From 1st January 2013, the Financial Services Authority will require all financial advisers to hold a valid Statement of Professional Standing before they give regulated investment advice.

A Statement of Professional Standing is provided by an Accredited Body, such as the Institute of Financial Planning, and confirms an adviser has the correct qualifications, has kept their knowledge up to date and adheres to the FSA ethical code of conduct.

PageRussell is one of the first firms in the country to have all their advisers  awarded a Statement of Professional Standing.

Check our advisers’ Statements of Professional Standing.

IFP is the professional body for Financial Planners in the UK. It awards this title only to firms which it has assessed as demonstrating the highest professional standards of Financial Planning service and advice to its clients.

Richard Page CFP^CM comments : “PageRussell is delighted to have achieved this powerful recognition of our commitment to professionalism and outstanding client service. Our clients expect and deserve only the highest standards of advice and service as we work with them to plan their finances so that they can achieve their goals in life. We’re proud to deliver a service which they value and which has now been externally recognised too.”

When looking for professional Financial Planning firms in the UK, consumers should look for Accredited Financial Planning Firms as the hallmark of quality, and to find the services of CERTIFIED FINANCIAL PLANNER^CM professionals, the only globally recognised standard of professionalism for Financial Planners.

The only constant in the world of pensions is change.  The rules for pensions changed again in April 2011.

The PageRussell retirement income guide is designed to help you understand your post-retiremetn options and make good decisions about your financial independence.

Download your guide here

At PageRussell we know the benefits a flexible retirement policy can bring to a business.  A large proportion of our clients approaching retirement want to slow down rather than stop work completely.   Employers will soon have to accommodate their employees’ wishes to work on, as from April to October 2011 the Default Retirement Age (DRA) is phased out.

We asked Becky Moore, a PageRussell client and HR professional, to write this Briefing Note and equip our clients with solutions so this change is a positive one for your firm.   This Briefing Note is aimed at employers, but will also be of interest to employees who are approaching the age of 65.

What is changing?

Currently, the only time an employer can force an employee to leave service (other than for disciplinary matters) is when they reach the Default Retirement Age of 65.  Currently, employees have the right to ask to continue working, but employers can refuse.   From 1^st April 2011:

• Employers will not be able to force an employee to retire at the age of 65.
• Employees have the right to continue working past the age of 65 if they wish too.

Is it still possible to have a compulsory retirement age?

The typical employer is unlikely to be able to enforce a compulsory retirement age.  To do so the employer must be able to justify it objectively for one or more of the following reasons:

• Economic needs
• Health, safety and welfare
• The particular training requirements of the job

If it does achieve those aims, the discriminatory effect must be significantly outweighed by the importance and benefits of achieving a legitimate aim, and reasonable alternatives should be sought first.

Some groups will be unaffected by the removal of the DRA such as police and the judiciary, partnerships, and where there is a statutory age limit e.g. commercial pilots.

What if you want to retire an employee who is 65 before 1st October 2011?

If an employer wishes to retire an employee who is 65 on or before 1^st October 2011, you can legitimately follow the current procedure and retire them from the organisation.  You are required to give the employee a minimum of 6 months notice that you would like them to retire.  Provided this process is commenced before 1^st April 2011, and then no claim can be brought by the employee.

What about benefits-in-kind?

The costs of insured benefits-in-kind increases dramatically over age 65.  The new legislation exempts group risk insured benefits (including income protection, sickness and accident insurance, as well as private medical insurance) for employees amd employees’ dependents.  So it will be possible for employers to cease to provider or offer insured benefits to employees aged 65 or above.  This age limit will increase in line with the State Pension Age.

Having no retirement age does not have to be a problem

Having employees working on past 65 has a number of benefits:

• They are motivated.  If an employee could retire but doesn’t, they clearly want to work.  Wouldn’t it be nice if all your staff were like that?
• Many older workers may wish to work fewer hours, so there is less pressure on their weekends and holidays.  Older workers are often happy to work weekends and holidays as they can still do their leisure activities during the week when venues are quieter (and cheaper).
• There will be many other benefits for your firm; you just have to think about it for a bit.

Watch points

There are a number of actions employers may want to take now:

• Check the age profile of your firm to check who will be 65 prior to 1^st Oct 2011 and start the retirement process sooner rather and later if you do not wish them to carry on working.
• Contracts of employment, staff handbooks and retirement policies may need to be reviewed.
• It will no longer be acceptable to ask an employee whether they are thinking of retiring.

What do you need to do differently?

This change is all about having objective measures of all your employees’ capability to do their job – whatever their ages.

The policies and process employers need to put in place to manage the retirement process will also help employers avoid other types of discrimination problems.  These need to include better job descriptions, job specifications and skill profiling, improved performance management, better training for line managers and a more strategic approach to retirement.

Some employees can apply for flexible working, although many employers have extended this to the total workforce.  This is another way to manage an age diverse workforce, provide job satisfaction and increase motivation.

