paid.

Vince Smith-Hughes, retirement income expert at Prudential, said: "The basic state pension alone is not nearly enough to provide a comfortable standard of living. While it's a very valuable source of additional income for millions of pensioners, the state pension should ideally only represent a part of someone's retirement income, not all of it. Relying on the state will see many people retiring below the poverty line this year, which shows the importance of building up a personal pension."

Joanne Segars, chief executive of the National Association of Pension Funds, said: "The average man or woman retiring now is expected to live into their 80s, and lifespans are increasing every year. It is worrying that around 100,000 people face the grim prospect of spending their final two decades struggling to get by on the state pension alone, and even more will be below the poverty line. Our state pension is up for some long overdue reform to make it simpler and fairer, and auto-enrolment will bring millions of people into a workplace pension. These vital changes will tackle the problem for future generations, and also help narrow the gender divide, but sadly they will come too late for this year's pensioners."

Minister for pensions Steve Webb said: "For too long women have been second class citizens in retirement. But women will be the main beneficiaries of our new flat-rate state pension introduced in 2016. In addition, millions more will start to build up a private pension because of our policy of automatic enrolment into a workplace scheme. We are protecting the income of current pensioners with a state pension that is the highest share of earnings for 20 years."

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Pensioners on a seventh of minimum wage

Sarah Coles — 2013-05-20T09:30:00+00:00

Filed under: Pensions

The minimum wage will be a distant pipe-dream for the average current and future pensioner, according to research by pension provider Liberty SIPP.

So just how miserable is life set to be, and what can we do about it?

The company calculated that a person retiring at age 65 would need a pension pot of £220,276 to have an annual income equivalent to the minimum wage (£6.19 per hour or £12,115.20 a year). At the moment, however, the average UK pension pot is estimated to be around £30,000 - less than a seventh of the amount needed to generate a minimum wage income.

This is also way below the £8,254 a year that the Joseph Rowntree Foundation estimates marks the poverty line for a single pensioner in the UK.

John Fox, Managing Director, Liberty SIPP, commented: "These simple calculations drive home just how extreme the current pension crisis is. It's widely known that many pensioners are on the breadline but when you think that the typical retirement income will be just one seventh of the minimum wage, it relays the true extent of the problem we're dealing with."

Alternatives

Of course, pensions are not the only sources of income. Research from JP Morgan Asset Management revealed that 46% of pre-retirees admit they currently save nothing for retirement.

Almost half of respondents (47%) said that they will use state benefits as their expected source of income in retirement (up from 29% in 2006). At the moment, the state pension can be added onto any private pensions, which will bring many households within touching distance of the minimum wage. The question is how long the state pension is going to be part of the equation - and whether in 20 or 30 years time the level is so low - and starts so late in life - that it can no longer be factored into your pension planning.

Others will add their property value into this (16%) , but there's always the risk that you will not be able to downsize at the key time, or that property prices work against you. Similarly the 16% who are relying on an inheritance to fund their retirement are overlooking the risk that their relatives spend their money or fail to pass away in time. Almost a third (32%) say they will work part time, although this depends on them being in good enough health to work.

Help yourself

There is no easy answer to this crisis. There's no getting around the fact that the only away to be certain of avoiding poverty in retirement is to save as much as you can as early as you can. As a basic minimum, younger people need to be putting aside £200 a month, which should increase as you get older and your income rises. Those who start saving later in life will have to put a great deal more aside in order to make a dent in their retirement needs.

It may feel a burden too far in the current environment, but we need to sit down with a household budget and work out how we can squeeze this extra cash out of our income in order to save for the future. It may seem impossible, but if you think things are tough now, try living on seventh of the minimum wage.

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Why 'lifestyling' could destroy your pension pot

lovemoney.com — 2013-05-15T08:30:00+00:00

Filed under: Pensions

Lifestyling is supposed to mean that your pension pot becomes more secure the nearer you get to retirement. Yet your pension provider might be switching you to overpriced, and therefore riskier, investments.

Many retirement savers have chosen the 'lifestyling' option in their pensions.
This option sees their pension provider slowly and automatically take their funds out of shares and put them into other assets that are meant to be safer. However there are growing fears these other assets aren't so safe after all, and nor, therefore, is lifestyling in general.

