Professional trustees therefore have a great deal of responsibility, and will also be subject to liability in the event of a pension wind up, where a trust is brought to an end by dividing up remaining assets among the beneficiaries, or members and their relatives as specified under the scheme, in accordance with the trust deed, or what might be described as the ‘constitution’ of the fund.

The guiding principle for independent and professional trustees is that they must act in the best interests of the beneficiaries, and this applies throughout the pension wind up also. Trustees might be personally liable for any losses caused to members of a pension fund if it is found that these were the result of a ‘breach of trust’ during the pension wind up. A breach of trust in this context would be where the trustee sold off assets s/he was not authorised to sell, or secured a company’s debt in such a way as to cause loss when that should have been foreseen. In this way, failing to act or acting carelessly in the administration of the wind up can also amount to a breach of trust.

The liability of independent trustees in the event of a pension wind up is described in law as ‘joint and several’. As such, it is possible to be liable for one trustee to be liable for the actions of another, if that trustee should have taken steps to know and understand what was happening. In this way the liability of trustees is set up so as to place the onus on each trustee to check for potential breaches of trust. If a trustee becomes aware of a breach of trust, even if s/he had nothing to do with brining it about, s/he will be potentially liable. This will be the case unless there is a personal liability protection in operation under the pension scheme.

Special care must be taken by trustees during the unusual event of a pension wind up as liability might arise out of failure to ensure the proper identification of assets through to taking all reasonable steps to ensure the process is completed as quickly as possible. The Pension Protection Fund, the pension regulator, expects a maximum of two years as a wind up period. In particular trustees will be liable throughout this time for keeping beneficiaries of the trust informed as to what is happening to their pensions.

There are five stages involved in the FAS (Financial Assistance Scheme) process – notification, qualification, provision of member data, assessment, and payment. In the PPF assessment (Pension Protection Fund) process, there are also five stages, including a fairly lengthy assessment period of at least a year followed by a transition period and then takeover by the PPF itself.

The FAS was set up to help workers whose pension scheme collapsed or began to wind up between 1 January 1997 and 5 April 2005. The PPF was established in April 2005 to pay compensation to members of final salary pension schemes.

FAS payouts are a maximum of 90% of the pension entitlement, with a cap set at £30,297 for anyone whose entitlement begins between 1 April 2011 and 31 March 2012. If the PPF takes responsibility for a scheme, members will typically receive 100% of any pension compensation owed to them. The payout is 90% for those yet to retire, with the cap for the current financial year for any member aged 65 set at £33,219.

Notification and qualification are the first two steps in the FAS assessment process using form FAS A1. This provides some basic information about the scheme, usually provided by a trustee, manager, or professional advisor to the scheme. If the scheme is already wound up, a former trustee, manager or professional advisor can provide the information. Information can also be provided by a member of the scheme or their appointed representative, a surviving spouse or civil partner of a member of the scheme who has died.

Successful notification does not guarantee qualification, which is the next step, achieved by completing the second part of form FAS A1 and providing appropriate documentation, such as a copy of the scheme’s trust deed and rules. Once a scheme completes qualification, information about individual members and their pensions are provided over a time-limited three month period.

Only then can the FAS assessment stage begin. Eligible members are identified and the levels of assistance payable calculated. They are then notified and sent the Personal Details form FAS A2 to complete in order to confirm their personal details. Payments will not begin until FAS A2 has been completed and returned to the FAS.

PPF assessment begins following the receipt and validation of a Section 120 Notice – usually issued following an ‘insolvency event’, for example, the appointment of administrators to look after the affairs of the insolvent company. The PPF then has 28 days to decide if the pension scheme is eligible.

All data for the scheme is assessed for accuracy to make sure members receive the correct compensation payments. During this time, too, the scheme’s trustees are charged with keeping members up-to-date with progress, and for paying pensions at PPF levels during the assessment process. Once transition has been completed, and the scheme deemed to have insufficient assets, the PPF will take over the scheme.

A spokesperson for the consultancy PensionsFirst today suggested that assets held by benefit schemes of FTSE 100 companies have increased by 29 billion GBP’s over the past eight months, while liabilities have fallen 25 billion GBP’s.

Though this has decreased the funding deficit by 54 billion GBP’s to 80 billion GBP’s as investments in higher risk assets such as stocks, private equity or hedge funds, paid off, the report warns that the schemes are missing the chance to “de-risk” and could repeat the mistakes of 2008 when companies failed to capitalise on an increase in growth before the turmoil of the current financial crisis kicked in.

Benjamin Reid, Chief Executive at PensionsFirst commented:

“It is worrying to think that many (schemes) are leaving themselves open to this happening again” .

This failure to act may have a knock on effect that means companies may have to make up the shortfall, which in turn means a decrease in profits.

Everything from lavish holidays to premium pension plans was aimed at this group of people and many were happy to oblige by passing on some of their hard earned but ‘disposable’ cash.

