The Pension Debate Continues: DB Pensions AKA Final Salary Schemes –Things you NEED to know and my Opinion


Ok, so I get asked ALL the time ‘what should I do with my UK Final Salary Pension and what guarantees & benefits do I get’, WELL below I have highlighted just a few of the main points you should consider when looking at this and reasons why you should or shouldn’t look at a potential transfer in to a UK regulated SIPP.


There are so many articles being published and it makes me frustrated that they try to make people confused about retirement….Yes you do need to retire with a pension pot, Yes, you should always try to save and Yes, Final Salary schemes or DB’s may not be around when you retire…But to scare people with articles, trying to confuse them because the UK government and FTSE companies will be affected isn’t fair, especially when its these FTSE companies who have underfunded their pensions for their loyal employees.


You as an employee or ex-employee should be able to decide what the best option for you in retirement is and be able to control this, after all you’ve worked your life to retire happily without having to worry about what and or who is going to affect you and it should be easy to do….It sometimes isn’t and this puts people off asking for help.


I/we can help and I will try my best to educate and inform rather than scare and confuse, take control of you pension, be fully informed, understand how retirement is calculated, how annuity rates are compiled, I am happy to share this information with everyone. A pension transfer is not for everyone, BUT in my opinion it’s definitely something to look at very closely with all these companies previously mentioned trying to change rules and under-fund their schemes..


Questions Answers
Is my Final Salary a Guarantee? NO, DB or Final Salary pension is NOT a guarantee, it is a promise and promises can be broken! The government are changing rules and regulations constantly as most schemes are dangerously under-funded, like Carillion, BT, BA, Shell, Tata, BHS etc.
How does my UK pension perform compared to other options? Government may be looking to change the benefit increase from RPI (3-5%) to CPI (2-3% or even get rid of any increase each year)
Expected Performance? UK Pensions are proving to seriously underperform currently at 0-1% growth, we would be looking at 4-5% and the saving on the costs above
Can I still take 25% lump Sum at 55? Yes, you are still able to take 25% PCLS after 55.
What are the succession Benefits? Most DB schemes pass on 50% of the pot to your spouse and then 25% to the children if they are in fulltime education and below 23 years of age. The entire pension may be lost if these boxes are not ticked.

If you move to a SIPP, the wife will receive the pension minus death taxes and if you were above 75, there is no death tax.

What happens if the company I worked for goes in to Liquidation or files for bankruptcy? Once a company begins to struggle to fund a pension, they are within their right to reduce your benefits and effectively take from that pension pot. In the event of total collapse, you may end up on the Pension Protection Fund, whereby your pension benefit may reduce significantly. We believe that if a larger company goes under, the PPF may well fail and pensioners may be left with no pension at all.
Will the UK government stop pension transfers? We don’t think they will stop transfers out, but they may well tax pensions differently or put other restrictions to help protect the UK pension industry.
Will interest rates in the UK affect my pension? Yes, our analysis suggests that this will have the effect of cutting current transfer values by almost half (48%). If Interest rates rise back up to a level of 4% where they were in 2007 then transfer values could be cut by as much as 64% from their current levels.
Is it still a good idea to look at transferring? Yes, Final Salary Pension Transfer Values are based on annuity rates which are in turn based on government bond rates. As the interest on government bonds drops it costs more to provide an annuity and hence the transfer value offered to you must rise. Pension valuations are still at an all-time high and getting a valuation is imperative to making the correct decision before transferring.
Is it easy to get a valuation? Yes, we are able to assist and valuation can take up to 3 working weeks, then we can make the correct calculations as to whether your pension is better served controlled by you.
Does it cost me anything to get a valuation? NO, generally you are allowed 1 or 2 valuations per annum and will be fully calculated by actuaries so your figure may change between valuations
Am I locked in? Pensions, can be accessed via flexi drawdown, but you will be taxed at UK income tax rates. There are a number of options available for drawdown, so it’s always worth exploring these scenarios with an adviser. All SIPPS provide an early retirement date (if chosen) at 55
I have over 5 years until I retire, what’s the best option? Please get a valuation on your current benefit, this will give you the best info of what the expected pension at retirement will be. Be fully informed
Does getting a valuation mean I have to transfer? Absolutely NOT, it is your right to be fully informed about your pension and you MUST know what is best for you and your family
How long does my Valuation last? Once you get a valuation, the benefit is locked for 3 months, to decide if the best action is to transfer is best to do within 4 weeks and transfer to a SIPP can take 6 months
Can I retire early? It depends, because all UK Pensions are regulated by the FCA to ensure that they will provide enough financial support to the individual and their family past their working years and protect them from falling short, the earliest retirement achievable for draw-down of a SIPP is 55. In most cases, Final salary scheme retirement dates are set at 65 resulting in smaller sums paid out by companies and delayed overall retirement dates of individuals.


