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March 2017 - Newsletter

Pension equality lacking for same sex couples

… Walker, 65, wants to ensure that should he die first, his 52-year old husband will be adequately provided for. If he was married to a lady she would be entitled to receive about £1000 a year, his lawyer said.

Lawyers for the human rights organisation Liberty, which is representing Walker, hope to persuade five justices at the court in London to overturn a previous ruling against him.

Liberty have said that ensuring a same-sex husband enjoys the same pension rights as a wife, could dramatically change the lives of thousands of couples.

Martin Chamberlain QC, representing Walker, told the court: “This is direct discrimination. They have chosen to treat Mr Walker’s partner less favourably than that of a heterosexual married man.

The marriage does not have to have taken place during the period of service. The only thing that matters is that the person claiming pension at the time of death [of the retired employee] is the spouse.”

Walker worked for chemicals group Innospec for more than 20 years and retired in 2003. He made the same contribution to the pension scheme as his heterosexual colleagues.

He has been with his husband, a former computer executive since 1993. The Civil Partnership Act 2004 came into force in December 2005. They engaged in a civil partnership in January 2006, which was later converted into marriage.
According to Liberty, the claim “challenges an exemption in the Equality Act that lets employers exclude same-sex partners from spousal benefits paid into a pension fund before December 2005, when civil partnerships became legal”. It argues that the exemption is discriminatory.

Commenting before the hearing, Walker said: “The Government should be ashamed that, in 2017, I and so many others are being forced to live with the worry that our loved ones won’t be provided for when we’re gone, solely because of our sexuality.

“My husband and I have been together for 24 years. During that time, I also gave more than two decades of my life to Innospec, paying in exactly the same amount into the company pension fund as my heterosexual colleagues. How can it be right that my husband will get practically nothing but, if I were to divorce him and marry the very woman I see, she would immediately be entitled to the full spousal pension? It’s not just unfair – it’s absurd.”

The case is being heard alongside claims by a retired part-time Judge over his accumulated pension right.

See more below:


Budget 2017 – Offshore pension transfers charge

… However, the 25% tax charge will not apply if, from the point of transfer, both the individual and the offshore pension scheme are in the same country, both are within the European Economic Area (EEA), or the QROPS is provided by the individual’s employer.

“If this is not the case, there will be a 25% tax charge on the transfer and the charge will be deducted before the transfer by the administrator or manager of the pension scheme making the transfer,” the Government said.

The Government also announced that payments out of funds transferred to a QROPS on or after April 6th 2017 will be subject to UK tax rules for five tax years after the date of transfer, regardless of where the individual resides.
This means that UK tax charges would also apply to a tax-free offshore pension transfer if, within five tax years, an individual becomes resident in another country.

Chancellor Philip Hammond, said that the measures supported the Government’s objective of promoting fairness in the tax system.

“It continues to allow overseas transfers from pension schemes that have had UK tax relief that are made when people leave the UK and take their pension savings with them to their new country of residence,” The Government said.
“This is a real crackdown on those pension transfers made overseas just to gain the benefit of different tax regimes,” said Rachel Vahey, product technical manager at Nucleus, the investment platform.

“From today, any new requests to transfer overseas will face a 25% charge unless the transfer is for ‘genuine’ reasons. Situations such as where the person wants to transfer their pension to their new employer’s scheme, or to a pension scheme in the EEA are all allowed without charge.

“But where the transfer is to merely take advantage of different pension tax rules, The Chancellor is coming down heavy.”

The Treasury stated that only a “minority” of the estimated 10,000-20,000 transfers to QROPS each year would be impacted by the new overseas transfer charge.

But in policy documents published alongside the Budget, it also estimated that the transfer charge would raise £65m in tax revenue in its first year and £315m over the five years from 2017/18.

“As of midnight, people could be subject to a significant 25% charge on transferring their UK pension pot to an overseas equivalent,” said David Hartles, private client principal at chartered accountant HW Fishes.

“This has the ability to affect up to a quarter of a billion pounds of pension savings leaving the UK,” he claimed.

Andrew Tully, pension technical director with Retirement Advantage, said that the move appeared to be a “significant shutting down” of the QROPS market.

“The Government has been increasingly concerned about the use of these schemes for the past few years and this appears to be a major move to reduce their use,” said Mr Tully.

See more below:


Budget 2017 – Permutations for pensioners

Dividend allowance slashed:

The tax-free dividend allowance will plummet from £5000 to just £2000 a year from April 2018, a blow for pensioners who are dependent on income from dividends paid to shareholders.

According to figures from Blick Rothenberg, the reduction in the allowance could cost a basic-rate tax payer £225 a year, a higher-rate tax payer £975 and an additional-rate tax payer £1143 per year.

However, on a more positive note, the investments held within an ISA or pension will not be affected.

Pension tax relief unchanged:

Pension experts were worried that Hammond would use this Budget to cut these benefits. Therefore, his silence on the matter will come as a relief to many – even though some commentators believe that changes could be announced later this year.

Jason Hollands, Managing Director at Wealth Manager Tilney, said: “It remains to be seen whether changes to pension allowance are now off the menu for the remainder of this parliament, or if the existing system has merely had a temporary reprieve until the Autumn Budget.”

New National Savings & Investments account rate announced:

The brand new three-year investment bond from NS&I available from next month will pay a market-leading rate of 2.2%.

The account will be available for 12 months from April and will be open to savers aged 16 and over who want to save between £100 and £3000 over the next three years.

Money Purchase Annual Allowance cut confirmed:

The MPAA restricts the payments that can be made to a pension when an individual has “flexibly accessed” their benefits. This will fall from £10000 a year to just £4000 a year from 6th April 2017.

The move is designed to prevent “inappropriate double tax relief” and has disappointed many pension experts who believe it may catch people out unfairly.

See more below:

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