A recent Axa Life Europe poll of financial advisers shows that the majority of them believe lifestyling pensions are more risky than they were a year ago.

The problem is that these funds typically move your money gradually from shares into bonds - and it's bonds that are currently the biggest concern.

So much for safety
Bonds are loans from pension savers and other investors to governments and companies. There is the risk that these borrowers will default but, on average, the short-term risks for bondholders are relatively low. The problem is, when the price of bonds is high, they can become far more risky to buy than shares.

Bonds have become expensive because too many people have been buying them, driving up their prices and making them ready for a fall. Worse, the government has been printing money and using it to buy bonds, which has raised prices even more.

You wouldn't want to buy goods on the high street at a high price, and nor should you want to buy investments at a high price either.

This is why advisers are currently concerned about lifestyling.

Don't just take their word for it
The problem of using bonds for safety today was recently highlighted by the greatest living investor. Warren Buffett, chairman and CEO of the phenomenally successful conglomerate Berkshire Hathaway, recently said that bonds are "terrible investments now... Bonds are priced artificially. You've got some guy buying $85 billion[-worth] a month and that will change at some point. And when it changes people could lose a lot of money if they are in long-term bonds."

Buffett's referring to the US and to the money-printing, bond-buying programme of the Federal Reserve (the US central bank). Nevertheless, similar conditions are occurring in the UK and many other countries. The Bank of England has printed money on an unprecedented scale and has bought bonds with much of that money.

Lifestyling is a dubious concept
The nub is that anyone who's automatically having their pensions lifestyled for extra safety are currently getting the reverse: they're moving into what now are probably more-overpriced investments.

This could be particularly devastating for those retiring soon. Potentially, some pension savers using lifestyling have unknowingly locked in their stock-market losses after the crashes in 2000 and/or 2008 when their pension providers automatically sold shares at those market bottoms in order to move into bonds.

Now bonds look overpriced too, making them more at risk of crashes. If bond prices collapse in the coming years, many retirees might be lucky to have a fraction of the pension they hoped they'd get in the late 90s.

An alternative to lifestyling
One alternative is to save for retirement more quickly. Once you have as much as you need for the future, plus quite a bit extra to account for potential inflation, you then get out of both shares and bonds altogether, moving your money into cash funds. You will miss out on future gains, but you've locked in the pot you believe you'll need.

There are significant dangers to this, such as underestimating inflation or your future needs. The largest problem, however, is that many - perhaps even most - people won't ever reach the retirement pots they desire, even if they stick with shares until their planned retirement date and there is no collapse in share prices immediately before.

As a result asking pension savers to save even faster is simply unrealistic.

Another alternative to lifestyling
Some people hope to keep on investing their pot after retirement, and take money from that pot when they need it to supplement their retirement and other state benefits. This is known as income drawdown.

This is a fantastic idea if you have the knowledge, experience and temperament for investing, but, even if you do, you still won't dramatically improve your living standards in retirement if your investment pot is too small.

It could well be that, unless you put a very large amount of money into your retirement plans, you're likely to be disappointed. This is the same whether you're saving in pensions, share ISAs, property or anything else.

Nothing can make up for a small pot
Most people are either unwilling or unable to save enough to provide the retirement income they think they'll need. Many don't even know how much they need.

All this puts them at even greater risk if their lifestyled funds go wrong.

The good news is that, while some are surprised how expensive their retirement is, many more find they need far less to live on than they thought.

The bad news is that, if you're not able to save enough by the time you want to retire, your only real choices are to live on a very stringent budget or to keep working, at least part time.

The universal solution
I think the best thing that anyone can do to prepare for retirement is to make mental preparations: get yourself used to the idea that you might have to work far longer than you currently want or expect. The earlier you prepare yourself psychologically for this significant possibility, and start thinking about how you can try to turn it into a positive experience, the less painful it's going to be when it happens.

The additional advantages are that this gives your pot time to recover if it crashes just at the point you wanted to retire, and your pot won't have to stretch for as many years when you finally do hang up your clogs.

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Ruling allows divorcee to keep £100,000 pension overpayment

Sandra Haurant — 2013-05-15T06:45:00+00:00

Filed under: Pensions

A divorced mother who was given almost £100,000 too much by a pensions company following a valuation error has been told by the Pensions Ombudsman that she should be keep the money.