The main thing that every pensioner should ensure, is that the fund selection within their SIPP is clean and suitable for its purpose. We only use highly regulated daily liquid funds, hence you can be safe in the knowledge that our fund selection is within your risk attitude and from leading fund managers, such as Templeton, Schroders etc.

I hope you find this information useful and informative and you can always contact me directly via email or call our office +60 3 2026 0286, I am here to help and explain how all this information works, just let me know

All the best




International Adviser – Latest DB Article

This shows companies are trying to change the way pensions are valued

DB pension deficit headache worsens for struggling employers

The UK High Court has ruled that communications group BT cannot change a pension scheme from the retail price index (RPI) to the generally lower consumer price index, placing more significance on an imminent government white paper on defined benefit pension schemes, a legal expert says.

BT is the latest in a line of companies that are struggling to deal with increased pension scheme deficits and have sought to implement a change in the inflation rate they use.

Each scheme has its own contractual rules and some are “broad enough to allow the calculation to be changed, and sometimes not”, pensions law expert Stephen Scholefield of Pinsent Masons said.

“Where there is no flexibility, some had hoped that the courts would decide that RPI was simply inappropriate, regardless of what the rules said,” he said.

The news follows the collapse of Carillion where it is understood its pension scheme has a deficit of about £580m.



Scottish Expats Unaware of International Privilege


Unmarried Scots, even those who have lived abroad for long periods, have a right to raise a claim to a partner’s estate in the event of separation.

The little-known law, which was introduced by the Scottish Parliament, is unique in the UK.

Based on domicile rather than residence, the rule means that individuals can claim a share of their ex-partner’s wealth up to a year after moving out of a shared home, wherever it is in the world.

After a year, the ability to raise a claim in the Scottish courts disappears.

While well used in Scotland, it is little known among the expat community, according to international family law expert John Fotheringham of law firm Morton Fraser.

He is campaigning to make Scots aware of the law’s international ramifications, which also covers instances where a partner dies.

Introduced in 2006, it is among a raft of family law measures which are ahead of their UK equivalents, according to Fotheringham

A similar system is available to New Zealanders and Australians, which English and Welsh family law is “not a patch on”, he says.

“People aren’t aware it is based on domicile,” Fotheringham told International Adviser.“What is the point of a right which you don’t know anything about?

“This is important for cohabitants because a claim can be made in Scotland if either party is a domiciled Scot.

“The claim itself is not as strong as a claim in divorce but it can be well worth making for one of the parties. It can also be well worth excluding for the other party. Either one will need detailed legal advice since the rules are not particularly intuitive.

“The point is that if you have been cohabiting with someone with a Scottish domicile then even if you have never lived with that fortunate Scot in his homeland, you may have a valuable claim against him or against his intestate estate.”


Cohabitation trends


In the UK, the fastest growing family type over past 20-years has been the cohabiting couple family.

They have more than doubled in number from 1.5 million families in 1996 to 3.3 million families in 2017.

This may be explained by an increasing trend to cohabit instead of marry, or to cohabit before marriage, particularly at younger ages, according to the Office for National Statistics, which compiled the data.

There is currently no such thing as common law marriage in English and Welsh (UK) law, meaning cohabiting couples do not have the same legal rights as married couples.

