MP calls for fair deal for bmi staff

Debate raises pensions puzzle

Edinburgh North & Leith MP Mark Lazarowicz MP led a debate in Parliament today to call for pensions justice for bmi staff.

A number of bmi staff – some of whom are Edinburgh-based – saw their pensions significantly reduced after takeovers first by Lufthansa, then by IAG, the group that includes British Airways.

Lufthansa is paying compensation to members of the bmi pension fund but it is to be subject to tax and National Insurance by HMRC. One constituent lost out substantially because of this and contacted the North & Leith MP: their discussion resulted in today’s Westminster debate.

Speaking after the debate, Mr Lazarowicz said: Longstanding staff, some of them based here in Edinburgh, have seen their pensions cut significantly and are now losing out again as the compensation is taxed by HMRC.

“The Government has said it has no choice but to apply the tax rules but it is the Government itself and Parliament that decide what the tax rules are.

“This is a matter of justice and has much wider implications for pensions: if a perfectly solvent company takes over another solvent company with pension liabilities, how is it possible for both companies to be freed of responsibility for those pension liabilities?

“The Government should act to allow bmi staff to receive the compensation in full – employee pensions built up over years should not be wiped away amidst commercial wheeling and dealing.”

When bmi was sold to Lufthansa in 2009 there was no obligation on it to fund the pension scheme although it was prepared to continue to do so to a limited degree. When Lufthansa then sold bmi to IAG in 2012, the pension fund was excluded from the deal.

At that point it entered the public Pension Protection Fund which does not pay all of the pension entitlement built up where staff have not yet reached retirement and some staff have lost as much as 50% of their entitlement even after the Lufthansa compensation.

In the case of Equitable Life, the Government decided to pay compensation tax-free to those members who lost out and in another taxation issue, improvements to listed buildings, it set up a fund to compensate for the imposition of VAT.

Osborne: pensioner bonds will pay 'best available interest'

Chancellor of the Exchequer George Osborne has announced that that the government’s 65 plus bonds will pay savers the best available interest rates.

One year bonds will pay an annual interest rate of 2.8%, while three year bonds will pay 4% – both rates are significantly higher than any others currently offered in the market.

A key part of the government’s long term economic plan is to support savers at all stages of their lives. That is why the government announced at Budget 2014 that National Savings and Investments (NS&I) will launch two fixed-rate, market-leading savings bonds, which will be available in January 2015.

These bonds, the rates of which were confirmed on Friday, will provide certainty and a good return for those who have saved all their lives and now rely on their savings in retirement.

With an investment limit of £10,000 per bond per person, the government expects that the 65 plus bonds will help an estimated 1 million pensioners. The bonds will be available directly from NS&I by post, phone or online.

The Chancellor made his announcement during a vsit to Eastleigh, where he met with pensioners to discuss the benefits of the 65 plus bonds. The visit formed part of the Chancellor’s tour around Britain aimed at highlighting the policies announced in Autumn Statement 2014.

Mr Osborne said: “A key part of our long term economic plan is to support savers and boost hardworking peoples’ financial security at all stages of life. That’s why the government is introducing savings bonds for people aged 65 and over, and why we’re confirming today that these bonds will pay the best available interest rates. They will give hundreds of thousands of older savers the certainty and comfort of a good return over the life of their investment”.

Investors can hold bonds jointly, but this will still count towards their individual limits – i.e. a couple could hold £40,000 jointly.

There is a minimum investment of £500 per bond.

Visit www.nsandi.com for further details.

Pensions: millions to benefit from impartial advice

Millions of people will benefit from a right to free and impartial guidance on how to make the most of the new pensions choices that come into effect in April 2015, Chancellor of the Exchequer George Osborne announced today. This follows the Westminster government’s consultation on how best to deliver the radical changes to how people access their pensions announced at the Budget.

In total 18 million people will be able to benefit from the changes to pensions should they wish to do so.

From April 2015 300,000 individuals a year with defined contribution pension savings will be able to access them as they wish when they turn 55 – subject to their marginal rate of tax.