Those that could and were inclined to, piled their money into pensions to protect their future lifestyle – and then came Black Wednesday and everything started to go pear shaped.

The financial crisis has made things even worse and a report from insurance company Aviva published today suggests that many of us are going to fall seriously short when it comes to retirement.

The over 55s are in the news for all the wrong reasons this time around as the financial crisis and all of the baggage it br¡ngs with it, including unemployment begin to take their toll on this once affluent age group.

The report reveals some devastating facts for the over 55’s in the UK, the Aviva Real Retirement Report shows that a quarter of that group are forced to dip into savings that would previously have been reserved for retirement income, to pay for unexpected expenses.

With banks offering very little worthwhile return on savings, the over 55s are most concerned about the cost of living above most other things, and over 60% are concerned over how they will pay unexpected expenses of £500 or more.

The report finds that over half have made no provision for such expenses and not surprisingly only 6% have made provision for long term care, 9% for private medical care and 23% for home maintenance.

Longer life expectancy a decade ago seemed like a good thing, but these days faced with thirty years of poverty until death doesn’t look so great.

From personal experience paying into a private pension during the 1980/1990’s proved to be  a complete and utter waste of time despite the promise of a better life in the future. Black Wednesday saw to it that the fund was rendered practically worthless, at least was worth less than the hard earned cash that had been put into it.

Following advise from my IFA I continued to make payments into seperate pensions for a couple of years during which time the fund never increased a penny. The payments were stopped and the pension frozen.

Many others are certainly in the same position, the pension market has hardly bucked the trend since. The current economic situation generally means that we are at least worse off than a few years ago and in a lot of cases out of work with little chance of employment because of age discrimination.

If you are 55 now there is another decade to face before the official retirement age in the UK, regardless of the losses they have heaped upon us over the previous ten years you can be sure that pension providers and banks alike will be urging us to take out more business with them to provide for the retirement years.

Is there an alternative?

alliance & leicester international

A survey by Alliance & Leicester International has revealed that a staggering 87% of ex pats are content to choose to retire in the country that they have chosen to reside in, with France (18%), Spain (13%) and the UK (12%), being the most popular retirement destinations.

With the cost of retirement in the UK estimated to hit £400,000, ex pats intend to fund their retirement in the sun through savings (27%), UK State Pension (23%) and Private Pension (20%). Property is a major source of retirement funding with 6% relying on rental income, 6% intending to sell a residential investment and 2% opting for an equity release plan.

When considering the key factors that contribute to choosing the perfect retirement destination, better quality of life was the most popular answer with 21%, but close behind is a better climate (20%) with value for money (14%) in third.

Major concerns regarding moving abroad appear to be proximity to the UK, with well over half of those surveyed choosing to live in Europe to be closer to UK relatives and friends. Health care and medical issues- in a foreign language, concerned 22% while finances and exchange rates would concern 12%.

Ten percent of those surveyed said that they would not consider moving abroad because of family ties in the UK. Also their lifestyle allows them to take summer vacations as well as the opportunity of skiing holidays in the winter months.

Lynette Byrne, Head of Marketing at Alliance & Leicester International, commented:

“It is interesting to see that many UK expats have settled in their new home, with 87% of UK Expats intending to retire abroad.  However, while some Expats might prefer life outside the UK, they are still very attached to friends and family thus settling in European destinations that are only a low cost flight away.

This research really highlights the international nature of society today and raises some interesting questions as to how people are going to manage their finances and protect their savings against interest rate fluctuations.

Expats who bank with Alliance & Leicester International can choose to hold their savings in a sterling, US Dollar or Euro account giving them not only access to ‘Best Buy’ rates but also the opportunity to shield their retirement cash from currency fluctuations.  They can also be safe in the knowledge that they can access their money using internet banking 24 hours a day no matter where they are living.”

law society

As divorce rates amongst the over sixties continue to soar, the Law Society warns potential divorcees to take legal advice or risk not having enough funds to see out retirement.

As the so called ‘Saga divorces’ have increased dramatically over the last ten years, the Law Society stresses the importance of the financial implications of separation for those approaching retirement and to urge those seeking divorce to get professional legal advice before proceeding.

With falling property prices and reduced assets following the credit crunch, pension funds could be hit. Confounding the problem is that older people have fewer opportunities to build up capital again after a divorce.

Law Society President, Robert Heslett says:

“Divorce at any stage of life is undoubtedly a stressful experience, but for the over 60s, bigger estates, complicated pension funds and less working years to build up assets again will exacerbate this stress.

A solicitor is the only professional who has the qualifications and foresight to work towards a fair settlement in complex divorce cases. It is especially important for those who have little experience of the financial side of their lives to seek reliable advice on getting what they need.”

The society also warns those considering divorce in later life to factor in the possibility of one or both parties needing specialist care or health treatment in the future and to make provision for this.

A total of 13,678 people over 60 were divorced in 2007, up from 12,636 the previous year and from 9,052 in 1997.