There is a Cohabitation Rights Bill, which addresses the rights of cohabiting couples, but is held in the early stages of passing through Parliament and does not apply internationally.


All the best



Farringdon Group

+60 3 2026 0286




10 steps to avoid being hit with 40% IHT in 2018



With inheritance tax payments hitting a record high at the end of 2017, the New Year is a good time for advisers to ensure that clients are being as tax efficient as possible when passing on wealth to future generations, law firm Collyer Bristow has advised.


According to HM Revenue & Customs, IHT receipts hit £5.3bn ($7.2bn, €6bn) in the year to November 2017, up from £4.7bn for the whole of 2016, as more estates than ever fall within its scope.


Collyer Bristow says that failure to take advantage of the tax breaks available when transferring wealth from one generation to the next can see families being hit by the maximum IHT rate of 40%. This can come as a big blow – especially for individuals who are asset rich but cash poor.


However, there are a number of easy steps individuals can take in 2018 to ensure they or their families do not pay IHT unnecessarily.


Take advantage of lifetime gifts and “potentially exempt transfers”


Consider gifting cash or assets during your lifetime to reduce or potentially exempt them from IHT.

The liability on such gifts reduces by 20% each year if you survive by more than three years after making the gift, down to zero after seven years.



Make gifts to friends and family out of excess income


Individuals are allowed to make the following gifts, exempt from IHT, each year:


  • £3,000 (one year’s unused allowance can be carried forward to the next, accruing a total allowance of £6,000)
  • Wedding gifts worth up to £5,000 for a child; £2,500 for a grandchild; or up to £1,000 for anyone else, can also be made free of IHT.
  • Multiple small gifts of up to £250 per person can be made each year, as long as they have not already benefitted from other gifts made.
  • Gifts made out of excess income as part of a regular pattern of giving are exempt – with no limit to the amount which can be gifted.



Check your will is up-to-date


Write a will and review it will periodically to ensure that your current wishes are reflected; that changing family circumstances are taken into account; and that IHT is minimised.


Monitor whether your estate’s value is likely to exceed the nil rate band


Keeping an eye on the approximate value of your estate means you will be able to take timely action to reduce the amount of IHT beneficiaries could have to pay, using the steps outlined below.


Estates worth £325,000 can be passed on free of IHT. For married couples and civil partners, this nil-rate band can now be transferred to a surviving spouse – effectively doubling the nil-rate band to £650,000.


Plus, there’s an additional nil-rate band where individuals wish to pass on a property to direct descendants, worth an extra £100,000 free of tax in 2017/18, rising to £175,000 by 2020/21.



Consider setting up a trust


Individuals whose estates are likely to exceed the nil-rate band may want to consider setting up a trust to shelter assets from IHT. Effectively this means handing over assets to trustees to look after for the benefit of beneficiaries, so they no longer form part of your estate for IHT purposes.


Identify assets to sell or give away free of CGT


Assets worth less than £6,000 can be sold or given away free of capital gains tax (CGT). This can be an easy and simple way of reducing the value of your estate.



Take out life insurance and ensure it is tax efficient


It is important to make sure that life insurance benefits are assigned into trust rather than being paid to the (taxable) estate of the insured.


Make a bequest to charity


Bequests to charity will be taken off the total value of your estate before IHT is calculated. If you leave more than 10% of the total value of your estate to charity, the IHT rate will be cut to 36%.



Make sure cash is accessible


Having an emergency pot of cash for families to fall back on after death is important. It can help in the short and medium term by, for example, enabling spouses or children to settle outstanding bills.


Investigate the possibilities of Business Property Relief


Business Property Relief (BPR) is available on family businesses as well as that company’s land, property or equipment. However, it is also available on unquoted shares generally – meaning that investments in many AIM or EIS (Enterprise Investment Scheme) shares may qualify for 100% relief.


Collyer Bristow points out that investments in AIM shares or EIS should only be made for sound investment reasons rather than for tax purposes.