Natalie McNicholas received £311,500 in her pension fund when the couple divorced. However, Scottish Widows, her husband's pension provider, later said that the amount was incorrect and that mistakes had been made when evaluating Mr McNicholas's pension. It said she should, instead, only have received £213,850.

The firm's solicitors consequently contacted Mrs McNicholas and requested that she return the money, some £97,650, and said court proceedings would be started against her and her own pension provider, Legal & General, if she failed to do so. According to Mrs McNicholas, the insurer had threatened to seek repayment of the money paid in error as well as its legal costs and court fees.

The case was referred to the Pensions Ombudsman, Tony King, who said that the overpayment had been a case of "maladministration." He said Scottish Widows should not pursue its claims against Mrs McNicholas, and ordered the insurer to pay compensation of £250 "in respect of the distress and anxiety caused to her," according to the FT Adviser.

The lawyers acting for Mrs McNicholas said in the Telegraph: "This is a classic case of David v Goliath. The ombudsman has seen clearly that the error was Scottish Widows', and it involved money inextricably woven into divorce settlement calculations which cannot be revisited. Both sides in that divorce settlement had every reason to assume the information given by Scottish Widows, and the money subsequently paid over, were accurately calculated."

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Although the error was with the insurer, it was legally entitled to reclaim the money overpaid. However, a Scottish Widows spokesman said: "We accept the Pensions Ombudsman's decision into this isolated case and are very sorry for any distress and inconvenience caused."

Tom McPhail, head of pensions research at Hargreaves Landsdown, said: "Anybody going through a divorce should assume they need independent advice from a pensions professional."

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Children are leading the way in personal finance

Michelle McGagh — 2013-05-14T11:30:00+00:00

Filed under: Pensions

For those that think young people are money-wasting gadget fiends who are more interested in splashing the cash than savings, new research says you're wrong.

I'll admit that my generation of 20 and 30-somethings were untroubled by burdening ourselves with student debt and indulged in the odd credit card until the recession hit us like a truck and we all learnt the true cost of life on credit.

But it seems it's not just taught us a lesson, it's taught younger generations the value of saving. A survey of 2,000 children and adults in Britain shows that a massive 98% of 10 year olds have already started savings, while just 15% of adults said they had started saving before the age of 15.

Some of the children surveyed are saving for something special and 14% are saving for when they are older. And even more staggering - 70% of children understand what a pension is and are already thinking about how they would like to spend their retirement.

The lessons of the recession have trickled down to us all, and it's incredible that so many children have picked up on the importance of pensions - there are plenty of adults who need to take heed of it.

It gives me hope that the next generation won't be as apathetic and wasteful as so many adults of all ages have been.

This understanding of long-term saving chimes well with the government initiatives like auto-enrolment. I know these children are only 10 but time flies and it won't be long before they're looking at the jobs market. If they carry their enthusiasm through to adulthood then workplace pension saving will once again be something this country can be proud of, rather than the disproportionate two-tier, underfunded mess we have now.

We may all feel that the government's austerity measures are tough on us but they have taught us all a lesson, and the austerity measures we are putting in place in our own homes have instilled a valuable nugget of information in our children; spend less and save more.

And when those children get round to reading Charles Dickens, they'll more than understand why Mr Micawber was right:

'Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen ]shillings] and six [pence], result happiness. Annual income twenty pounds, annuity expenditure twenty pounds ought and six, result misery.'

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Protection for auto pension savings

Press Association — 2013-05-10T12:00:00+00:00

Filed under: Pensions

Workers automatically enrolled into pension schemes will not see their savings raided to cover advice received by employers under a Government crackdown on rip-off charges.

Pensions minister Steve Webb announced plans to tackle "high and inappropriate" pension fees by banning charges for advice given to employers for auto-enrolment schemes.
He said it was the first step as part of a clampdown on consultancy charges following a six-month review that found more needed to be done to stop advisers deducting high fees from pension pots.

The Government also discovered that employees who move jobs regularly were being hit particularly hard by consultancy charges as they switched schemes. It added that it was looking at capping charges on the default funds within schemes following an investigation of the entire workplace pensions market by the Office of Fair Trading (OFT) and plans to publish a consultation in the autumn.
Mr Webb said: "With millions of people taking up pension saving for the first time under automatic enrolment, we have to give people confidence that they will get good value for money. That is why we are banning consultancy charges, where scheme members end up paying for advice given to their employer."

