Andrew from Vista Financial

Protect your position!! – UK F/S Pensions

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    I recently posted a link regarding the Lord Hutton report which laid out proposed changes to the UK private pension system.

     

    I attach the outlined Lord Hutton proposals again for information http://www.gad.gov.uk/Documents/Press%20Releases/2011/IPSPC-Lord_Hutton's_Final_Report.pdf

     

    Within the proposals is the age at which private pension benefits can be taken to increase in line with State Pension age (age 66 from 2018 / age 67 from 2034 / age 68 from 2044)

     

    Probably the biggest news on this report was the proposed changes to Final Salary scheme pensions whereby benefits should be based on a ‘Career Average salary as opposed to ‘Final Salary’. It looks as though these changes have been accepted by the Chancellor.

     

    This could mean that the actual pension someone receives from the proposed ‘Career Average Salary’ basis as opposed to the ‘Final Salary’ basis will be much less.

     

    For deferred members that have already accrued pension benefits it seems as though these benefits will be protected at this stage and the final salary basis will still apply. Let’s hope for them that this remains the case as these people have already seen reductions in their benefits due to the recent changes in accrual from Retail Price Index (RPI) to Consumer Price Index (CPI).

     

    However the potential downside to all of this will be that due to these changes ‘Transfer Values’ are likely to decrease for people looking to transfer their pensions across to Australia.

    When the change from RPI to CPI was implemented transfers values reduced by around 20%, the new changes could also have similar effects.

     

    It is crucial that a transfer from a Final Salary scheme is not done based on these proposed changes as there are many other factors that will also play a part in the decision but you should also take these proposed changes seriously if you feel that you want to consider a transfer as it may be worth acting sooner rather than later.

     

     

    Protect your position – There are a number of ways that people may be able to protect their current transfer value before they potentially reduce again.

    Within these options it may also be possible to keep your money in Pounds so that you are not transferring into Dollars (if you believe that the exchange rate will pick up again in favour of the Pound).

     

     

     

    Regards

     

     

     

    Andy

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