However, for those with the right experience and risk appetite, this could be a way to drive investment portfolio returns as well as reducing IHT.


Louise Jones, associate at Collyer Bristow LLP, says: “A simple annual check-up can make a huge difference to how much wealth can be passed on to loved ones.

“The new year can be a good time to re-evaluate your position and identify any sensible tax planning steps that could be taken. A pro-active, forward-thinking approach is key.


“Identifying opportunities to trim your assets down is really important.

“A review also allows you to consider how much of your exemptions you have used up – and how much more you have to go before the end of the financial year in March.”


All the best



Farringdon Group

+60 3 2026 0286

Courtesy of International Adviser


UK Expat Issues – Residency, Domicile & Tax












As you have seen in the news lately things are changing in the UK not only to combat money leaving the UK but to also combat tax evasion. There is a misconception that tax avoidance is the same as Tax evasion, it’s not.


Definition of Tax Evasion

“Income tax fraud is the wilful attempt to evade tax law or defraud. Tax fraud occurs when a person or a company does any of the following: Intentionally fails to file a income tax return. Wilfully fails to pay taxes due. … Makes fraudulent or false claims”


Definition of Tax Efficiency

“Tax efficiency is an attempt to minimize tax liability when given many different financial decisions. … Other options to reduce tax liability include taxefficient mutual funds, irrevocable trusts and tax-exempt commercial paper”


So, this is where things get interesting for all UK Expats as things get complicated, VERY COMPLICATED!


Take a look at the below Fact Sheet and have a think about what you will be doing, not now, but in a few years, will you go back to the UK to retire because of the NHS, because of family, most do believe it or not and then forget about everything, until it’s too late.


Legislation Changes

  • Legislation changes impacting on UK Expats , Non-UK residents with residential property and future UK resident

Are you:

  • Were born in the UK?
  • Frequently visit the UK and have ties to the UK?
  • Have residential property in the UK?
  • Plan to live in the UK but not born there?
  • Planned to return as a ‘Non Dom’?


UK Residency

As you live overseas and pay the jurisdictions taxes you live in you become a ‘tax resident’, this is not the same as ‘Resident’

We see this on many occasions and unfortunately people just DON’T know the correct way to calculate this

We hear;

I am not UK resident, I only spend the summer holidays there’ BUT,

  • If more than 16 days you CAN be UK resident


*Must look at number of days and ties to the UK to determine residence and exposure to the tax system


Residency, the Basics


For a UK tax liability to arise;

  1. HMRC use: The ‘Theme of ‘connecting factors to UK’ which means that there:
  2. Must be a UK source for the Income/Capital Gain


  1. Person must be UK resident


Historic UK Residency

This can be used but only for guidance as this is historical and reasonably ambiguous and things change





UK Residence Developments

The developments were brought in 2013 and without much advertising so previously were you could go by the 90 day rule these have been brought in;

  • Statutory Residence Test enables the tax payer to have more certainty since April 2013
  • Test based on connecting factors
  • Concept of ‘Ordinarily resident’ no longer used


Connecting factors – Residence

This has now become a 3 part test called ‘Connecting Factors’, where you are able to confirm/test your residency

  • Part A contains rules which if met confirm that the individual is non-UK resident
  • Part B has rules where if met a person would be considered to be UK resident
  • If neither Part A nor Part B apply, Part C looks at ‘connecting factors’ for tax purposes – too many and person could remain UK resident
  • Most UK expats will have ‘connecting factors’ to the UK, this is where planning is required


Statutory Residence Test 1

  • Part A of the test will conclusively determine that an individual is not resident in the UK for a tax year if they fall under any of the following conditions, namely they:
  • Were not resident in the UK in all of the previous three tax years and they are present in the UK for fewer than 45 days in the current tax year; or
  • Were resident in the UK in one or more of the previous three tax years and they are present in the UK for fewer than 16 days in the current tax year; or
  • Leave the UK to carry out full-time work abroad, provided they are present in the UK for fewer than 91 days in the tax year and no more than 31 days are spent working in the UK in the tax year