Industry experts welcomed the move to stamp out the pension charges "scandal" amid fears of a rip-off for the 11 million workers due to be enrolled under the automatic pension saving programme over the next five years.

A recent investigation by Which? found that in the worst scenarios, some employers were prepared to pay charges for advice that would see the first year of a worker's pension savings slashed by 50%.

Dr Ros Altmann said: "Consultancy charging was a huge scandal in the making and it is entirely right that this practice should be outlawed. Millions of workers are being automatically enrolled into pension schemes at the moment, but the regulators were allowing their pension funds to be raided to pay fees to 'consultants' who advised their employers on which scheme to choose for auto-enrolment. Although the workers foot the bill, they receive nothing in exchange."

The Department for Work and Pensions (DWP) said employers are not required to seek advice when setting up an auto-enrolment scheme and can get free advice from the Pensions Regulator.

A DWP spokesman added that if advice was necessary, the Government would expect companies to meet the costs themselves rather than paying for it through staff pension pots.

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Flat rate pension at heart of Bill

Press Association — 2013-05-08T14:30:00+00:00

Filed under: Pensions

A new flat rate pension designed to encourage saving and make the system fairer is at the heart of sweeping Government reforms of state retirement funds unveiled in the Queen's Speech.

The Pensions Bill promises to create a simpler state pension by scrapping the two-tier system of basic pension and earnings-related additional pension from 2016.A new flat rate pension designed to encourage saving and make the system fairer is at the heart of sweeping Government reforms of state retirement funds unveiled in the Queen's Speech.

The Pensions Bill promises to create a simpler state pension by scrapping the two-tier system of basic pension and earnings-related additional pension from 2016.

It will mean a single flat rate of around £7,000 a year - or £144 a week in today's money - for everyone in Britain who spends at least 35 years working or caring for children or the elderly.

The Bill will also bring forward a change in the state pension age to 67 to take place between 2026 and 2028, with regular reviews of the age in light of rising life expectancy.

Changes will include a clampdown on overseas pensioners claiming payments based on their spouse's history by putting an end to the married person's pension. Current rules have allowed spouses of UK pensioners to claim up to £66 a week even if they have never paid any national insurance contributions, or even set foot in Britain.

It is a loophole that allows around 220,000 pensioners living abroad to claim on their spouse's record, costing taxpayers £410 million a year. The new pension system will instead be based on an individual's record only from 2016, although it will not impact current pensions.

Ending the married person's allowance is one of the more controversial changes, given that it will also mean UK resident spouses cannot claim on each other's records.

Steve Webb, pensions minister, defended the proposed law change earlier this week, saying it will prevent "unacceptable" numbers of those living outside of the UK from being subsidised by British taxpayers.

Higher earners are also expected to lose out under the single-tier pension as they are set to receive a lower payout.

The flat rate pension is the central plank of the coalition's pension reforms, alongside the new auto-enrolment scheme that automatically saves a sum from employee wages into a retirement fund, unless workers opt out.

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'Error' raised pension liabilities

Press Association — 2013-05-07T12:30:00+00:00

Filed under: Pensions

An accounting error meant teacher pension liabilities were overstated by £1.8 billion, the Finance Secretary has said.

The "significant factual error" appeared in Scottish Government accounts but was the fault of the UK Government Actuary's Department (Gad), according to John Swinney.
The position was clarified in letters to two Holyrood committees.

"It is clearly regrettable that an error of this type can occur and be identified only after scheme accounts have been published," Mr Swinney wrote.
"I am however able to assure the committee that this error has had no practicable implications for the Scottish Government's financial management of the scheme."

The error was in the 2011-12 accounts of the Scottish Teachers' Superannuation Scheme (STSS), laid before parliament in December.

It was identified in January following work to provide the Treasury with other details.

Mr Swinney said Gad overstated by £1.2 billion its estimate of scheme liabilities, later revised up to £1.8 billion.

It had no impact on the wider Scottish consolidated accounts, amounts paid to STSS pensioners or contribution rates paid by members of employers, he explained in letters to the Finance Committee and the Public Audit Committee.

