The Dubai Quality Award is based on the

The Dubai Quality Award is based on the Excellence Model of the European Foundation for Quality Management (EFQM). The latter has been successfully applied in private and public sector organisations since 1992.


Guidance guarantee not enough, say 62% o

Guidance guarantee not enough, say 62% of pension schemes

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Most pension schemes believe that the guidance guarantee that was announced in Budget 2014 will not provide adequate support for defined contribution (DC) members ahead of retirement, research by Mercer has revealed.
According to Mercer’s survey of more than 300 employers and trustees, only 62% of schemes surveyed said that the guidance guarantee will be enough to support members.

Only 38% plan to simply facilitate access to the free independent guidance, while 62% will offer additional support, although how they intend to deliver this will vary by scheme.

Mercer UK DC & savings product leader Roger Breeden said: “Receiving generic guidance provided shortly before retirement will be useful, however, for most DC savers it will be too late. To increase their chances of getting a decent pension individuals need to make their investment and contribution choices at a much earlier stage.
“Trustees and employers need to review their communications and support to ensure employees get a full picture of the options available to them and the consequences of these early decisions. Once the changes announced in the Budget are fully defined they also need to check that all communications material meet the new requirements.”
Of the schemes surveyed, 76% said they expected less than 20% to transfer out and only 16% expected more than 40% to do so, when asked whether they expected many transfers from defined benefit (DB) to DC schemes.
Breeden said: “Our experience suggests that the actual number of transfers from DB to DC would be around 30%, so not dissimilar to what our participants expect.
“Such transfers, especially in great numbers, could have an impact on asset liquidity, administration processes and the employer covenant, so regular monitoring and building it into risk management programmes is essential.”
First published 14.08.2014

Legal and General has reversed a decisio

Legal and General has reversed a decision to block a transfer to a pension scheme which has been subject to a number of refusals by life companies over ‘pension liberation’ concerns, and which was subject to a complaint with the Pensions Ombudsman.

In correspondence seen by FTAdviser between Manchester-based Warwick and Eaton, which administers the SCCL scheme subject to the blocks, the Pensions Ombudsman and L&G, it is revealed that the provider changed its stance in April, six months after it had initially decided to block the transfer.

A complaint that had been with the Ombudsman – one of 16 raised in relation to blocked transfers by a number of life companies – was subsequently withdrawn.

Under the Pension Scheme Act 1993, a transfer must take place within six months or theprovider risks incurring a penalty. L&G has previously said that where pension liberation is suspected but not proven, the interpretation of this rule becomes a “grey area”.

Simon Walker, director at Warwick and Eaton said in response to L&G’s decision: “We are delighted that L&G took another look at the scheme. They reviewed what we’d said and then decided to transfer.”

Legal and General declined to comment.

Earlier this year it was reported that number of providers were blocking transfers to the SCCL scheme, including major life insurers such as L&G, Aviva and Standard Life.

Warwick and Eaton has now referred 16 cases to the Ombudsman against providers with regard to blocked transfers. However, the firm said these cases still have not been attributed an investigator as delays continue over the publication of a number of complaints.

The Ombudsman has twice delayed the publication of a number of decisions – originally around 45 but now believed to be more than 80 – from an original estimate of May. A further update is expected this month, when publication is likely to be postponed further.

A spokesperson for Aviva said: “The cases remain before the Pension Ombudsman. As a result we have no comment to make at this time.”

A spokesperson for Standard Life said that the firm was unable to comment on individual cases, but added: “We are fully committed to preventing our customers falling victim to pension liberation schemes.

“The decision on whether or not to transfer to a scheme is based on a number of factors, including Pensions Regulator guidance, HMRC advice on the status of the receiving scheme and whether HMRC are aware of any concerns regarding potential liberation.

“We will not make a transfer payment in any case where we suspect that liberation may be involved and in total we have refused over 370 transfers to date.”

