Pension News 04/07

June 13th, 2007 by JCB
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PENSIONS NEWS

The Secretariat

Well, both Richard Wiscombe and I are still located at Buckhurst House in Sevenoaks. The lease comes up for renewal later this year and I am very pleased to say that the Trustees have agreed that we can stay, as I really do not think either Richard or I could take the upheaval involved in moving the office. Just the thought of dragging all the old files out of the attic is enough to make one shudder.

Benefit Statements

Members should have, by now, received their annual benefit statement for 2006. These statements are based on the member’s highest (usually latest) Final Pensionable Earnings with service projected to normal retirement age.

P60s

P60s in respect of our pensioners and widows will be sent out at the end of April. Pilots who retired on or after 6 April 2006 will be sent additional information in respect of the Lifetime Allowance.

Change of Address

All members are requested to advise the Secretariat, in writing, of a change in their address. For deferred members this is particularly important as recent research from Aon Limited indicates that a third of workers risk losing the pension they are entitled to and falling victim to ID fraud if they do not inform their pension provider of their new address.

P.N.P.F. Rules and Explanatory Brochures

Changes in the P.N.P.F. Rules arising from tax simplification and the 2004 valuation have now been finalised, agreed and adopted by the Trustees. These changes have resulted in a major revision of the P.N.P.F. Rules which have now been sent to the printers. Therefore, I hope, members can expect to receive their reprinted copy of the Rules and Explanatory Brochure in the not too distant future.

Investment Strategy

In November 2006 the Trustees received a presentation from EIM, a “bespoke” hedge fund of funds provider with a view to implementing the third phase of their investment strategy. The first tranche of funds was disinvested from Schroders and transferred to EIM on 1 April 2007. This will be followed by a further two tranches on 1 May and 1 June respectively.

Budget March 2007

In March 2007 the Chancellor delivered his 11^th (and final) budget. The general points of interest are:

Financial Assistance Scheme (FAS)

The Chancellor announced that the present Financial Assistance Scheme budget of £2bn would be increased to £8bn in order that the 125,000 people who had lost much of their benefits through membership of underfunded schemes sponsored by insolvent employers would now receive help. The cap on assistance will be increased to £26,000

(I suppose this is not surprising considering the recent High Court ruling stating the government’s rejection of the Parliamentary and Health Service Ombudsman report was unlawful)

Lifetime Allowance

The Lifetime Allowance (LTA) rises to £1.6m while the 2007/08 annual allowance is set at £225,000.

Tax Allowances

Single Person

Aged under 65	£5225
Aged 65-74	£7550
Aged 75+	£7690

Married Couple’s Allowance

Aged under 75	£6285
Aged 75 and over	£6365
Age income limit	£20,900

Blind Person Allowance

£1730

Income Tax Bands

Starting rate	10%	0 – £2230
Basic rate	22%	£2231 – £34,600
Higher rate	40%	Over £34,600

Review of Pensions Regulations

Two external reviewers have been appointed by the Government to carry out a deregulatory review of pensions regulations. In their consultation paper they state the aim of the review is to foster an environment where employees are adequately protected, but where trustees and employers can plan long-term with some confidence regarding the costs of the pensions promise without being stifled by excessive regulation in the design and administration of the provision. They are committed to preserving those rights that have already accrued.

The terms of reference for the review are ‘to examine regulation with the aim of simplifying and reducing the burden of legislation governing private pensions’.

Is it just me or is anyone else getting the feeling of ‘déjà vu’? Was this not what the Pensions and Finance Acts 2004 and tax simplification suppose to achieve?

Soap Box

Treasury documents released under the Freedom of Information Act show that the Chancellor, Gordon Brown, received not less than 4 papers warning him about the damage his £5bn (now closer to £8bn) a year raid on British pension funds would inflict. Not only has it ruined a pensions’ system once considered the best in the world it has struck at the heart of public confidence in long-term saving.

It is true that the stock market slump of 2000-2003 added to the pension fund problem and that lower interest rates brought about a fall in investment return, but one has to wonder if these two developments would have impacted on pension schemes so severely had there not been the withdrawal of tax relief on pension fund dividend income.

Some industry pundits claim that Gordon Brown must accept responsibility for the destruction of the pensions industry.

(They may say so, I could not possibly comment)

Debbie Marten

Debbie@pnpf.co.uk