Statutory Residence Test 2

  • If Part A of the test does not apply, an individual will be conclusively resident for the tax year under Part B if they meet any of the following conditions, namely they:
  • Are present in the UK for 183 days or more in the current tax year; or
  • Have only one home and that home is in the UK (or have two or more homes and all of these are in the UK); or
  • Carry out full-time work in the UK


Statutory Residence Test 3

  • Where neither Part A or Part B apply conclusively, then the factors of Part C are used as the


‘Tie Breaker’


Tie breaker – Connecting Factors

  • Connecting Factors are:

– Family (defined as spouse, civil partner, common law partner and minor children) resident in the UK

– Available accommodation in the UK

– Working in the UK for 40 days or more days per tax year (working 3 or more hours a day constitutes a working day)

– Spending 91 days or more in the UK in either of the last two tax years

– Spending more time in the UK than any other single country

  • Also depends on whether you are an ‘Arriver’ or a ‘Leaver’


Connecting Factors – How Many Are Required?









Case Study – Arriver

Mr D is a businessman with homes in various countries. He has not been resident in the UK prior to 2015-16. He has business interests in the UK and owns a house in London but, until 2015-16, he spends only a few days in the UK each year. In 2015-16 his wife moves to the UK to live in the London house with their two children. His wife and children become resident in the UK.

The children enrol in local schools and Mr D visits whenever he can. He spends 95 days in the UK in 2015, 45 of them working. He stays in the London house on days when he is in the UK.


Mr D is resident in 2015-16 under Part C of the test. This is because he spends 91 days or more in the UK and has 3 connecting factors:

  1. A UK resident family;
  2. Accessible accommodation in the UK; and
  3. Substantive UK employment


Case Study – Leaver

Mrs E has been UK resident for several years, always spending more than 250 days per year in the UK. She has a successful IT company and now decides to create a new branch of the business in South Africa.

In 2015-16 she buys a house in Cape Town and spends a large amount of her time there. Until the new branch is established her family will remain resident in the UK and continue to live in the family home. She commutes back to the UK when she can, staying with her family when she does. She is in the UK for 93 days.


In 2015-16 Mrs E is resident in the UK under Part C as she spends 90 days or more in the UK and has 3 connecting factors:

  1. A UK resident family; and
  2. Accessible accommodation in the UK; and
  3. Spent 91 days or more in the UK in the previous tax year.


Residence – Summary

  • Plan to be challenged , keep evidence of arrival/departure
  • Don’t simply rely upon ‘day counting’
  • If claiming non-residence be aware of ‘everyday’ connections
  • If you are UK resident, you are subject to tax on your worldwide income and gains
  • Losing UK residence status is not as easy as you think, retaining it can be easier.
  • HMRC is interested in everybody, not just ‘high profile’


  • Care using UK as a ‘correspondence address’ OECD common reporting standards.


What is Domicile?

  • Generally ; The country that the person treats as their permanent home,  or lives in and has a substantial connection with
  • You cannot be without a domicile
  • You can only have one domicile at a time
  • You are normally regarded as domiciled in the country where you have your permanent home.
  • Your existing domicile will continue until you acquire a new one


UK Domicile

We hear ‘I don’t have a problem, I was born in the UK but I’m Non-Dom now’ so often when trying to assist UK Expats, so:

  • Born in the UK = UK domicile of origin
  • Can be lost, but difficult and open to challenge (Barlow Clowes v Henwood)
  • If you move to another country , you revert back to your domicile of origin
  • If retained on death, exposure to all UK taxes on worldwide assets


Your domicile is distinct from your nationality, citizenship and your residence status, although these can have an impact on your domicile


UK Domicile/IHT Rules


  • Nil rate band of £325,000 each
  • Transfers on death between UK Dom Exempt from IHT
  • UK Dom/Non-Dom , only up to £325,000 (after NRB)
  • Election can be made to be UK Dom following death of UK Dom spouse but…. 2 year limit and residence requirement
  • Although all assets free of IHT following election, will remain UK Dom for next 4 years, even if UK Domicile renounced and leave the UK.
  • 15/20 rule for deemed domicile