This is the biggest change to how people access their pensions in almost a century, removing the effective requirement for many to purchase an annuity.

The consultation since the Budget has shown that these changes have been overwhelmingly well received, with individuals supporting greater freedom and choice, and the pensions and insurance industry ready for the challenge of creating new, flexible products, which better suit individuals’ needs.

The government’s response to the consultation today confirmed that:

the guaranteed guidance on pensions choices will be provided by independent organisations rather than pensions schemes or providers
even more people will be able to benefit from the new pensions flexibilities as the government will continue to allow individuals to transfer from private sector defined benefit schemes to defined contribution pension schemes – subject to two important new safeguards
a new override will be introduced so that pensions schemes are able to offer individuals flexible access to their savings and the pensions tax rules will be amended to allow providers to develop new retirement income products that are tailored to the needs of individual consumers

Chancellor of the Exchequer, George Osborne, said: “It’s right to support hard working people that have taken the long-term decision to save for their future and I’m pleased that the responses we had to our proposals on making pensions more flexible have been overwhelmingly positive.

“We’re making sure that people have the right support to make their own choice about how best to finance their retirement and I’m pleased to confirm that everyone with defined contribution pension savings reaching pension age will get free and impartial guidance on their range of available choices at retirement.”

The government wants to ensure that guidance is trusted by consumers, and the vast majority, including most of the financial services industry who responded, said that consumers would not trust guidance given by a person or organisation with a vested interest in selling a financial product or service. It will bring together a range of delivery partners, including the Pensions Advisory Service (TPAS) and the Money Advice Service (MAS), which already provide guidance and support to consumers.

People with private sector defined benefit savings will continue to be able to transfer to defined contribution schemes (excluding pensions that are already in payment), alongside two new safeguards to protect both pension schemes and the individuals transferring out.

Guidance will be offered through a broad range of channels, including web-based, phone-based as well as face-to-face, and to remain free to the consumer will be funded by a levy on regulated financial services firms.

The Financial Conduct Authority (FCA) have also today published a paper which consults on the elements of the guidance guarantee for which the FCA will be responsible: setting and monitoring the standards with which guidance providers will have to comply, making and enforcing rules on how contract-based schemes signpost to the guidance services, and adjusting the FCA’s existing conduct rules to support the introduction of the guidance guarantee and in response to the new flexibilities.

Two new safeguards are being introduced to protect both individuals and pension schemes in relation to defined benefit to defined contribution transfers: a new requirement for an individual to take advice from an impartial financial adviser regulated by the FCA before a transfer can be accepted; and, new guidance for trustees on the use of their existing powers to delay transfer payments and take account of scheme funding levels when deciding on transfer values.

HM Treasury also published the following guide today:

Pension Reforms: Eight things you should know

Understanding the pension system can be complex sometimes. We’ve explained how the new system will work and what it means for you.

1. We’re completely overhauling the system so you can take your pension how you like

In order to create greater choice and flexibility for people who have saved hard for their pension, we announced at Budget 2014 a series of changes to how people access their pension.

From April 2015, no matter how much you decide to take out from your pension after retirement, you will be charged the normal rate of income tax you pay on your salary (so either 0%, 20%, 40% or 45%) rather than the previous tax charge of 55% for full withdrawal.

2. 25% of your pension pot will remain completely tax-free, as it was before

You’ll be able to access 25% of your pot in one go without paying any tax.

3. We previously announced this would apply just to people with ‘defined contribution’ pensions

This is a type of pension also known as a ‘money purchase’ scheme.

This is when the money you and your employer pay in is invested by a pension provider chosen by your employers. The amount you get when you retire usually depends on how much has been paid in and how well the investment has done.

4. We’ve now announced that people who have a ‘defined benefit’ scheme will benefit too

A ‘defined benefit’ pension is typically a promise of a certain level of pension in retirement which is linked to your salary.

We’ve now announced that people in the private sector or in a funded public sector scheme will still be able to transfer from a defined benefit pension scheme to a defined contribution one if they want to, meaning they can benefit from the changes.

