British pensioners offered chance to top up State Pensions

The UK government’s Department for Work and Pensions (DWP) announced on Monday that people eligible to receive a State Pension before 6 April 2016 can increase their pension income by between GBP1 and GBP25 per week by obtaining a State Pension top-up,  from 12 October 2015.

According to the DWP, the State Pension top-up scheme can provide additional guaranteed pension income for life and could boost a lifetime retirement income up to GBP1,300 annually.

These pension payments are protected against inflation and a surviving spouse or civil partner can also inherit between 50% and 100% of top up income.

Eligible claimants for a top-up must be entitled to the basic State Pension or Additional State Pension and be either a man born before 6 April 1951 or a woman born before 6 April 1953. 

Successful applicants need to make a lump sum contribution by 5 April 2017, however the amount of the Class 3A contribution depends on the age of the applicant and the amount of extra income they require. Younger applicants will pay more for a given level of income. For example, if someone aged 65 wants an extra income of GBP10 per week, they would have to pay a lump sum of GBP8,900, while those aged 75 would only have to pay GBP6,740.

Approximately seven million existing pensioners and anyone who will reach state pension age before April 2016 will qualify for the scheme, according to the Pensions Policy Institute (PPI). The current basic state pension is worth up to GBP115 .95. After April 2016, the government will introduce a single tier flat-rate pension worth up to GBP155 per week.

However, the BBC reported that the DWP expects around 265,000 eligible people to apply for the top-up scheme and has conceded that it will not be suitable for everyone.

Pensions Minister, Baroness Altmann, was quoted as saying: “It won’t be right for everybody and it’s important to seek guidance or advice to check if it’s the right option for you.

“But it could be particularly attractive for those who haven’t had the chance to build significant amounts of state pension, particularly many women and people who have been self-employed.”

UK Government to reform pension charges

 Radical reforms to pension charges are to be brought forward by the UK Government, which will reduce the charges on pension schemes used for auto-enrollment, HM Treasury and Department for Work & Pensions revealed today.

The measures are intended to protect pension pots and encourage people to save for their retirement through workplace pensions.

According to the Treasury, the government anticipates that up to 9 million people will open new pensions under workplace schemes, which is expected to increase the amount being saved in to auto-enrolment pensions by approximately GBP11bn annually.

The average charge on new pension schemes is reportedly around 0.51%; however the Office of Fair Trading has reported that annual charges of over 1% are made on more than 186,000 pension pots with GBP2.65bn assets. Charges include costs and fees levied on the scheme member for a range of services such as administration fees, contribution fees, active member discounts and investment fees, which include transaction costs.

A consultation by the Department for Work and Pension has also begun,  with regard to capping pension fees and increasing transparency in the pensions sector. Industry members and the public are being asked for their views on how a cap that protects savings should be designed. The caps could include: a higher charge cap of 1% of funds under management; a lower charge cap of 0.75% of funds under management; or a two-tier ‘comply or explain’ cap.

It is proposed that there would be a standard cap of 0.75% of funds under management for all qualifying schemes and there would be a higher cap of 1% for employers who explained to the Pensions Regulator why a scheme charged more than 0.75%.

Sajid Javid, Financial Secretary to the Treasury, commented: “The government is determined to help hard working families and that includes making sure someone’s saving will deliver the biggest possible returns and not be eaten away at by a variety of charges and fees. As part of

Expats in the UAE Get the Pension Scheme They Have Been Deprived Of For Years

Foreign workers in the United Arab Emirates are finally able to invest in a competitive, locally-based pension scheme – thanks to the National Bank of Abu Dhabi. The Telegraph is reporting that expats in the country can now invest in corporate trust solutions that are designed to discourage overseas workers from sending the lion’s share of their salaries back home. The Wealth Builder Plan will be administered by the Jersey-based NBAD Trust Company, and it is hoped that the move will attract more people to an economy that is in great need of skilled labour. However, what benefits can expats realistically expect to enjoy from these innovative offshore pensions?

How the New Scheme Will Revolutionise Offshore Pensions

Expat employees will be able to choose from a range of investment fund options according to their appetite for risk. The new pension scheme is, essentially, a packaged portfolio of corporate investments – something that foreign workers in the UAE have hitherto been deprived of. The UAE is one of only a handful of leading financial centres that doesn’t currently offer a government-backed pension facility, so this new initiative is expected to be hugely popular. Each plan will be tailored specifically to the needs and income of the individual and the employee will also have the option of topping up the contributions made by the employer.

