Contact us: 01799 543222

25% charge on QROPS transfers

Archive for the ‘Pensions’ Category

25% charge on QROPS transfers

Wednesday, March 29th, 2017

In the Budget earlier this month, the Chancellor Philip Hammond announced a 25% charge for people moving their pension abroad via a QROP (a Qualifying Recognised Overseas Pension Scheme). If you’re planning to spend your retirement somewhere warmer and sunnier than the UK then the news may have worried you somewhat – will it end up stalling your dreams of life after work spent overseas?

The charge will affect qualifying recognised overseas pension schemes (QROPS) and has been introduced in an effort to prevent people from moving their pension savings overseas in order to avoid paying UK tax. As such, there are a number of exemptions to the new rules, which should mean that anyone legitimately planning to move abroad when they retire will be able to do so without parting with a hefty sum from their retirement pot.

There are three situations where an individual will be exempt from paying the new 25% charge: if both the QROPS and the individual are in the same country following the transfer; if the QROPS is in a country within the European Economic Area (EEA); or if the QROPS is sponsored by an employer and constitutes an occupational pension.

HMRC has stated that “only a minority” of QROPS transfers will be subject to the new policy which further backs up the idea that the 25% charge has been introduced to deter people from abusing the QROPS system to avoid paying UK tax. As such, anyone with plans to retire to a warmer climate shouldn’t worry about losing a quarter of their pension to do so.

It’s also worth noting a further change to the QROPS system, however. HMRC has stated that “payments out of funds transferred to a QROPS on or after 6 April 2017 will be subject to UK tax rules for five tax years after the date of transfer, regardless of where the individual is resident”. It’s definitely worth seeking professional financial advice regarding QROPS if the changes to the rules surrounding overseas pensions are likely to affect you in any way, so please get in touch with us directly to ask any questions you have.

What could be the best way to provide for your grandchildren?

Wednesday, March 1st, 2017

With both property prices and the cost of living continuing to rise, as well as low interest rates making it difficult to save, the ‘Bank of Mum and Dad’ is increasingly becoming a partnership with the ‘Bank of Gran and Grandad’. If you have grandchildren, it’s only natural that you’ll want to provide for them in some way as you move towards your retirement years. But what’s the best way of supporting the younger members of your family in the long term as well as the short term?

One way that you could do this is to set up and regularly contribute to a pension in your grandchild’s name. As today’s younger generation are likely to miss out on the robust pension security enjoyed by their parents and grandparents before them, creating a pension for them early in their life will undoubtedly help them in the decades to come.

A key plus point of paying into a pension is the tax relief your investment will enjoy. Including the 20% boost this relief will provide, you can pay in up to £3,600 annually to your grandchild’s pension even if they’re not yet earning an income. Adding £240 a month will achieve this sum, with £2,880 paid in by you and a further £720 in tax relief claimed by the pension provider automatically.

Doing this for fifteen years will mean that a 21-year-old grandchild today could have a pension pot of £220,000 by the time they reach 57, and that’s without including any additional contributions. Assuming an annual net growth of 5% after charges, if the pension remains untouched until they reach 67 it could grow further, to around £340,000.

However, this highlights the one potential drawback of choosing to pay into a pension: the money won’t be available to your grandchild until they reach their 50s. Whilst this does mean it can be left to mature, it also means that any money paid in won’t be available should it be needed. As there are likely to be other forms of expenditure you might want to help grandchildren with, such as paying for a deposit on their first home or going to university, you should think carefully about how much you want to put away for their future and how much you want to make available to them in the short term.

Keeping track of your pensions

Wednesday, March 1st, 2017

A recent study has revealed the worrying statistic that over a fifth of all people with multiple pensions have lost track of at least one, with some admitting to have forgotten the details of all of them. With around two thirds of UK residents having more than one pension, this amounts to approximately 6.6 million people with no idea how much they’ve put away for their retirement. Double the amount of people admit to not knowing how much their pensions are worth.

It’s an undesirable side effect of the modern working world. Whereas in previous generations someone might stay at a single employer for their entire working life, the typical worker today will hold eleven different jobs throughout their career, which could potentially mean opting into the same number of pensions through as many different providers. The new legal requirement for all employers to offer a pension scheme through auto-enrolment is likely to add further complexities.