This means that around 18 million people will ultimately be able to withdraw their pension flexibly should they wish to do so.

5. Everyone who will be able to take advantage of the new reforms will be able to access free and impartial guidance

This will help people make confident and informed choices on how they put their pension savings to best use.

This guidance will be available through a number of different channels – via an online tool, over the phone, or face to face. Individuals will be able to choose the channel, or mix of channels, that they find most convenient.

It will be entirely impartial, so won’t be given by anyone who could be trying to sell you a product.

6. Your pension provider or scheme will be required to tell you about the guidance and how to access it

Accessing the guidance will be arranged by your pension provider, who will be required to tell you about it.

7. The changes will come into effect from April 2015

If you are over the age of 55, or will be from April 2015, you will be able to take advantage of the new system from then.

If you’re younger than 55 then you will be able to take advantage of the new system when you do reach 55.

8. You don’t need to do anything until then

If you’re thinking about retiring soon, you don’t need to do anything in the meantime, but we’ve also made other changes to help you save until then, such as our reforms to ISAs.

You can find more information about the pension reforms by reading our factsheet we published at Budget explaining the differences between the new changes and the old system, or more details on our response to the consultation.

Budget: ‘government is leaving retirement to chance’

‘Pensions ‘fiddle’ proves government is leaving retirement to chance‘

Britain’s biggest pensioners’ organisation The National Pensioners Convention (NPC) say pension changes in the recent Budget will simply store up bigger problems for later. The group adds that the private pensions industry might ‘make a killing’ but changes proposed by the Chancellor do not address the underlying problems of funding an adequate income in retirement.

The NPC’s main objective is to promote the welfare and interests of all pensioners, as a way of securing dignity, respect and financial security in retirement, and the organisation believes that the Chancellor’s real intention is to place further responsibility for retirement onto individuals and the market, rather than seeing it as a role for the government. The campaigning group adds that welfare caps, pensioner bonds and changes to pensions prove government ‘is leaving retirement to chance’.

Dot Gibson, NPC general secretary said: “Pensioners will be concerned that benefits such as the winter fuel allowance, cold weather payments and the Christmas Bonus have all been placed into the welfare cap, which could lead to cuts in the future, at a time when fuel bills in particular are continuing to rise. The announcements regarding a new Pensioner Bond and changes to ISAs were also rather rose-tinted. 55 per cent of all pensioners receive less than £10 from their savings and 29 per cent of older couples have less than £1500 put aside.

“The idea that older people therefore have huge amounts of money to invest is rather optimistic, but the most serious change was related to defined contribution pensions. These reveal that more has to be done to improve the prospects for future pensioners. The state pension is one of the worst in Europe and the high water mark of decent company pensions has long gone.”

She went on: “However, allowing people to take all their pension pot doesn’t make the pot any bigger and belies the fact that the average worker will have a pension pot of little more than £30,000 to cover all of their retirement. Enabling people to take their pensions from aged 55 also shows the chancellor has realised there is a huge problem coming down the line which has to be funded. His plans to raise the state pension age to 68 will create an army of older workers, who if lose their jobs in their late fifties will be unable to find work. The only way they will have to fund this period of limbo until they reach retirement age will be to use their pensions – which might solve the problem in the short-term but will store up bigger problems later on when their money starts to run out.

“Once again it’s a pensions’ fiddle and those left to carry the burden will be some of the lowest paid workers.

“The reality is money purchase defined contribution pension schemes are simply not the answer to funding a decent income in retirement. The private pensions industry might make a killing from the schemes but most workers end up with much less than they thought.”

For further information about the National Pensioners Convention visit www.npcuk.org or email npc.scotland@yahoo.co.uk

Letter: Warning – pensions under attack

Dear Editor

Pensioners of today and tomorrow, be aware: the government is laying the ground for further attacks on pensions and pensioners benefits.

First, they have to divide opposition, for example by saying they wish to be fair by stopping the wealthy getting the winter heating allowance. It sounds fine, but does that mean the introduction of a means test for everyone to qualify? And who sets the level?