Mr Walker added of schemes which are currently blocking transfers: “It doesn’t really matter to us – they are big schemes but for members involved they are laboured with admin charges and it seems quite wrong.
“To us admins it’s frustrating and of course we’d like the members to be in the scheme. They shouldn’t be charging and making profits out of a member while they are awaiting a decision.

“Something appears very wrong… Clarity is what is needed from the Ombudsman in how they are going to act. It seems stupid to wait for the Ombudsman if you know they are never going to report.”
Current rules mean HMRC typically ‘registers’ occupational pension schemes with little to no formal checks, meaning firms are often left in a difficult position if the watchdog refuses to close a scheme during the six-month delay window.

New powers handed to HMRC at this year’s Budget broaden its ability to refuse to register a pension scheme if it believes it will be used as a liberation vehicle.

HMRC denies plans to ‘charge IHT before

HMRC denies plans to ‘charge IHT before death’

From Tax & Regulation Aug 12 2014 BY: Simon Danaher , Online Editor , International Adviser

HM Revenue & Customs has denied claims it plans to collect IHT from an estate before the individual has died.

Earlier this week, a number of mainstream UK media outlets suggested the Revenue was looking to send so-called accelerated payment notices to people looking to mitigate inheritance tax using a trust, before they had died.

While this is true to some extent, a spokesperson from HMRC pointed out the notices would only ever be sent to those using tax avoidance schemes registered under the Revenue’s Disclosure of Tax Avoidance Scheme (DOTAS) and, even in those circumstances, if the avoidance relates to IHT on an estate at death, it will only come into effect after death.

The spokesperson added: “The Government is not making any changes to the collection mechanism for inheritance tax, which is payable after death. In no circumstances is the Government seeking payment of these charges during the taxpayer’s lifetime. The only IHT charges currently payable before death relate to trusts. This is an established feature of the IHT and trusts regime and is not changing.

“The proposals would only affect a small minority of wealthy individuals actively seeking to avoid inheritance tax through the use of an avoidance scheme that has been disclosed under DOTAS.”

The claims made by the newspapers were based on two consultation documents released earlier this summer – “Inheritance tax: A fairer way of calculating trust charges” (open until 29 August) and “Strengthening the Tax Avoidance Disclosure Regimes” (Open until 23 October).

Paragraph 2.58 of the DOTAS consultation states: “For IHT chargeable following death no Accelerated Payment notice could be issued until after the person had died and an IHT account had been delivered, irrespective of when the scheme was made available by the promoter or implemented by the user.”

Accelerated payment notices are issued when a taxpayer has entered into a tax avoidance arrangement that has been notified to HMRC under the disclosure of tax avoidance scheme rules.

Those who receive an accelerated payment notice will have to pay the tax due within 90 days.

While not as aggressive as some reports suggest, the IHT consultation does propose the introduction of a number of restrictions on the use of trusts to mitigate IHT.

These include introducing lifetime charges on:
Transfers of property (cash etc) into a trust that exceed the nil-rate band (£325,000) in a seven year period. [Only chargeable property)
10 yearly charges based on the value of property in the trust
Exit charges – where property leaves a trust

Employers short-changing workers in cash

Employers short-changing workers in cash for pension swap

Employees shouldn’t be encouraged to transfer out of generous defined benefit pensions.

Unscrupulous employers are using changes to the retirement rules to short-change workers by offering them lump sums in place of their pension.

The excitement around the relaxation of the pension rules to give retirees access to their entire pension pot as cash has led some employers to offer members of generous defined benefit (DB) pensions cash to transfer out of the scheme. While the change in the rules is great for those in defined contribution (DC) pension there are very few instances where transferring out of a DB scheme is a good idea.

DB pensions pay a set amount of pension on retirement, based on number of years worked and salary level. As individuals live longer, the burden of these pension payment grow as the company has to continue funding retirements of former employees that could run for decades.

Hargreaves Lansdown head of pension research Tom McPhail said since the pension changes were announced in the Budget, he had seen an increase in employees with DB pensions being offered cash sums – known as enhanced transfer values – to leave the pension.