"It is a matter of regret that such as error has occurred, but I trust that the committee will recognise the limited practical impact it has had and be assured that the necessary processes are now in place to avoid any recurrence," he wrote.

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Minister defends curb on pensions

Press Association — 2013-05-07T03:00:00+00:00

Filed under: Pensions

It is not fair to taxpayers that a growing number of people overseas can claim UK pensions even though they have "never put a penny" into the system or even been here, pensions minister Steve Webb said as he defended a proposed curb.

The Pensions Bill, part of the Government's legislative package to be unveiled in Wednesday's Queen's Speech, will seek to end the practice of women being able to claim solely on the basis of their husband's contributions or vice-versa.

Fewer and fewer UK residents take advantage of the "anachronistic" measure but the numbers overseas have risen in recent years, requiring action, Mr Webb said.

Existing pensioners will be unaffected but new claims at home and abroad will be barred from 2016 as part of a significant overhaul of the system that will see the introduction of a single-tier pension, worth around £144 a week in today's money.
The simplified retirement set-up will be based solely on personal contributions.

Mr Webb rejected suggestions that he highlighted the impact on overseas spouses in an interview with the Daily Telegraph newspaper in an effort to counter the appeal of the UK Independence Party, after its strong showing in last week's county council elections.

"Not at all," he told BBC Radio 4's The World at One. "I think the fact the we do pay over 200,000 pensions outside the country, many people who may not even have visited the country, would strike most people as not fair. And we are going to change it."

The present cost to the taxpayer of those payouts, worth up to £3,500 a year, is put at around an annual £410 million.

"We're not saying we care who you marry, that's your choice. What we are saying is: don't expect in the future that when you marry somebody they acquire rights in the British system even if they haven't put in," Mr Webb said.

The Queen's Speech will also feature a Bill giving increased rights to consumers but reducing "burdens" on business, aimed at saving £4 billion over 10 years in more effective protection and better understanding of consumer rights. The expected legislation is designed to consolidate consumer rights, currently split between eight pieces of legislation, into one place.

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Labour to review pensioner benefits

Press Association — 2013-05-01T08:30:00+00:00

Filed under: Pensions

Labour will "review" universal pensioner benefits in the lead-up to the next election, deputy leader Harriet Harman said.

Coalition ministers traded blows earlier this week after Work and Pensions Secretary Iain Duncan Smith said he would "encourage" people to forego perks such as free TV licences and winter fuel payments.
Mr Duncan Smith later clarified his comments, saying it was up to pensioners what they do with the money.

But amid calls for "inter-generational fairness", Ms Harman admitted that Labour would look at the policy of universal benefits for pensioners.

She told BBC Radio 4's Today programme: "There's a problem with pensions when you means test. We wanted to tackle pensioner poverty, but things change. You always have to look at everything to make sure that your provision is right for the demography, for the income distribution at the time, there's no mystery about that.

"We stand by why we introduced it (universal pensioner benefits), we will review it coming up to the next election. The thing about universality as opposed to means testing is you want to ensure that there's a sense of the contributory principle - that people, when they pay in, can take out when they need it.

"You want to be able to give extra help to those who are the poorest. What you don't want to do is have a situation where the administration and testing costs more than the actual provision of the benefit."

Ms Harman also admitted Labour would temporarily borrow more if elected to Government.

"Two parts of our five-point plan would involve a reduction in VAT on a temporary basis which would involve a temporary increase in borrowing," she said.

"For part of our programme it would need to be financed by a temporary increase in borrowing for temporary measures. Some of it we have showed how we could pay for it - through for example cutting tax relief on pensions - some of it we've thought would be self-financing, others would require initial borrowing."

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Deal boosts Kodak pension hopes

Press Association — 2013-04-30T06:32:00+00:00

Filed under: Pensions

Thousands of members of Kodak's UK pension fund could be spared the collapse of the debt-laden scheme after it struck a deal with the US firm.

The arrangement should settle a 2.8 billion US dollars (£1.8 billion) legal claim by the fund against the company, helping Kodak emerge from bankruptcy in the US.

In return, the UK Kodak Pension Plan (KPP) will take control of part of a 650 million US dollars (£419 million) chunk of the business.

The current pension scheme, saddled with a £1.9 billion deficit, is to be closed and members offered the chance to join a new scheme. It will have lower benefits but spare them the prospect of having to rely on a statutory rescue fund.