Offering continued or flexible working instead of retirement can help retain your skilled and experienced employees, reduce staff turnover and recruitment and training costs.

ACAS have published a very useful employers’ guide to working without the default retirement age.

As ever the devil will be in the detail and we will publish updates on these changes when available.

If you require more information and advice on how to do this in practice, please contact Becky at Moore HR Consulting 07872471072 or ku.oc.gnitlusnocrheroomnull@ykceb.

Important declaration

This document does not recommend you buy, redeem or vary any regulated investment. It is believed to be accurate as at 29th September 2010; however no warranty is given as to its accuracy and no responsibility can be accepted by Page Russell Ltd for any action taken in reliance on its contents.

Following the government’s announcement on Wednesday 20th October, more people will receive their state pension later than was previously the case.

We know that the lastest changes will affect at least two groups of people:

• The state pension age will be equalised with men at 65 for all women by November 2018.
• The state pension age for men and women will increase to 66 between November 2018 and April 2020.
• The planned increases in the state retirement age to 67 and then 68 may also be brought forward.

We will not know exactly how our clients will be affected until these changes are passed into law - probably sometime in the summer of 2011.   In the meantime the government have issued the following handy table. (Please note that the State Pension Age calculator on the Pensions Advisory Service website will not include the new changes until they are passed into law).

It is important to remember that you do not have to stop work at your state pension age.  If you have enough money saved you can stop work earlier.  Or from April 2011 you will have the right to keep working past the age of 65 if you want to.

There has already been much fevered speculation in the media about what this will mean for public sector employees.  Some PageRussell clients have asked us if they should retire early or opt-out to protect their benefits.

The answer is that no public sector pension scheme member should make any knee-jerk decisions now and should take independent financial advice before doing so.  Here is why:

Not every public sector scheme will be affected

Firstly, not every scheme that some people think is a “public sector” pension scheme is affected. To check this click here. 

Any pension earned to date is safe

The terms of reference for the report say any recommendations must protect “accrued rights”.  That means any pension rights you have built up to date will be safe and not affected by any changes.

Therefore if you have already retired or have left employment and have “deferred” benefits your public sector pension will be unaffected.

Not all the recommendations will become government policy

Don’t forget this is a report with recommendations from an “independent” commission.  Not all of the recommendations may become government policy.

The government can’t make the changes without parliament

If the government decides to accept the Hutton Report’s recommendations it can’t make any changes without passing an Act through parliament.  That is easier said than done with a coalition government.  Even if the government does get its proposals through parliament largely unaltered, this will take at least a year, may be two, to achieve and be implemented. 

The public sector pensions will still be based on earnings

Even if the basis of pension accrual changes from final salary to career average, the pension will still be a “defined benefit” pension.  This means the costs and risks of paying the pension will still rest with the pension scheme and ultimately the taxpayer.

Most private sector pensions are now “defined contribution”.  This means the employer is only responsible for paying contributions.  The risk of the pension fund not growing fast enough to provide an adequate pension at retirement rests with the employee.

Therefore we can expect public sector pension pensions to remain significantly more valuable than the typical private sector alternative.

Speculation not fact

Right now much of what is being said on this subject is speculation and opinion, not fact.  PageRussell recommends you ignore all the instant “rent-a-quote” opinions that will dominate the media now.  The report is a weighty tome and will require a day or two to read and digest properly.

PageRussell will issue an update to this post week commencing 14^th March.

The following schemes ARE covered in the report:

For civil servants:

• Principal Civil Service Pension Scheme
• Principal Civil Service Pension Scheme (Northern Ireland)

Armed Forces Pension Scheme

For NHS employees:

• NHS Pension Scheme
• NHS Superannuation Scheme (Scotland)
• Health and Personal Social Services Northern Ireland Superannuation Scheme

For teachers:

• Teachers’ Pension Scheme (England and Wales)
• Scottish Teachers’ Superannuation Scheme
• Northern Ireland Teachers’ Superannuation Scheme

For Local Government:

• Local Government Pension Scheme (England and Wales)
• Local Government Pension Scheme (Scotland)
• Northern Ireland Local Government Pension Scheme

Police Pension Scheme (administered locally)

Firefighters’ Pension Scheme (administered locally)

United Kingdom Atomic Energy Authority Pension Schemes

Judicial Pensions Scheme

Department for International Development – Overseas Superannuation Scheme

Research Councils’ Pension Schemes

In addition there are a number of smaller schemes and many established to cover only one senior appointment which do not specifically need to form part of the review but which will be required to act on the recommendations.  (Source:  Terms of reference for the Independent Public Service Pension Commission http://www.hm-treasury.gov.uk/indreview_johnhutton_pensions_tor.htm).

The following pension schemes are NOT included in the report:

 USS (University Superannuation Scheme)

 RMPP (Royal Mail Pension Plan)

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BURY ST EDMUNDS 4

The government will change the post-retirement rules for pensions from April 2011.  Whilst a fortunate few will benefit, most people will notice no change and most of the “squeezed middle” already in drawdown will face more restrictions.

