June 2017 - Newsletter
Defined Benefit pension transfers reach 80,000 in one year …
After a Freedom of Information request published recently, TPR says that between 1st April 2016 & 31st March 2017, defined benefit schemes reported 67,700 transfers out.
However, this figure is not completely accurate because not all schemes reported how many transfers were carried out.
It is estimated that the true figure is more like 80,000. TPR says that it does not hold information to compare with previous years.
According to figures from the Office for National Statistics, active membership of open private sector defined benefit schemes stood at 600,000 in 2015, fewer than half the 1.4 million in 2006.
This figure compares to 1.6 million actives overall in 2016, as previously stated by the Pension Protection Fund.
Money Marketing reported recently on the level of mounting concern around the demand for DB transfer advice and worries that problems are building up for the future.
Separate figures published last week from the City of London Police show losses from pension scams hit a record high in March of £8.6m.
See more below:
Hung parliament brings pension future into doubt …
The news came as a real shock to the financial planning committee. An industry spokesperson said: “A dreadfully poor campaign has caught up with Theresa May and the Conservative Party, leaving the UK facing the prospect of a coalition Government for the second time in three General Elections.”
“Going into the poll markets had rather lazily been relying upon the opinion of polls which continued to point to a Conservative win, so this unexpected development is likely to create some short-term volatility in stock, bond and particularly currency markets.”
Two recent Treasury Ministers have lost their seats: former chief secretary to the Treasury Jane Ellison and former economic secretary Simon Kirby. Ellison had been working to steer through the Finance Bill, which legislates for the proposed cut to the money purchase annual allowance, and had fronted Government responses to challenges from Labour to make advice of the Lifetime ISA compulsory.
Pensions Minister Richard Harrington held on to his Watford seat. However, there is uncertainty as to the future of pensions policy, as Labour and the Conservatives disagree on issues such as the triple lock. Labour would like to keep the measure, whereas the conservatives would move to a less generous ‘double lock’ and the Liberal Democrats say they would conduct a review into the feasibility of flat rate pension tax relief.
Another industry figurehead was quoted in saying: “Like most others, the pensions industry needs certainty and today’s result gives us anything but that. Even if a government can be formed the prospects of a clear and considered approach to long term savings seems remote.
“Strategically it seems that any reform of pension tax relief will remain on the Conservative back burner though economic circumstances may force it on to the agenda. Following through on the Cridland recommendations on state pension age and the proposed abolition of the triplelock now look difficult and given the severe reaction to the long-term care funding proposals we can expect little here any time soon.”
President of the Society of Pension Professionals, Hugh Nolan thinks that it may prove impossible for the Tories to cut a deal with Labour when balancing cutting the deficit with Labour’s promises of higher pensions.
He says: “It looks like the grey vote from pensioners has done it again. Theresa May dared to withdraw the Conservative commitment to the triple lock while Jeremy Corbyn’s manifesto promised to make pensioners even better off, in the same year that pensioner household income passed the level for working-age families for the first time ever. It might be impossible for a Tory party committed to keeping down the deficit to reach a consensus with a Labour Party that pledged higher pensions for all irrespective of the spiralling costs.”
Conservative pension plans rejected by DUP …
This will be seen as a boost for struggling pensioners. Theresa May was locked in talks with the Democratic Unionist Party (DUP) to prop up her minority government, but a DUP source told the Sunday Post that they won’t support any change to the triple lock.
Each of the opposition parties wish not to change the triple lock – which was introduced in 2010 and guarantees pensions will rise by the higher of prices, average earnings or 2.5% - so the plan is finished.
Negotiations between the DUP and the Tories in the coming days, are expected to see Northern Ireland’s biggest party win promises on investment in the country and on the Brexit deal.
A DUP source said: “There will be no formal coalition and we have other priorities – not least Brexit – for the negotiations, but we won’t support any changes to the pensions triple lock.”
And a source close the UK Government said: “To be frank, I don’t think we’ll put up much of a fight on this one given that the issue tanked during the election, though you still have find the money to pay for this.” During the General Election, the Conservative party said that they would keep the triple lock guarantee until 2020, then replace it with a so-called “double lock”.
This would mean the state pension no longer rises by the minimum of 2.5%, but by whichever is the highest of inflation or annual earnings growth.
This means that pensioners would be potentially worse off. The UK Government estimates put the current cost of the policy at £6 billion a year. SNP MP Ian Blackford said retaining the triple lock would be a good result for pensioners. But added: “If Theresa May can’t even rely on her new friends in the DUP to support her key manifesto commitments then she is in serious trouble – it shows just how disastrous her campaign was.
“At every turn, SNP MPs will stand up to the Tory plans to remove the triple lock on pensions.” Meanwhile, the Prime Minister’s two closest aides have quit in the wake of the disastrous General Election result. Mrs May’s joint chiefs of staff, Nick Timothy and Fiona Hill, resigned in the wake of the election which saw the Tories lose a Commons majority.
The role of Mr Timothy and Ms Hill as Mrs May’s joint chiefs of staff had been severely criticised by dissatisfied Tories in the aftermath of the election result. Mr Timothy acknowledged that one of his regrets was the way Mrs May’s social care policy – dubbed the “dementia tax” by critics – had been handled.
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