As a result, the Pensions Dashboard is set to launch in 2019 in the hope that it will make it easier for savers to keep track of their pensions in one place. Until then, however, there are four relatively simple steps to help you track down information on any pensions you’ve forgotten about:

  1. Find your pension using the DWP Pensions tracing service at Start by entering the name of your former employer to discover the current contact address for them. You’ll then need to write to them providing your name (plus any previous names), your current and previous addresses and your National Insurance number.
  2. In the case of a pension scheme which hasn’t been updated for a while, you’ll be required to fill out an online form to receive contact details. You’ll be required to give your name, email address and any relevant information to help track down your pension details. This could include your National Insurance number and the dates you worked for the company.
  3. You can also receive a forecast of your State pension either online or in paper format by going to After entering a few details to confirm your identity, you’ll be told the date you can access your State pension and how much you’ll receive.
  4. Finally, and most importantly, once you’ve managed to track down all of your pension information, get some advice. Consolidating your pensions might be tempting to make managing your savings easier, but you also want to make sure you don’t lose out on any benefits by doing so. Before you make any decisions regarding your pensions, seek professional independent advice on what to do next.

The new pensions minister’s savings tips!

Wednesday, January 25th, 2017

Richard Harrington, who was made pensions secretary by Theresa May soon after she assumed office as Prime Minister in July last year, recently wrote an article for This Is Money divulging his spending tips for 2017. It’s a piece littered with what could be called ‘financial advice’, so what does the new minister recommend we do with our wealth this year?

Harrington’s first piece of advice is to look at your pension, even if you’re not going to be retiring for many years to come. The government has set up a website called ‘Check Your State Pension’, which can be found at and allows you to see an estimate of your state pension’s worth and when you’ll currently be eligible to receive it. There’s also a Pension Tracing Service set up by the government at to help you identify pension schemes you’ve paid into in the past of which you may have lost track.

The article also advises those already in retirement to look into whether the State Pension Top Up Scheme will benefit them. The scheme allows those who reached state pension age before 6th April 2016 to make a one-off payment to increase their retirement income by up to £25 a week, but it’s only available until the end of the current tax year.

Other key pieces of advice from Harrington include urging younger earners to leave their pensions alone to ensure contributions made now have decades to build up interest, and looking into whether your employer will match any increases in pension contributions you decide to make.

The pensions secretary also warns against the many pensions scams still operating within the UK, advising strong caution against anyone offering attractive rewards for investing pension savings. If it seems too good to be true, it probably is, so do your research thoroughly and check with the Financial Conduct Authority to avoid losing your hard-earned money.

Harrington ends his article with a reminder that the UK has no set retirement age and that over 1.2 million over 65s are still employed, so if you enjoy your job there’s no compulsion for you to retire immediately. Delaying your state pension if you choose to carry on working can give your income a healthy boost when you do decide to retire.

The future of the pensions triple lock?

Wednesday, January 25th, 2017

The ‘triple lock’ on state pensions has protected the older generation’s income since 2010, guaranteeing that pensions will rise each year in line with the highest of either the average earnings, the consumer price index, or 2.5%. But the triple lock’s days look increasingly numbered, with an increasing number of financial and political figures calling for it to be scrapped.

Back in November 2016, the Work and Pensions Committee criticised the triple lock, describing it as both “unfair” on the younger generation and “unsustainable” in the long term and calling for the new state pension and basic state pension to be linked to average earnings alone. They also proposed the development of a formula to protect pensioners during periods where earnings are lower than price inflation.

More recently, former pensions minister Ros Altmann has denounced the triple lock on her blog as “a lazy way of claiming to offer pensioners brilliant protection” which is “increasingly unfair”. She goes on to explain: “If the new state pension (designed to always be above pension credit level) remains triple locked, while pension credit only increases with earnings, then the poorest and oldest pensioners will become relatively poorer”.

Responses to the review of the state pension by former chief of the Confederation of British Industry John Cridland have also seen calls for the triple lock to be dropped. A number of respondents called for the Cridland Review to make major changes to the state pension system, including a move away from the triple lock and towards indexation in line with earnings.