Who should read this?

This briefing note will be of interest to people who are close to or already drawing down from their pension. It should be useful to younger people wondering whether it is worth using a pension as a vehicle for saving for their financial independence.

This briefing note is about rules for individual pensions such as personal pensions or SIPP; not final salary pension scheme benefits.

The headlines

There are two useful changes which are due to come into force from April 2011.

First, there is no need to make any change to a pension fund at age 75. You will not be forced to buy an annuity.

Second, if you can prove you have a minimum of £20,000 a year individual pension income you will be able to draw down unrestricted amounts from your pension funds.

What happens currently?

Currently from age 55 to 75 you can take a tax-free cash lump sum (usually 25%) from your pension fund and either buy an annuity or draw down an “unsecured pension” from the fund.

At age 75 if you don’t want an annuity you can take Alternatively Secured Pension. This option has strict income limits and an eye-watering 82% tax on any cash lump sum paid on death. It is not a practical option for most people and effectively forces people to buy an annuity.

What’s wrong with an annuity?

Not a lot.  Annuities are a cost-effective way of buying guaranteed life-time income.  They will remain the most suitable source of retirement income for most people.

An annuity is insurance against living too long. You hand over a premium (your pension fund) and the insurance company guarantees to pay you an income for the rest of your life – however long or short that is.

Objections to annuity purchase are often emotional, although this makes them no less valid.  For example, most PageRussell clients will be on the “winning” side of the annuity gamble and live longer than average; but we understand why they may not want to take the risk.  So we understand why having an alternative to an annuity is important.

Drawdown forever

From April 2011, the same options will be available at whatever age you take your pension benefits after your 55th brithday:

• Annuity
Buying an annuity will continue be appropriate for many retirees, especially as money-back guarantees will be allowed on death after age 75.

• Capped drawdown
This option will be a more restricted version of Unsecured Pension.  The maximum income limit will be reduced from 120% to 100% of an equivalent annuity (known as the GAD rate). The minimum limit will stay as £Nil.

• Flexible drawdown
This option will allow individuals to draw down unrestricted amounts from their pension pot, provided that they can demonstrate that they have secured a sufficient minimum income to prevent them from exhausting their savings prematurely and falling back on the state.

The 25% tax-free cash option will remain available, even after age 75.  All benefits drawn down will continue to be taxed as income.

Minimum Income Requirement

Flexible drawdown is a useful innovation. But before we get too excited, individuals will have to satisfy Minimum Income Require (MIR) initially set at £20,000 a year.

The MIR is designed to stop people spending their pension fund and then falling back on means-tested benefits in retirement.

The following types of pension income can count towards the MIR, as long as they are already in payment:

• Basic and additonal state pension
• Pension annuities, including dependents pensions
• Occupational scheme pensions
• Certain overseas pensions

The pension will not have to be index-linked (which can add 30% to the cost of providing a pension).

The following types of income will NOT count against the MIR:

• Salary or other employment income
• Share dividends or gilt interest
• Purchase life annuities
• Drawdown pension income, or dependents drawdown income
• Means-tested state benefits, such as pension credit.

An example provided by HM Treasury is of a 65 year old man with £5,078 basic state pension and £2,500 additional state pension, but no other pension income.  A healthy 65 year old would need a pension fund of roughly £233,000 to buy the £12,500 a year annuity income to meet the MIR.  Any extra pension fund can be put into flexible drawdown and taken as taxed income without restriction.  Alternatively this person can stick to the more restrictive capped drawdown.

What happens if you die?

This is the main sting in the tail of these changes.  On death any funds in drawdown (capped or flexible) which are paid out as a lump sum will be taxed at 55%. This compares with 35% now for Unsecured Pension and 82% for Alternatively Secured Pension. This is good news for those aged over 75, but bad news for younger people.  Financial dependents can avoid this tax by buying a dependent’s annuity or continuing in drawdown, but other beneficiaries will have to accept the tax charge.

Untouched pension funds can be paid out as cash, free of inheritance tax before 75.  After age 75 untouched pension funds will suffer the 55% tax charge.  However, in a welcome clarification, the HM Treasury have confirmed no further inheritance tax will be charged.

Welcome reforms

PageRussell believe these planned changes are welcome if they give savers more confidence that money saved in a pension is not wasted.  However, drawdown will remain a minority sport. 

We expect the Financial Services Authority to issue more restrictive rules on drawdown advice in response to these reforms.   This will further restrict access to full flexibility in retirement to the wealthy.

If you have any queries please email Tim Page at ku.oc.llessuregapnull@mit

More information is available from HM Treasury .

Important declaration

This document does not recommend you buy, redeem or vary any regulated investment. It is believed to be accurate as at 12th December 2010; however no warranty is given as to its accuracy and no responsibility can be accepted by Page Russell Ltd for any action taken in reliance on its contents.