The Benefits of the New Pension Scheme

Current UAE laws stipulate that foreign workers only receive an indemnity at the end of employment – awarded according to the employee’s length of service. The new scheme is expected to be a far more lucrative proposition than the current cash lump sum, paid at the end of employment. This is the first serious scheme in the country that seeks to distribute the burden of expats pension contributions between the employer and the employee, and local government officials are hoping it could persuade more skilled foreign workers to make their home in the fast-growing country. Expats will be further encouraged by the announcement that investments can be tracked on a daily basis through the use of secure web portals. Customers will have access to real-time data on their account as well as the plan’s overall performance. The flexibility of the new scheme will also allow expat investors to change their overall contributions in line with the performance of their plan, or a change in their own circumstances.

According to Trade Arabia, all investment funds will be managed by the trustee, the NABD Trust Company in Jersey. This means that a trust structure will be developed that is completely independent from employers. This groundbreaking announcement is all the more impressive because of Jersey’s involvement, and it will put people at ease with such a new pension product. The island has a world-renowned financial regulatory system that provides a safe haven for investments from all over the world. The UAE is a country where around 90 percent of the population is from overseas; this news will be almost universally welcomed – and it should result in increasing numbers of foreign workers arriving to do business.

Company Profile:

Which Offshore is an online consumer resource for those seeking information and advice pertaining to matters related to expatriate life and offshore finance. For more information, please visit – http://www.whichoffshore.com/

QROPS for USA Residents

Thousands of people make the decision to relocate to the USA from the UK every year, yet there are many who make the decision without being in possession of all the facts surrounding the taxation of their pension funds. The decision to leave the UK to enjoy retirement in a country that offers a better quality of life is often driven by the heart. However, retirees need to be absolutely certain that their pension will cover the entire length of their retirement. Leaving the UK to enjoy the latter years of life will remove the safety net of the British welfare system, and that can have devastating consequences.

Unfortunately, QROPS pension rules in the USA are more complex than in most other countries in the world, and this means that a foreign-based pension fund cannot simply be ‘plugged in’ to the American system. However, recent changes to the regulations mean that QROPS USA is now live, and there are a number of schemes that have recently been brought to the market. Several US 401K pensions have now been officially registered with Her Majesty’s Revenue and Customs (HMRC), but there are still various compatibility problems seem to originate in the USA.

Problems of incompatibility arise when USA residents have accrued their pension funds in the UK or another foreign jurisdiction. Foreign pension funds are not recognised by the American government, so contributions and investment growth may be subject to taxation from the Inland Revenue Service (IRS) in the States. The IRS has extremely stringent guidelines governing the reporting of taxation issues, so a new breed of QROPS is needed specifically for expats living in the USA. Thankfully, there are now pension products that comply with the reporting requirements of both the HMRC and the IRS.

The benefits of transferring pension funds to a QROPS pension with American compatibility are wide-ranging, but the most significant involves the protection of investment growth from US Federal Income Tax. This type of overseas pension fund will also enable people to draw a tax-free initial lump-sum of up to 30% of the fund’s value. USA residents can also be confident that their pension incomes are not subject to UK taxes, and that is an issue that can allow people to plan their financial future accurately. The advantages and benefits of QROPS USA are extensive, but both the HMRC and IRC websites contain detailed information for fund-owners.

Under the British taxation system, a 55% charge is levied on unused funds that still remain in a pension fund; however, American-compliant pension funds incur absolutely no charges. This type of pension scheme incurs no tax on funds that pay regular benefits, and funds which aren’t in drawdown are also free from taxation. A QROPS also falls outside of UK inheritance tax laws, so there really are several benefits to setting up such a pension arrangement.

 

A Qualifying Recognised Overseas Pension Scheme is open to foreigners wishing to reside in the USA, American nationals who have been working outside the USA and American nationals who currently live outside the USA. It allows retirees to take control of their finances, as they can protect their pensions from the unfair or unnecessary tax burden imposed by the country of their origin. For more information, please visit – http://www.whichoffshore.com/qrops

 

 

 

UK retirement savings hit all-time low, Scottish Widows reports

An increasing number of people in the UK are saving nothing for their retirement, a survey from pension provider Scottish Widows has revealed.

The eighth annual Scottish Widows Pensions Report 2012, which is compiled from the findings of a survey of 5,200 UK adults, shows that 22% have put nothing aside for later life, up from 20% in last year’s report.

Moreover, retirement savings have hit an all-time low as only 46% of people are currently saving enough for their retirement, a decrease of five percentage points from last year and a fall of eight percentage points from 2009.

Even though people are saving less for their old age, expectations remain high: people’s aspirations for their pension income have increased by GBP200 since last year. The average level of annual income that people say they would feel comfortable living on at 70 years old now stands at GBP24,500, compared to GBP24,300 in 2011.