In his Autumn Statement last year, the chancellor Philip Hammond indicated that the triple lock would remain in place until at least 2020, when the next general election is expected to take place. If the pressure continues to mount against it, many feel the government may be forced to remove the triple lock much earlier, with some predicting its demise before the end of 2017. Labour have recently come out in support of the triple lock, however, pledging to keep it in place until at least 2025, making the future of the mechanism even more difficult to predict.

Fraud losses from pension freedoms 25% higher than anticipated

Wednesday, November 30th, 2016

Recent statistics from City of London Police suggest that losses due to fraud after pension freedoms were introduced could be around 25% higher than was initially estimated.The figure originally reported to the force for the first six months from April 2015 was £10.6 million.This figure has recently been revised to £13.3 million following updated statistics, due to the updating of reports by victims to reflect the full amounts lost. The new figure demonstrates a 146% rise year-on-year in reported fraud from the £5.4 million figure recorded during the corresponding period during 2014.

The figures have played a large part in the call for a complete ban of cold calling in the pensions sector, with a petition to the Government having attracted well over 7,000 signatures at the time of writing. Those in the pensions industry have criticised the Government for ‘sitting on its hands’ with regards to taking action against pension scammers.

“The good financial advice companies don’t need to cold call. Government services don’t cold call”, explains Michelle Cracknell, head of the official government-funded Pensions Advisory Service. She went on to refer to the number of calls we all receive about PPI and whether we’ve had a car accident but explained that this would be coming to an end under new regulation, making pensions the next potential sector for scammers to target. She was adamant that putting a ban on cold calling would give customers added protection, as it would help vulnerable people to know that any cold call they received about their pension was suspicious.

It is estimated that over 10 million pensioners are now being targeted every year by cold callers, a figure which has risen considerably since the introduction of pension freedoms. As scammers often put the money through several companies based overseas, this makes it incredibly difficult for investigators and forensic accountants to identify the criminals and where the money has come from. Mrs Cracknell admitted that her organisation has been forced to advise those who contact them about being scammed that they have virtually no chance of retrieving their money.

Savings ‘Moments of Truth’

Thursday, November 10th, 2016

A recent study has found that around one in three people in the 18-40 age bracket not only are not saving any money for when they retire, but also don’t consider it likely that they will begin paying towards their pension in the future. Many people aged between 30 and 40 said they now felt they had left it too late to begin putting money away for their retirement, and planned to rely on the state pension alone when they finish working.

The reason behind these alarming figures is the financial pressure many feel during this period in their life. In a survey of those aged between 35 and 44, around a third said they felt their financial position was ‘squeezed’, meaning that they struggle to meet regular financial commitments including bills, debt repayment and raising a family. Those in this group also ranked saving for retirement as one of their lowest financial priorities behind saving to buy a house and living for today.

When asked about improving their savings habits, most said that they would put away more if they had a change of circumstances. This could include an increase in pay, an unexpected windfall, or even an existing financial commitment coming to an end. These could be referred to as ‘Savings Moments of Truth’ (MOTs), and recognising them can help to create an environment of saving, rather than spending.

Let’s say you’re spending £245 a month on childcare (the national average). There will probably be a temptation to spend that extra money once your children no longer needs childcare. However, you could identify this MOT and put that money away, into a pension or ISA say, which will steadily manage to build up your savings without impacting upon your everyday finances, as your monthly outgoings will remain the same. Other MOTs like this could be paying off a credit card or personal loan in full. What about keeping your car for a little while longer, once you have paid it off?

Embracing these MOTs when they occur can help build up a substantial pension pot of savings cushion before you retire. Even someone aged 40 paying £240 per month towards their retirement could end up with a pension fund in excess of £100,000 (above the national average pension pot size) by the time they reach 65. It’s never too late to begin saving for your retirement, and seizing your savings MOTs when they happen can be a manageable way of accruing a worthwhile nest egg.

Lifetime allowance hits more than just ‘pension millionaires’

Wednesday, October 26th, 2016

The latest figures surrounding the pensions lifetime allowance (LTA), which governs how much can be placed in a pension pot whilst still claiming tax relief, suggest that a considerable number of middle-income earners are being hit by the lower threshold. The amount collected from pensions exceeding the LTA by HMRC during the 2015-16 tax year came to £126 million, close to two thirds more than in the previous year. The number of pensions breaching the LTA limit also went up from 1,482 to 1,539 this year.