KPP has nearly 15,000 members, including 8,610 who are already claiming their pensions.

Steven Ross, chairman of the fund, said the deal with Kodak "provides security for and delivers the greatest value to" the members.

Under the agreement, KPP will take control of parts of the business involved in areas such as photo kiosks, speciality photo services and scanners.

Antonio Perez, chairman and chief executive of Kodak, said that in one transaction the company would divest the businesses and "settle its largest legacy liability", calling it an "extraordinary result".

Mr Ross said: "This settlement gives the KPP members greatly improved future prospects whilst being good for Kodak's employees, its creditors and for UK business. The businesses that we are acquiring will deliver long-term cash flows to support the plan's obligations."

Kodak, a pioneering photographic company, entered bankruptcy last year. Soon afterwards it announced that it was phasing out making cameras after more than a century. The firm had struggled to adapt to the latest developments in digital camera technology. Its deal with KPP must be approved by the UK Pensions Regulator and the US bankruptcy court.

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Pensioners 'paying back benefits'

Press Association — 2013-04-30T02:30:00+00:00

Filed under: Pensions

Pensioners are already paying back benefits they do not need, Iain Duncan Smith has claimed.

The Work and Pensions Secretary defended his remarks over the weekend when he said he would "encourage" people to forego perks such as free TV licences and winter fuel payments.
Coalition ministers traded blows over the comments but Mr Duncan Smith described himself as "relaxed".

He told Radio 4's Today programme: "It was in answer to a question which was 'what if they don't need it or don't want it?' My answer is if they don't want it or don't need it there has always been on the website a helpline. If they want to go and ring that and make arrangements to pay back we have already been taking money from people who want to do that anyway."

On Sunday, Deputy Prime Minister Nick Clegg responded by attacking the Tories for blocking means-testing of the benefits. And Mr Duncan Smith's Conservative Cabinet colleague Ken Clarke said he did not believe it was even possible to return money to the Government.

But the Work and Pensions Secretary said that his comments had been "twisted".

"I think that it's right for them to keep whatever they want to keep, it's up to them, I am absolutely proud of what we have done," Mr Duncan Smith said.

"Honestly, you shouldn't try and twist what I'm saying. I said categorically I neither want them to give it back or keep it. If they are eligible for it it's wholly their money to take as they wish. It's right to give them this money, pensioners are vulnerable and they need to know they have a security of payment over a long period of time."

Asked if David Cameron supported Mr Duncan Smith's call for wealthy pensioners to hand back the payments, the Prime Minister's spokesman said there was a Government commitment to protect the universal benefits.

He said: "The Prime Minister's view on this is very simple. He made a promise, he made a commitment that we we would retain these benefits and that they would stay in place. That is in the coalition agreement. There are absolutely no plans to change that, that's very much his view on the matter."

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Ban sought over pension charges

Press Association — 2013-04-25T04:30:00+00:00

Filed under: Pensions

"Damaging" pension charges which can wipe huge chunks off people's retirement pots and risk undermining confidence in saving must be banned, MPs have urged.

The Work and Pensions Committee also wants to see one single regulator taking charge of workplace pensions, to strengthen protections as millions of workers enter into retirement saving for the first time.

Up to nine million people will be newly saving or saving more as a result of the Government's landmark efforts to tackle the pension savings crisis by automatically placing people into workplace pensions.

But the committee warned that the majority of these people would be placed in schemes where they bore all of the investment risk - and many would be ill-equipped to deal with the "complex and confusing world of pension saving".

It called for a ban on a practice in the current system, which allows employers to offload the costs of financial advice given to them to help them choose and manage a pension scheme onto their employees, in the form of extra "consultancy" charges on workers' pension pots.

The report said that an example of how high these costs could be given by consumer group Which? included an initial charge to each scheme member of £600 over 12 months followed by an ongoing £60-a-year charge.

Which? said that if such practices happened every time someone switched jobs and enrolled into a new pension, they would see large amounts of money disappear.

The Government has said it would expect that a consultancy charge should only be applied where advice "leads to a tangible benefit for its members". But the provision of pensions advice to employers is unregulated and there is no clear guidance as to what is considered a "reasonable" charge, the report warned.