Other benefits, such as travel passes, television licence and free medicine prescriptions – things to help pensioners maintain some quality of life – are threatened: the government is looking to see if the nation can ‘afford’ them.

The campaign of setting one section of people against another is well-prepared, with millions of words and pictures; every person working or retired is the target. Just a few figures:

31% of the population are of retiring age; not all get a full pension as many qualifying conditions apply
The government is raising the age of retirement for women from 60 to 65 by 2018 and for both men ad women to 66 by 2020, with increases to 67 and 68 later on
The ‘full’ state pension is only approximately one sixth of the average age
The amount paid out in pensions from the total wealth produced in one year is approximately 5%, yet the percentage of the population’s pensioners is 31% (and most have contributed to a pension scheme throughout their working lives).

Just two further points: today’s working population, who now produce all the nation’s wealth, were raised, loved and cared for by our pensioners. Today’s working population and pensioners combined have massive voting power: use it!

Tony Delahoy

Silverknowes Gardens

Don’t fall for early pension cash scam

Have you reached an email or letter recently offering you the opportunity to make some quick cash by surrendering your pension plans early? In these cash-strapped times the offer of ready money may sound tempting, but the chances are the deal really is too good to be true.

A hard-hitting information campaign for consumers and pensions professionals has just been launched as part of an ongoing multi-agency crackdown on predators claiming to be able to release pensions cash as a loan or lump sum before the law allows.

According to The Pensions Regulator, the perpetrators often work alongside ‘introducers’ or ‘advisers’ who try to entice the public with spam text messages, cold calls or website promotions into transferring their existing workplace or private pension with the promise of being able to release a portion as cash before the age of 55.

People may be misled or not properly informed that tax charges and fees can erode their pension pot by more than half, leaving them with little to live on in retirement.
The remainder of their funds are likely to be invested in highly dubious and risky, unregulated investment structures, often based overseas.

The amount that has been ‘liberated’ from pension schemes in this way is known to be in the hundreds of millions of pounds, with thousands of members affected.
To combat this, The Pensions Regulator has worked with other agencies to produce information, carrying distinctive scorpion imagery, illustrating the threat to people’s pensions if they are taken in by such offers.

The new information includes:
A warning insert that administrators and pension providers will be asked to include in the information they provide to members who request a transfer of their pension.
A more detailed information leaflet for members looking to understand the consequences of these offers, which will be hosted on The Pensions Advisory Service website.
An action pack for pension professionals, including a checklist and examples of what to look out for.

Where administrators receive a transfer request and detect the warning signs of liberation, such as pension money being passed back to the member before age 55, they may wish to consider whether to make the transfer, and report their concerns to Action Fraud. The action pack includes more information to help them with this decision.

If you think you may have been a victim, or if you have information regarding pension liberation fraud, contact Action Fraud on 0300 123 2040.

Government ‘caught red-handed’ over pension reforms

Hundreds of local women will lose out as a result of the latest pension reforms, according to North and Leith MP Mark Lazarowicz.

House of Commons Library research has revealed the true cost of last week’s pension reforms to 500 women in Edinburgh North and Leith and 2,900 women in Edinburgh as a whole who are set to lose out. Five hundred local women born in 1952 and 1953 will not be eligible for the single tier pension since they are due to retire in 2017, before the state pension reforms come into effect. Men born during the same period, however, will qualify.

The news comes after the Government claimed that “we have to be absolutely transparent [about who will lose]” yet it has failed to make clear the full consequences of the planned reforms.

The unravelling of this latest pension announcement is the second time this government has been caught trying to hide the full impact of its changes for pensioners following the Granny Tax, according to Mr Lazarowicz.

He added: “Ministers have been caught red-handed hiding the truth on pension reforms. This government’s pension changes have hit hardworking women in Edinburgh time and again and these reforms are no different. 500 women will be nearly £2,000 worse off compared to men, but instead of being honest with the women that will lose out this government tried to bury the truth. Once again Ministers have been caught with their hands in pensioners’ pockets – it’s about time this government had the decency to be honest about who will lose out under their plans.”