The LTA was set at £1.8 million in 2011-12, but has since decreased over subsequent years to the current £1 million threshold. This means that exceeding the LTA is increasingly becoming an issue not just faced by those considered to be ‘super wealthy’.

The current LTA level allows an income of around £45,000 for those retiring at 65. A general rule of thumb can be to aim for an income in retirement of around two thirds of that you are earning when you finish work, so a £45,000 pension income would be sufficient for someone who was earning around £68,000. Whilst this figure is somewhat higher than the current average UK salary, it’s also not a figure which is the reserve purely of the elite, penalising those on middle incomes.

Those with higher percentage returns on their savings are also likely to breach the LTA earlier. This means that the current limit comes down hard not only on the wealthy, but also on those who have made wise pension investments in order to enjoy a better return on their savings. As such, the potential charges for breaching the LTA may lead to those approaching the point at which they want to retire needing to stay in work longer due to the constraints on their retirement income.

If you have any questions about the potential impact of the LTA on your own retirement income, please feel free to get in touch with us directly.

Pensions freedom planning is essential

Thursday, October 13th, 2016

According to recent research, the introduction of pension freedoms has led to many thousands of people taking out large sums from their retirement funds, then leaving it earning them next to nothing in low-interest accounts. The figures from Citizens Advice who carried out the study suggest that around three in ten people are currently doing this, with the move appearing to be just as common amongst those with smaller pensions as those with pots valued at over £100,000.

As well as impacting upon the returns seen from their savings, these people could also be inadvertently losing a chunk of their pension through taxation. Only 25% of a person’s pension fund can be withdrawn without incurring tax, with anything more than that taxed in the same way as income. Particularly large withdrawals could therefore result in a sizeable tax bill, as well as potentially pushing those paying basic rates of tax into the higher-rate bracket.

Other perks that may be lost through withdrawing pension funds include capital gains, which are tax-free within pensions, and protecting retirement savings from inheritance tax. If the money is moved into a current account, it becomes part of an individual’s estate and therefore will possibly incur death duties.

Part of the problem is that many see pension schemes as complicated, with their bank or building society account looking like a simple alternative where their money can be easily accessed. A ‘Retirement Quality Mark’ is set to be launched in September to help savers with the best ways to access their savings without sacrificing the benefits a pension fund provides.

Whilst the findings are concerning, it is worth remembering that there are many people who have taken advantage of pension freedoms since they were introduced last year and have been able to pursue interests and investments in a positive way. Withdrawing larger amounts from your pension pot in one go can be hugely beneficial as long as you do so with a plan set out to ensure you are using the money wisely and not opening yourself up to additional taxation that could have been avoided. If you have any questions around accessing your pension, please feel free to get in touch with us directly.

Europe facing increasing retirement ages

Thursday, October 13th, 2016

Whilst the Brexit result of the EU referendum may have made many in the UK feel more distant from their European neighbours, it seems that the retirement proposals of a number of countries may be closer to our own than you might think. The Bundesbank, Germany’s central bank, recently made a muted proposal to raise the retirement age to 69 by 2060.

Whilst recent pension reforms have taken place in Germany, the bank has stated that these won’t protect citizens from pension payment levels dropping from 2050 onwards, and those who don’t have state-supported private insurance could be hit sooner than that. Current plans by the German government include raising the retirement age to 67 by 2030, but the Bundesbank has said that these measures don’t do enough to counteract the widening gap between the number of retirees and those contributing to pension schemes.

Other countries across Europe are pushing forward plans to gradually increase their retirement ages. Italy has made the decision to raise its retirement age to 66 for both men and women by 2018, in an effort to combat the high levels of public debt seen in the country. France’s previous retirement age of 60 was one of the lowest on the continent, but the French government recently raised this to 62 for those who have made social security contributions for the whole of their working life. For those who haven’t, the retirement age in France is now 67.

The UK state pension age is set to rise to 66 from 2020 onwards, going up again to 67 between 2026 and 2028. There are plans by the government to review the retirement age every five years in order to properly support the ageing population. However, with reports of more and more people choosing to continue working part time, in a different role or even a new industry altogether after becoming a pensioner, there is an argument to be made for the concept of retirement undergoing a radical rethink for future generations.