80,000 Pensions transferred from the UK in just 12 months
Two years ago marks the beginning of some significant changes in UK pensions which are now coming to a head. Practically all of the people who have lived and worked in the UK have a private or company pension.
The key to putting control back into the hands of people can be partly summarised in one word, mobility. Take Barclays Bank as an example. The company had ￡4.2bn in pension transfers out of its final salary pension scheme in 2017, that’s nearly 10% of the total Barclay’s pension fund transferred out in just one year!
Following on from this development, the Pensions Regulator estimates 80,000 people transferred out of defined benefit pension schemes from April 2016 to March 2017.
Data from the last two years shows a decrease in the volume of pension transfers to New Zealand from the United Kingdom to New Zealand. Why is this, considering that developments in the UK pension market have a significant impact on millions of people, including British expats living in New Zealand and also New Zealanders that have worked in the UK?
While the Local Authority Pension Fund Forum (LAPFF), representing 72 of the UK’s local government pension schemes undoubtedly has some clout, the body seems to be addicted to change (for better or for worse).
Its submission to a consultation on the Financial Reporting Council’s (FRC) proposed revisions to the UK Corporate Governance Code is the second time. They call for the FRC to be wound up and replaced with a new body since a parliamentary consultation on corporate governance in 2016.
LAPFF’s calls for the country’s accounting watchdog to be wound up and replaced with a new statutory body materialise against a backdrop of the State pensions rising period which is set to occur from April 6, 2018. In September inflation rates are used by The Department for Work and Pensions in order to set how much pensioners receive from the start of the new tax year.
2016 was also the year that changes were made to the State Pension, a weekly wage when you have reached state pension age (63 for women, 65 for men) and which you have to apply for.
Pensioners who are entitled to the full new state pension will enjoy a payments increase from ￡159.55 to ￡164.35 per week. It’s important to note that if you reached State Pension age before 6 April 2016, you'll get the basic State Pension but if you reach that age before or after 6 April 2016, you will get the new state pension under the new rules.
The problem, is if you live in New Zealand, you’re not going to benefit from this increase because the state pension will only increase if you live in Gibraltar or Switzerland, the European Economic Area (EEA) or one of the nations with a social security agreement with the UK. This means that Australia, Canada and New Zealand are out.
In a world where everything is becoming moveable and mobile, it seems that some things just won’t budge.
What if you have your pension deposited in the Pension Protection Fund (PPF) which is endorsed by the government and caps your pension income as of 1 April 2018 at ￡39,006.18. Unfortunately this amount is not a certainty for many disappointed pensioners as we note from the PPF website on 31 March 2016, the average annual pension income paid across the 129,661 members was just ￡4,309.00 pa. The PPF ‘lifeboat’ is dependent on many factors including wind up fees and auditing the pension deficit itself. Once your pension is in the PPF it’s there for life. This option removes any ability for pension holders to control their own pensions. You will not be able to enjoy flexible access, no lump sum payments and no transfers out.
As we begin to watch 2018, government intervention will be seen as good only so long as the respective bodies at the top of the chain are willing to listen to the stats. We live in a mobile world in which new possibilities must be given the light of day in order to mature and become viable alternatives.
With two years preparation, we will see whether government efforts are on a track towards progress in solving some of the issues that affect the relationship of UK pensions with the outside world.
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I’m Tyrone Skipper, a fully qualified, seasoned financial advisor with over 20 years of experience assisting high net worth individuals across the UK, NZ, UAE, India and Malaysia. Over the years, it has been a great honour to have the people and families I serve rely upon me as a steady hand, guiding them across the financial landscape. I specialise in investment planning including trust, education, insurances and retirement.