The report said that such charges have "the potential to cause serious consumer detriment and to damage confidence in pension saving and auto-enrolment".

The committee also wants to see an end to "active member discounts" - a practice whereby some schemes bring in higher charges for people who stop contributing to a pension pot, usually when they change jobs, but leave their fund in the scheme.

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Tesco set to launch pension comparison site: what does it mean?

Sarah Coles — 2013-04-23T09:56:00+00:00

Filed under: Pensions

Tesco has announced plans to launch a pension annuity comparison website. It has submitted an application to the regulator, to ask permission to run a service. If it is accepted, it could transform the annuity market.

So what would it mean for you and your pension?

The service

Tesco would essentially be setting up an annuity brokerage. The idea would be that if you have a defined contribution pension (also known as a money purchase pension, personal pension or group personal pension) then when you retire you will have saved a pot of money.

This pot will usually be spent on buying an annuity, which converts it to an income for life. When your pension provider writes to you on retirement they'll make you an offer for an annuity, and at the moment most of the 400,000 people retiring on this sort of pension every year simply take that.

However, everyone has the right to shop around for a better deal, which can make an enormous difference to the income they can receive in retirement. The best and worst deals can differ by as much as 25% - and those who qualify for enhanced annuities can get another 20% income on top.

In order to shop around, you go to a broker and ask them to search the market for you. Tesco would be setting up as a broker - to do the searching for customers. It would run the service online - through an online annuity comparison website - making searching for an annuity as simple as looking for cheaper car insurance.

At the moment there are no details as to whether it will search the whole of the market, or just a handful of annuity providers.

What it means

Tom McPhail, Hargreaves Lansdown Head of Pensions Research and Chairman of PICA says that in essence this is good news for consumers. He explains: "We have been campaigning for years now for a more active shopping around market at retirement; we believe it should be the default for everyone."

He adds: "It is vital that everyone who can, makes sure they benefit from an enhanced annuity, as well as considering inflation proofing and death benefits for their dependents. The more high profile participants there are in the shopping around market, the more likely it is that this will happen."

The company is currently the largest annuity broker in the UK,and has recently launched its own online annuity comparison tool, but he insists it isn't scared of the competition, because everyone stands to benefit as the market grows.

McPhail says: "PICA is developing a directory of shopping around intermediaries precisely because we anticipate that we will see more services being launched; every little helps."

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Cheese stocks boost pension fund

Press Association — 2013-04-18T12:00:00+00:00

Filed under: Pensions

Former milkmen and workers at Cathedral City maker Dairy Crest are to see their pensions backed with £60 million worth of maturing cheddar cheese under innovative plans to bolster the scheme.

The group has agreed to offer nearly half of its valuable cheese stock as security for the pension fund.

It will also pump in an extra £40 million to the scheme to help plug an £84 million pension deficit, using proceeds from last August's £341 million sale of its French spreads business St Hubert.

Dairy Crest has been battling to fill the hole in its final salary pension fund, which covers around 3,500 workers. It closed to new members in 2006 and shut to existing members in 2010.

The firm already pays £20 million a year into the scheme, but said the new deal will further boost its funding and help ensure it is protected in case Dairy Crest ever went bust.

Dubbed the "Bank of Dairy Crest", the group's cheese stock is worth around £150 million.

The cheese being used to back the pension fund is equivalent to 20,000 pallets or 20 million kilos.

Drinks giant Diageo struck a similar deal with its pension scheme in 2010 when it agreed to transfer millions of barrels of maturing whisky to the fund in an effort to close its funding gap.

Dairy Crest said it will also use cash from the St Hubert sale to cut debts and strengthen its balance sheet, while it will also invest in the business.

It had been considering using the proceeds to make acquisitions, but said in February that any large deals were unlikely. The group said it was still eyeing potential small deals.

10 tips to improving you pension

What would Thatcher think of auto-enrolment?

Michelle McGagh — 2013-04-15T11:00:00+00:00

Filed under: Pensions

I wonder what Margaret Thatcher would have made of the current state of our pension system as it harks back to the 1980s with semi-compulsion.

In her time as prime minister she famously scrapped compulsory occupational pension scheme membership in 1988 and brought in personal pensions. It was all part of her ideology of individual rights and responsibilities.

