As a UK expat with a pension, you probably will not have been amused to learn that not even the Bank of England’s Chief Economist is “able to make the remotest sense of pensions.”
So Andy Haldane revealed at a New City Agenda dinner on 18th May.
The UK pensions palava seems to go from bad to worse.
But somebody in the UK government has certainly got a ‘sense’ of pensions – and the common-sense to do something about it. Because there is good news at last for UK pensions. And it is coming straight from the top.
2016 UK Pensions Bill to Quell Rising Pensions Panic
A new Pensions Bill was announced in the Queen’s Speech of May 18, 2016 which aims to give the UK pension-holder a more stable future.
The Bill supercharges regulation of the so-called ‘master trusts’ at the heart of the UK pension system, as well as capping the early exit fees of some schemes and establishing a new Pensions guidance body.
The new Bill has emerged in response to mounting concern over the security of the UK pension system:
- First, towards the end of April 2016, there was the collapse of UK retail favourite British Home Stores – and the revelation of a £571m pensions ‘black hole’ that the Telegraph reports could cost the UK’s ‘pensions lifeboat’ (the Pension Protection Fund) £300m to fill.
- Shortly afterwards, fresh financial figures from The Pensions Regulator (TPR) revealed that many older types of final figure pension schemes were sinking into what investment firm Hargreaves Lansdown have dubbed the ‘dire state’ of a total liability of over £300bn – with their joint deficit mushrooming by 35% in the past three years.
- And then the Commons Work and Pensions Committee reported on 15th May of “a very real danger that ordinary scheme members could lose retirement savings” after “gaps in pension law and regulation have allowed potentially unstable master trusts on to the market.” The BBC reports that “only nine of 72 master trust schemes are listed … as qualifying for their Kitemark.”
Pensions Regulator Pleased by Pensions Bill
On the face of it, the Pensions Bill is great news – because, at the very least, an attempt has been made to address the explicit concerns of the Commons Work and Pensions Committee; the committee asked for a Bill, and they got it.
Lesley Titcomb, CEO of The Pensions Regulator (TPR), has certainly welcomed the Bill, having “voiced concerns for some time about the need for stronger legislative standards for master trusts.”
Titcomb said that TPR, “have been calling for a significantly higher bar regarding authorisation and supervision” and was pleased that the Bill proposed to authorise “the power to implement these safeguards.”
What Does it all Mean for the UK Expat with a Pension?
The simple answer – the Pensions Bill means what everything pensions-related means for the UK expat with a pension: the need for constant vigilance and regulatory back-up.
Having a pension nowadays is not what it used to be. There are many options to investigate. Regular monitoring of your options is key.
Here we have looked at the pros and cons of having a pension vs. investing in UK Buy-to-Let (BTL).
Beyond BTL, there are further options, including ‘self-saving’ – simply trying to save for your future yourself.
For the UK expat, of course, the pension situation has the added complication of the expat living abroad. And this brings up the big-shot option of – Qualifying Overseas Pensions Schemes (QROPs).
Not so long ago, QROPs were viewed as the absolute no-brainer for the expat pension-holder on the basis that QROPs allowed expats to effectively keep their existing pension as well as enjoy substantial tax exemption.
But the situation with QROPs has changed – and exactly what that means to the UK expat is something Holborn Assets are already investigating with clients on a day-to-day basis. Shortly, we will be publishing an overview of your options here on the blog. Stay tuned.