Legislation Updates – UK Domicile Rules


Retrospective from April 2017

  • If born in the UK & return to UK = immediate return to UK Dom
  • If born in the UK, retain UK Dom for 4 years after leaving
  • If acquiring UK domicile of choice, election remains for 4 years
  • ‘Lifelong’ non-domicile status to end
  • New 15/20 Deemed Dom Rule
  • UK property held through Offshore Company looked through
  • Remittance basis cannot be claimed once UK Dom
  • Asset value can be rebased to April 2017 value
  • Domicile ruling is in respect of all taxes, not just IHT.


Inheritance Tax & Domicile





  • 40% tax charge on value of estate above £325,000
  • Gifts between UK Dom spouses /civil partners exempt
  • Care required where Non-Dom spouse / civil partner


Individuals with a UK domicile of origin who planned to return to the UK as a Non-Dom must review their planning


Inheritance tax & Domicile

John has lived outside of the UK for the last 15 years working as an IT contractor and has the following assets in his estate:

Singapore Bank Account £250,000

Luxembourg Investment Platform £150,000

Apartment in Menorca £175,000

UK SIPP £100,000

UK residential property £200,000


What is his UK IHT Exposure if he returns?













Do You Have Residential Property in the UK?

  • IHT Irrespective of domicile/residence status
  • Ownership through a Company no longer provides protection
  • How will HMRC know?
  • Checks will be made when property is to be transferred as to whether property has ever been included in IHT valuation
  • Options – Insure against Liability sell or change to PPR?
  • If selling, was valuation obtained April 2015 for CGT?


UK Residential Property

  • ATED provisions in place since 2013 for HVRP that is ‘Enveloped’
  • ATED allowed charge to be paid to continue to avoid SDLT & IHT
  • IHT protection lost on all UKRP irrespective of value
  • IHT liability is the value of the ‘structure’ that relates to the UKRP
  • Debts can be offset against the value but loans between connected parties can not
  • Is there any point in paying this charge if no IHT benefits?


IHT and the Family Home

This is another we hear a lot ‘We don’t need any planning, we have a £1m IHT allowance’, wrong !


  • If you do not own a residential property, there is no £1m threshold!
  • There will be a tapered withdrawal of the additional nil-rate band for Estates (not the property)
  • With a net value of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.

More Restrictions….

  • It will not apply to reduce the tax payable on lifetime transfers that are chargeable as a result of death (UK Dom to Non Dom)
  • A property which was never a residence of the deceased, such as a buy-to-let property, will not qualify.
  • If property value is less than allowance, balance can’t be used to offset IHT on other assets

Even More Restrictions….

  • A person who dies with no direct descendants will not be able to benefit
  • Not restricted to UK properties only however, the property must be within the scope of UK IHT and included in the deceased’s estate.
  • Cannot be claimed by Non-UK Doms unless the home is in the UK


Non-Dom Planning

  • Jane is John’s wife, she also works in IT and will be moving back to the UK with him. She was not born in the UK however, it’s highly likely they she will be deemed domicile in the future. She is concerned that the wealth that has been accumulated is going to be eroded by the UK tax system. She requires access to her capital and isn’t keen on paying the remittance basis charge.

She has the following assets:

  • Non UK Bank accounts                                  £450,000
  • Non UK Stock Portfolio                                 £275,000
  • Non UK Investment Platform                      £300,000


UK Tax Exposure?


What is the remittance basis tax charge?

Annual tax charge to prevent non-UK source income and gains from being taxed. Only applies to Non-Doms.