Fast-forward to today and we have a Tory prime minister who is pushing through auto-enrolment, a kind of semi-compulsion, which means every UK worker will be placed into their workplace pension scheme but with the chance to opt out.

Personally I believe that auto-enrolment is just the first step in reverting back to compulsory pension membership, and a reversal of Thatcher's political ideology. It has been 25 years since Thatcher placed the responsibility for retirement savings in the hands of the individual and with hindsight it hasn't worked.

The number of people saving into a workplace pension has been falling steadily since 2008, and the number of people actively saving into their pension scheme has dropped from 8.3 million in 2010 from 8.2 million in 2011.

With pension savings at an all-time low and a government struggling under the weight of growing debt it will be necessary, and foolhardy, not to force people to save for their old age.

On one hand this idea of compulsion and collectivism may fly in the face of Thatcherism but on another hand it is in keeping with Maggie's dictate that 'there's no such thing as society' and that everyone should provide for themselves.

I'm no Thatcher fan, having grown up as part of a generation that knows her as the 'milk snatcher' but I agree with this sentiment:

"It's our duty to look after ourselves and then, also to look after our neighbour. People have got the entitlements too much in mind, without the obligations. There's no such thing as entitlement, unless someone has first met an obligation."

By compelling people to save into a pension you are helping them to look after themselves and stop relying on the state. We should first look to our own resources to sustain us in old age and look to the state as an extra bonus, a top-up to our pension if you will rather than the total sum of our old age income.

And people of my generation should recognise that we may only have ourselves to rely on.

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Almost one in four have 'lost' a pension

Sarah Coles — 2013-04-11T02:00:00+00:00

Filed under: Pensions

It seems crazy to think that 23% of people in the UK have lost at least one pension. These things are worth thousands of pounds, and are the single most important factor determining how we spend our golden years. It's like losing a car - or in some cases a small house.

So how do these pensions go missing, and how can we track them down?

Lost pensions

The research from Age UK discovered an incredible number of lost pensions. While 23% overall had lost a pension, this ranged from 18% in Yorkshire and Lincolnshire, to an incredible 36% of people in the South West.

The researchers didn't try to estimate the value of these lost pensions. However, the Pensions Policy Institute says that the average pensioner receives £189 a week in occupational pension income. Assuming this is from five sources, it would mean that each person with a lost pension could be missing out on just under £38 a week.

Download this handy free guide: 10 tips to improving your pension here.

How?

When asked how they went astray, 47% of people said they had simple been lost 'in the mists of time'. This was a common excuse in the North East - where 60% of people blamed these mysterious mists for the disappearance of their pension.

Meanwhile, 20% said they had mislaid the paperwork. This was a particular problem for people in the East, West and South Midlands, 28% of whom couldn't find their correspondence.

Some 10% of people blamed the frequency with which they have changed jobs - this was a particular problem for those in the South and South East - where 16% say this is the cause of a missing pension.

Moving jobs

This is likely to be an increasingly significant factor. The average person who is currently retired had five or six employers over their lifetime. If they each offered a pension, it's not impossible to keep track of.

However, 23% of people aged between 25 and 34 have already had this number of employers. They could have 20 pension pots scattered across schemes from each of their employers by the time they retire: it's easy to see how one or more could go astray. Worryingly 37% of people between the ages of 18 and 44 have already lost a pension.

Lucy Harmer, Head of Services at Age UK, said: "It's really important we all set aside time to keep on top of our personal admin, such as organising paperwork and keeping details of any financial products safe and secure. This is especially crucial for pensions as it may be some years down the line until they need to be accessed."

"With the number of jobs we have over a lifetime increasing, it's likely that people will accumulate several small pension pots. In many cases these bring a less fruitful income in later life than one large pension pot."

What can you do?

There's a large degree of confusion about the best way to go about finding a pension. The Age UK research found that nearly a quarter of people (23%) would ask previous employers for help; 15% would consult the government or tax office; 11% would look online for advice; and 7% would turn to a friend or relative for help.

Fortunately, if you lose a pension there is something you can do. Age UK says there are four straightforward steps:

Start by collecting as much information about your previous employer as possible including names, the type of business it ran, previous addresses and scheme dates
Search for any paperwork that you may have received with the pension
Try to remember if it was a workplace or personal pension
Call the Pension Tracing Service which can help to track down your lost pension on 0845 600 2537.