Pressure is mounting on the Government to oversee a root-and-branch overhaul of Britain’s “final salary” company pension schemes as they register their biggest ever funding shortfall, now at almost £1 trillion, reports the Telegraph (Final Salary Pension).
Low interest rates force savers to take risks
The problem is about to be subject to two major reviews, including one by the influential Work & Pensions Committee. Outcomes are likely to result in further support for compromise measures which would affect the 11 million or so workers who have savings in these schemes (Final Salary Pension).
While the Bank of England base rate cut from 0.5 per cent to 0.25 per cent may be good news for homeowners with variable rate mortgages (assuming lenders decide to pass on the cut); many savers who have historically shied away from stock markets will have to take on some investment risk if they want decent returns, says the Sunday Times. With a reported 81 per cent of over-65s with an Isa holding their savings in cash, the paper urges readers to take seek the services of independent financial advisers to carry out a financial review to help find the yields they need (Final Salary Pension).
Film investors face losses despite HMRC victory
Wealthy backers of film finance schemes and the UK tax authorities have both claimed victory following a ruling by the Tax Tribunal partially in favour of investors, following a decade-long battle over hundreds of millions of pounds in tax and interest charges, reports the Financial Times.
This week, the tribunal ruled that two of the three structures under consideration from Ingenious Film Partners were carrying on a trade — and therefore liable for tax relief — but it awarded relief at much reduced levels, meaning many investors could still suffer considerable losses.
Should you cash in your final salary pension?
With cash transfer values hitting record highs, many savers may be dazzled by the prospect of huge cash windfalls, claims the Financial Times, yet advisers say it is “vital” that anyone considering cashing in a pension — regardless of transfer value level — understands what future benefits they might be giving up before making decisions they might later regret. “The guarantees (including escalation and spouses benefits) that these schemes offer are invaluable for most people”, one such adviser tells the Financial Times. The Pensions Regulator is also reported as saying that in current conditions it is still likely to be in the best financial interests of most to remain in their defined benefit schemes.
Use your pension to minimise IHT
Because defined contribution pensions pass to heirs IHT free, it makes sense to run down the assets outside that pension as much as possible, and those within it as little as possible so as to die with very little outside the IHT efficient environment, says the Financial Times. Those with a defined benefit pension – which pays a percentage of pre-retirement salary for life – could instead consider giving away the pension income they don’t need using the gifts from income exemption; or alternatively seek advice on transferring to a defined contribution pension that would allow them to pass on the unused proportion of their pension pot IHT-free, suggests the paper.
Final Salary Pension and Financial Advice Bristol
If you would like to speak with one of our Independent Financial Advisors and potentially receive financial advice, please contact us on 0117 923 7652. We are based in Clifton, Bristol but we are happy to service clients from across the UK and we provide free initial meetings at our client’s convenience.
Churchill Wealth Management Limited is located at 13 Alma Vale Rd Bristol BS8 2HL.