    First 7 years                        £0

7 / 9 Years                           £30,000

12 / 14 Years                       £60,000

17 / 20 Years                       £90,000


Under new legislation more than 15 Years all assets will taxable as deemed UK domicile


Non-Dom – Moving to the UK

This is what you will have to pay:








By Using Isle Of Man Insurance Product and Trusts










Excluded Property Trust

Planning Objective

  • IHT mitigation , access to trust fund
  • Generally used by those who:
  • Are currently non-UK domiciled but who may become UK domiciled in the future
  • Want to ensure that post April 2017 rules do not impact planning
  • How does it work?
  • Assignment of Non-UK situs property (IOM Insurance Product) to trust
  • Person who creates trusts has unrestricted access
  • As trust fund created prior to UK Dom, not taken into account for IHT


IHT Planning – Excluded Property Trusts














UK Tax Treatment on Creation

  • N/A , on creation as Settlor is not UK domiciled therefore, property is ‘excluded’ from IHT
  • Where Insurance product used, CGT protection and IT deferral


  • Must be certain of domicile status
  • Must only contain non-UK situs assets


UK -Dom Planning Post April 2017

What can John do?

  • He returns to his UK domicile of origin as soon as the residency test met
  • Cannot claim the remittance basis of taxation
  • His corporate structures holding properties are looked through for IHT
  • All non UK source income & gains are taxable in the UK
  • Worldwide estate is subject to IHT


Popular Planning using Tax Efficient Investment

Accepted non-offensive IHT Planning?

  • Mostly Trust based Insurance Co’s investment products that facilitate

– IHT mitigation through Outright Gifts

– IHT effective Loans/Asset Freezing

– Immediately Discounted Gifts


Importantly, these structures ARE recognised by HMRC as legitimate tax planning and are not caught by any Anti-Avoidance legislation


We cannot stress enough that the correct Estate Planning, Tax Planning, Succession Planning, call it what you will is vitally important and does not have to cost as much as you think, we can look at your current situation and gauge the best way forward, don’t leave it and think it’s OK. Also using UK based advisers or lawyers can also not work too well, give us 15-20 minutes of your time and let us plan your future correctly with no obligation.


Have a good day

All the best



Farringdon Group

+60 3 2026 0286



This is The Time You Should be Looking to get a Pension Valuation !

  • BOE rates, life expectancy data seen curbing pension deficits
  • Firms with big liabilities have underperformed since Brexit

The U.K.’s $86 Billion Pension Problem Is About to Solve Itself


For U.K. Plc, the sting of Brexit comes with an unexpected bonus.

With no effort on their part, British businesses may see pension deficits that have burdened them for years be practically wiped out if the Bank of England raises interest rates as predicted and they budget for slowing gains in life expectancy, according to estimates of New York-based consultancy Mercer.




That will give executives one less thing to worry about as they prepare contingency plans in case Britain can’t strike a deal on splitting with the European Union. Companies like BT Group Plc and Marks & Spencer Group Plc, whose liabilities are almost double their market value, will also remove a stigma that has contributed to years of under-performance in their shares.

“If you bought a basket of these stocks you would probably make money from here,” said Andrew Millington, the acting head of U.K. equities at Aberdeen Standard Investments, which owns shares in firms with big pension liabilities like Tui AG, BAE Systems Plc and AA Plc that he expects will benefit.

The idea that corporate Britain could fill holes in staff retirement budgets without slashing dividends would have been unthinkable even a year ago. The shortfalls of FTSE 350 companies had soared to a record 165 billion pounds ($217 billion) as the BOE cut rates to spur the economy after the Brexit vote, throttling pension income that relies on higher bond yields.

But companies have been “climbing out of a pit” since then, according to Glyn Bradley, principal of U.K. wealth at Mercer. The gap dropped to an 18-month low of 65 billion pounds in September, partly because pension fund managers made more on their equity investments as the FTSE 100 rallied 8 percent in the past year.




Not all investors have noticed the U-turn. The 14 firms with the biggest liabilities relative to market value have trailed the FTSE 350 by 10 percentage points since Brexit, according to data compiled by Bloomberg and RBC Capital Markets.

The game changer will be if BOE Governor Mark Carney raises interest rates to contain inflation triggered by the pound’s post-Brexit decline. Traders see him hiking rates by 50 basis points in the next 12 months, possibly starting as early as the BOE’s Nov. 2 meeting. If the long-term yield on corporate bonds moves by the same amount, that could potentially bring the pension deficit down to about 12 billion pounds, according to Mercer estimates based on current conditions.