While these sums are supposed to be calculated on how much the pension would be worth, he said many schemes were short-changing the employees.

He said some of the transfer amounts being offered were ‘insultingly low’, but were being made on the back of the interest around taking pension cash.

‘I have seen a couple of examples where it looks like schemes want to tidy up their books and are doing an enhanced transfer exercise to encourage people off the books,’ he said.

‘Some of them were offering transfer values that were insultingly low and I do now know how they can justify offering [those amounts].’

Small pots

McPhail said employers were also trying to push workers into taking ‘trivial commutation lump sums’.

Under the trivial commutation rules retirees can take a pension worth £10,000 or less in cash. You can take three pensions of this level as cash meaning a total of £30,000 can be taken under the trivial commutation rule.

Before the Budget individual pots of £2,000 or total, cumulative pots of £18,000 or less could be taken as cash.

McPhail said employees were automatically being offered trivial commutation lump sums without other options being presented to them.

‘We have seen some papers [from employers] where they say here is the trivial commutation lump sum…they are making people feel like they have no option [but to take the cash],’ he said.

Get advice

Instances of employers offering cash for pensions could rise in coming months, warned McPhail. This is because next April a rule change means anyone wanting to transfer out of a DB pension must first be given regulated advice.

‘From next April employers will be required to offer regulated advice to individuals… if I was a scheme administrator or actuary looking to balance the books I would be keen to get rid of [DB scheme members] now,’ said McPhail.

He added that there were very few instances where transferring out of a DB was beneficial. An individual would have to be in poor health and have no dependents in order to benefit from transferring into a personal pension, he said.

If your employer approaches you offering a cash swap for your pension, McPhail said you were well within your rights to request the company pays for financial advice. Advisers charge ‘the best part of £1,000’ for advising on DB pension transfers on average.

‘Get regulated advice and even challenge your employer about it and ask them to get you regulated advice to see if it is in your best interest to take the transfer,’ he said.

‘I do not see how you can transfer out of a final salary scheme without having it analysed by an expert first… it is only reasonable that if an employer initiates [the transfer] then they should pay for [the advice].’…

A growing number of British expats are l

A growing number of British expats are likely to “sever financial ties with the UK” should the government introduce plans to make them pay tax on UK-earned income, forecasts the boss of one of the world’s largest independent financial advisory organisations.

The prediction comes from Nigel Green, founder and chief executive of deVere Group, which has 80,000 mainly expatriate clients.

The warning following reports that Chancellor George Osborne is preparing to prevent non-residents from offsetting income generated in the UK against their £10,000 personal allowance.

Under current rules, expats are able to offset income earned in Britain, such as income earned from renting out their properties, against the personal allowance.

The measure, which has now been put out for consultation, was first mooted in the Budget in March and could affect up to an estimated 400,000 expatriates.

Mr Green comments: “Historically, expats have maintained some UK investments due to the tax advantages they have received. However should this new rule come into effect, it can be reasonably expected that more and more expats would consider severing financial ties with the UK as there would be fewer than ever incentives for them to keep a financial base in Britain.

“If this latest benefit is scrapped, there would be, typically, no real tax advantage for expats to invest in UK property or UK pension schemes.

“If expats restructure their finances offshore, as I strongly suspect many will to take advantage of the important associated benefits, they will probably look to cut all what the Treasury is calling ‘strong economic connections’ to the UK – and this, for many, will include transferring their pensions out of Britain.

“As such, and because expat pensioners are those who would suffer the biggest hit from the proposed changes, there is likely to be a significant uptick in the already strong demand for HMRC-recognised Qualifying Recognised Overseas Pension Schemes, or QROPS.”

Amongst other major benefits, QROPS give the expat greater tax efficiency, investment flexibility and a choice of currency in which the pension is paid out.

Established by HMRC in April 2006, there has been a steady year-on-year increase in demand for QROPS. Currently around 10,000 expats, or those who are imminently planning to reside overseas, move their pensions each year.

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