With all the concerns about pensions and divorce rates among pensioners, why not treat yourself to a relaxing cruise holiday now?

In a grim property market, student housing is one of the rare areas that can still offer good investment, it is unique in that it is under supplied and therefore able to guarantee increasing rental income. In contrast to other residential and commercial property where not only have capital values fallen but so too as the rental income.

As Property broker Savills point out;

“Pension funds had their fingers burnt in commercial assets where if a big tenant drops out, the entire building is vacant; but if a student drops out, you still have a hundred more ready to take the room.”

Savills also say that Pension fund managers are contacting them at the rate of two a week as  rents for other assets such as shops, offices and factories are forecast to fall 15% this year.

The FSA propose that the public would be given access to data regarding the number of complaints received, the main products or services generating the complaints and the outcome of those complaints.

Companies generating the most complaints will be required to publish a detailed account of complaints they have opened and closed, what percentage have been closed within two months and what percentage have been upheld.

Companies will be required to update details every six months which will then be published by the FSA. The information will be broken down into five areas of finance, banking, home finance, general insurance, life and pensions and investments.

The FSA are making the proposals in an attempt to help ‘raise industry standards in this important area’. FSA director of retail policy and conduct risk, Dan Waters says:

“Transparency is an important regulatory tool. Publishing complaints data will mean that people can learn more about how firms handle complaints and the frequency with which they arise.”

Personal Allowances 2009-10

These remain as announced in the Pre-Budget report November 2008. From the 6 April 2009 the income tax personal and age related allowances are increased to:

Age under 65 – £6,475
Age 65 to 74 – £9,490
Age 75 and over – £9,640

The income limit for aged related allowances (over 65’s) is increased to £22,900.

Blind person’s allowance increased to £1,890.

Personal Allowances 2010-11

The basic personal allowance will be reduced for taxpayers who earn more than £100,000 per annum.

Where an individual’s income is above £100,000 the basic personal allowance will be reduced by £1 for every £2 their income exceeds £100,000.

Income Tax Rates 2009-10

Starting savings rate 10%* – £0 to £2,440

Basic rate 20% – £0 to £37,400

Higher rate 40% – Over £37,400

* There is a 10p starting rate for savings only. If an individual’s non savings taxable income exceeds the starting rate limit, the 10p starting rate for savings will not be available for savings income.

New 50% Income Tax Rates from 2010-11

From 6 April 2010 a new income tax rate of 50% will be applied to taxable income in excess of £150,000.

Capital Gains Tax 2009-10

The annual exempt amount for individuals is £10,100 (and for most trustees £5,050)

Inheritance Tax 2009-10

The individual IHT allowance is increased to £325,000.

Pensioners Taxback Campaign

From autumn 2009 HM Revenue & Customs will be targeting pensioners who receive the Pension Credit to help them reclaim tax they may have paid in error from bank or building society interest they have received.

ISA’s

2009-10 The ISA limit is increased to £10,200 (up to £5,100 can be saved in cash) restricted to people aged 50 or over.

2010-11 The limit is increased to the same level for all age groups.

Pensions – limiting tax relief at higher rates

From 6 April 2011 the Government intends to restrict tax relief for individuals with an annual income of £150,000 or more. Relief will be withdrawn gradually so that taxpayers earning over £180,000 will effectively achieve a 20% tax deduction, the same as a basic rate tax payer.

Additionally, from 22 April 2009, if the following conditions apply:

1. Your income is over £150,000

2. You make additional contributions in excess of your existing ongoing contributions, and

3. Your total pension contributions in the year exceed £20,000 (including contributions made by the employer).

Then any higher rate tax advantage, on additional contributions above the £20,000 limit, will be subject to a special annual allowance tax charge that will recover tax relief given at above basic rate.

Excise Duty increases

Alcohol Duty – From midnight 22 April alcohol duty will rise by 2%, equivalent to:

1p on a pint of beer
13p on a 75cl bottle of spirits
4p on a 75cl bottle of wine

Tobacco Duty – After 6pm 22 April tobacco duty will rise by 2% which will add 7p to a pack of 20 cigarettes.

Fuel Increases – Duty increases will add 2 pence per litre to the cost of unleaded petrol and diesel from 1 September 2009.

Stamp Duty Land Tax

The present exemption from SDLT of residential property sales up to £175,000 is to be extended to 31 December 2009. After this date the SDLT threshold will revert to £125,000 (£150,000 in disadvantaged areas).

Goodwin’s refusal to consider giving up his massive RBS pension has caused anger from politicians of all parties, the media and not least from the general public.

The attack comes as protesters plan demonstrations at the G20 summit in London next week, with flyers titled ‘Smash the Banks’ circulating on the  internet.

In a further twist to the RBS fiasco, with the bank now majority owned by the government, it means that the tax payer is now contributing towards security for Goodwin’s home at a cost of £290 per month. A spokesman for the bank says this is standard procedure for all departing senior executives.