Earlier Death

What’s left of the shortfall, meanwhile, could be eliminated if listed companies used the latest longevity forecasts from Continuous Mortality Investigation Ltd. in their retirement budgets. Last year, CMI cut projected lifespans for people aged 65 versus the 2013 figures many companies still plug into their models.

“We may well start to see the aggregated deficits across the defined-benefit universe disappearing, perhaps even moving to a small surplus over the next year or so,” Bradley said from Manchester.

Adopting the newer longevity statistics helped Tesco Plc more than halve its deficit between February and August. If BT were to switch, it could knock 1.3 billion pounds from its almost 10 billion-pound deficit, according to Gordon Aitken, a London-based analyst and actuary at RBC. He says BT and Marks & Spencer will benefit most from the revision in longevity.

“Money that gets paid to pension schemes is cash, so it’s money that could go to dividends,” Aitken said.

A BT spokesman declined to speculate on potential changes to the company’s pension scheme, citing an ongoing triennial review by trustees. A spokeswoman for Marks & Spencer didn’t respond to messages.


Final Salaries

Given how pervasive pension shortfalls have been this decade, some investors may wait for confirmation that deficits can narrow further before jumping in.

A lot could go wrong, after all. Stalled Brexit talks might put pressure on an economy facing the slowest growth since 2012, which would hinder the BOE’s ability to raise interest rates. If inflation keeps accelerating from five-year highs, that would eat into the pension income. And many factors beyond interest rates move bond prices.

But any evidence that pension deficits are sliding could also ease political pressure on business executives to stop prioritizing shareholders over pensioners — a practice that’s come under greater scrutiny since retailer BHS Group Ltd., and more recently Monarch Airlines Ltd., collapsed and left their pensioners uncertain about the integrity of their policies.

Defined-benefit schemes, which typically guarantee retiring Brits a percentage of their final salary, became untenable for some firms during the era of ultra-low interest rates that followed the global financial crisis. While most companies scrapped them in favor of less-onerous defined-contribution pensions, millions of legacy policies continue to weigh on corporate balance sheets.

While Millington of Aberdeen Standard Investments has been buying shares of life insurers like Aviva Plc and Just Group Plc that win from slowing improvements in mortality, he said the most pension-ridden companies would naturally be slower to lure money managers.

“Investors are just starting to see this trend in U.K. longevity, but many aren’t yet willing to believe it will continue,” he said.


Now is the time you should be looking to get a valuation on your final salary and maybe moving it in to a SIPP, with interest rates going up your pension valuation will go down….take advantage of this being the right time for a free pension valuation, email me at


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Article – Courtesy of Bloomberg News

UK Pension Transfer Values and GILT Rates







Mark Carney, Governor of the Bank of England indicated this week that he was prepared to see interest rates rise at least one time before the end of this year.

The announcement caught markets off guard as they had been expecting a slower rate rising cycle in the UK in the run up to Brexit. However, with UK unemployment at record lows and inflation running at 2.9% it seems unlikely that The Bank will be able to maintain rates at record low levels for long without causing a major inflationary surge in the UK economy.


Effect on Pension Transfer Values


Final Salary Pension Transfer Values are based on annuity rates which are in turn based on government bond rates. As the interest on government bonds drops it costs more to provide an annuity and hence the transfer value offered to you must rise.

Last year Government bond rates were cut from 0.5% to 0.25% following the Brexit referendum result. This had the effect of boosting transfer values by 40%.

However, this process will now be rapidly reversed. By the end of 2018 we expect to see as many as three UK rate rises.

Our analysis suggests that this will have the effect of cutting current transfer values by almost half (48%). If Interest rates rise back up to a level of 4% where they were in 2007 then transfer values could be cut by as much as 64% from their current levels.

If you never intend to take a transfer value from your scheme then this will not affect you. However, if you are considering an eventual transfer it is likely a future transfer value will be substantially lower even if you pay more money into the scheme in the coming years.


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