Based on today’s savings levels an average saver retiring at 65 would receive just over half the amount that they feel they need, which means that they would need to save an additional GBP4,500 per year or GBP375 per month to plug this expectation gap, Scottish Widows claims.

Scottish Widows considers people saving adequately to be those saving at least 12% of their income or expecting their main retirement income to come from a defined benefits pension.

Starting in October this year the UK government is introducing a system of automatic enrolment of employees into a pension scheme. Reflecting on the change, Ian Naismith, head of Pensions Market Development for Scottish Widows, said that it presents an opportunity to reverse the current trends and called on the government to launch a compelling awareness campaign so that people clearly understand the need to save for retirement.

Bogus financial adviser jailed for tax fraud

A bogus financial adviser who fraudulently manipulated his “clients’” pension funds to avoid paying tax of over ?1.9 million has been jailed at Hull Crown Court for three years.

Colin Pearson (47) used the proceeds of the fraud to maintain a lavish lifestyle, driving expensive cars and owning luxury homes both in the UK and Cyprus including a villa on an exclusive golf resort.

Bob Gaiger. from HM Revenue & Customs, said:

“Whilst Pearson was living a life most people could only dream of, he left the individuals he conned out of pocket and without the pension funds they expected.

“HMRC will not tolerate this type of blatant fraud and will investigate and prosecute those found to be involved in stealing from the public purse. If you have any information about tax fraud please contact our 24 hour hotline on 0800 50 5000”.

Colin Pearson, who previously worked for the Food Standards Agency and held a McDonalds franchise, claimed to be a financial adviser and persuaded his “clients” to release over ?3.4 million from their pension funds. Pearson completed UK pension transfer forms on behalf of his clients to falsely claim that the funds were going abroad to avoid paying tax due on the pension withdrawals.

He provided fake documentation to register two overseas pension schemes. He then submitted the fake documents using false names, addresses, references and signatures to ensure the pension funds were released without suspicion or delay, to bank accounts that he controlled. On occasions he even made telephone calls to the UK pension companies posing as the policy holder; during one telephone call he attempted to disguise his voice with a Cypriot accent to give the impression that he was calling from overseas.

To add further legitimacy to the scam, he used articles from the internet to create a PowerPoint presentation to explain and sell the scheme to unsuspecting UK clients. He then took a cut of the funds before passing the balance onto the pensioners. In total Pearson persuaded over thirty UK pension holders to make unauthorised transfers of £3.4 million to avoid paying tax of £1.9m

On sentencing Pearson, His Honour Judge Richardson QC, said:

“You are branded a criminal, your life is utterly destroyed, and you are totally dishonest in your deceitful actions.”

He went on to say that the investigating officers did a thorough job which made the case easier to understand.

HM Revenue & Customs investigators arrested Colin Pearson in September 2009, he pleaded guilty to cheating the public purse at an earlier court hearing.

Only one in six of us plan for the future

Standard Life has found that people in the UK live for the moment rather than the long term, with more than one in six (17%) failing to plan their finances at all, according to recent research from the savings and investments company.

The research, which looks into the UK’s fascination with living for now, finds that almost half of Brits (45%) only plan their finances just a year ahead, or less, with only a fifth of them (22%) planning up to five years into the future. Alarmingly, only one in six people (16%) plan more than six years ahead which underlines the real necessity for the UK to start addressing their long term savings plan. Doing this is critical if they are to be financially secure, achieve their future goals and live the lifestyle they want.

Of the UK regions, it was found that those from London were the top financial planners, with one in six (17%) planning six years or more ahead. In contrast, those from Scotland came out as the least likely to make long term financial plans, with only one in ten (11%) planning more than six years ahead.

To find out more about the nation’s attitudes to planning for the future, Standard Life is launching a UK-wide poll and prize draw and linking up with boutique hotel specialist i-escape.com. Entrants have to vote on which prize they would prefer; a short break this year with accommodation from i-escape.com, or a holiday of a lifetime in five years. The results will show whether people in the UK favour instant gratification or greater long term rewards. This issue of desiring instant gratification presents an on-going challenge for the UK because people are living longer and their financial security cannot be guaranteed. It represents a huge challenge for providers and advisers who are keen to help consumers plan ahead so they can look to the future with confidence and optimism.

Bruce Kelsall, group and UK marketing director at Standard Life, said: “The growth in our ageing population has created a dramatic need to shift from a culture of spending to one of saving. People are completely comfortable making financial plans for a summer holiday; planning and investing in your future is no different. You may have to finance your lifestyle up to the age of 90 or even longer and while planning for this eventuality is essential, it needn’t be stressful. Even the smallest actions now can have a dramatic effect on your long term finances.”