THE GREAT PENSION RIP OFF

I've been looking into this private pension scam, scam? Yes that's exactly what it is and here's why:

The Private Pension Corporations are creaming off a profit of over 20% of your money, that's more than the rip off Energy companies are scamming from you on your Gas and Electric bills and don't forget the Profit statistics are net! In other words after the bosses of these organisations have taken out their 6 figure salaries and perks.

Do you realise that when you reach pensionable age that unless your pension total value is over £100K the measly annuity you will receive means that you will have to live to be one hundred years old before you receive any monies above the amount that you have contributed into the fund.

The Pension companies are making a lot of money out of your so-called investment in your future, while you scrimp around and decide whether to heat or eat, they are living 'the good life'.

They will tell you that you cannot get your hands on your money but this is not so, what they really mean is that they don't want you to because that would mean that their profits and inflated salaries would be adversely affected.

They will try to put you off the idea by telling you that the Inland Revenue will take a up to 50% in tax if you go with a Pension Liberation Scheme this is also a misdemeanour, you are under no obligation to inform the Inland Revenue if you decide to legally free up to 50% of the total value of your pension as a lump sum cash payment and if you are presently unemployed or in receipt of state benefits it is classed as un-taxable income and therefore not taxable. If you sell your car for a few thousand you are not required to inform the Inland Revenue because it’s your money, your asset that you bought from your taxable income, in other words you have already been taxed on it. Well it's the same if you decide to cash up to 50% of your pension contributions.

Another thing that they don't tell you is that when you retire the annuity from your Private Pension will have a detrimental effect on your state pension and any other benefits that you may be entitled to.

The truth of the matter is that it's a scam, we were all told in the 1980's and 1990's that we must take a Private Pension out for our future welfare, they pushed the point home that we would be really well off if we took this course of action when in actual fact this was a lie. It was a way of them getting rich off the backs of the working people who keep them in champagne and fast cars. Don't be taken in by this government backed nonsense, it's your money.

- John Hardon

VIDEO: What's Your Pension Really Worth

If you are interested in converting upto 50% of your Private Pension into a cash lump sum the remainder being re-invested in a S.A.S. (Self Administered Scheme) please click HERE

Bosses switch pension contributions to cash to avoid tax clampdown

FTSE 100 directors move money away from company schemes to avoid 50p-in-the-£1 tax rate

Company directors switched millions of pounds worth of pension contributions into cash last year to avoid a government clampdown on tax relief for wealthy pension savers, according to the Guardian's survey of directors' pensions.

Some directors were granted all of their pension contribution as a one-off cash lump sum while others received a proportion of the money as a separate payment.

Pension experts said most directors asked for cash instead of a pension to dodge a cut in tax relief affecting people with pension pots worth more than £1.75m. The 50p-in-the-£1 tax rate was implemented in 2006 on pots worth more than £1.75m, prompting executives to rely less on their occupational schemes and more on individual savings plans.

The tax changes have also had an impact on the clarity of company reporting on directors' pensions – senior members of FTSE 100 boardrooms include only a fraction of their retirement savings in their annual accounts. The move effectively takes their pensions out of sight and sometimes offshore away from the prying eyes of shareholders, the UK tax authorities and other stakeholders.

This trend is likely to spread after the chancellor of the exchequer, Alistair Darling, approved new rules in the last budget that will cut tax relief on pension savings in 2011 for those earning more than £150,000 to the 20p basic rate.

However, new tax rates on top pensions failed to stop company directors registering record pension pots in 2008, the Guardian's survey found. Foreign nationals topped the list. Bob Catell, the US-based boss of National Grid, has amassed £20.4m, while Unilever's chief executive, Frenchman Patrick Cescau, has built up £18.7m. HSBC's English chairman, Stephen Green, can count on at least £17.7m to provide for his pension.

The directors' pensions escape the worst of the tax clampdown after an amnesty three years ago allowed some wealthy savers to preserve their accrued rights.

It is understood Sir Fred Goodwin, the disgraced former boss of Royal Bank of Scotland, protected much of his pension under the complex "lifetime allowance" rules to maintain the tax rate on his income at 40%. Goodwin was awarded a retirement income of £703,000 by the board of RBS as part of a "golden parachute" that included a £2.6m bonus. He later took a £2.8m cash lump sum that reduced his pension income to £555,000. The furore that surrounded his departure escalated last spring when details of his payoff emerged. By June he had agreed to a cut in his retirement income to £342,500 a year. Despite hanging on to the combined lump sum and bonus of £5.4m along with pension income more than 55 times the government's minimum income guarantee, threats of legal action from the government to recover Goodwin's wealth evaporated.

In RBS's favour, the value Goodwin's pension was at least clear. But increasingly it is impossible to see from company accounts how much pension income directors have accumulated.

Last year's best paid chief executive, Bart Becht, took a "basic" pension contribution worth 30% of his 2007 base salary. The £282,000 payment was deposited in an "executive pension plan" that acts like a personal pension. Like most other top executives, much of his remaining income – in Becht's case £36.6m – is expected to be channelled into other investments.

Bob Diamond, president of Barclays, keeps most of his fund outside Barclays' scheme. Last year he was paid £17.5m, but only £250,000 as base salary and he put only £7,000 into the company scheme.

The generous pensions amassed by Britain's corporate leaders are in stark contrast to the collapse in retirement schemes for workers. Since Labour came to power in 1997, private-sector pension participation rates have fallen from 52% to 42%, equivalent to 800,000 people losing pension provision. According to the Office of National Statistics, people on low incomes are the worst hit – only 21% of men, and 32% of women earning £300 a week or less are making contributions to their employer's pension scheme.

Millions of workers have also been thrown out of the generous final-salary schemes that guarantee to pay between a half and two-thirds of final salary as companies switch to cheaper arrangements. Today there are less than 800,000 workers in final-salary schemes that are still open to new members, compared with more than eight million workers in these schemes in 1968.

More than two-thirds of FTSE 100 directors remain members of final-salary schemes. They can usually gain their two-thirds of final salary in 20 years, rather than the standard 40 years that workers must wait, despite figures showing the 7,400 active schemes operate with a collective funding deficit hovering around £200bn.

www.theguardian.com

If you are interested in converting upto 50% of your Private Pension into a cash lump sum the remainder being re-invested in a S.A.S. (Self Administered Scheme) please click HERE

Exclusive: Pension pots for top company bosses soar to record levels

The former chief executive of Royal Dutch Shell, Jeroen van der Veer, 

now sits on its board of directors. His pension fund could pay out 

more than £1.4m a year

Britain's top company bosses can look forward to pension pots that have soared by 70 per cent in less than a decade and are now at record levels, according to new statistics to be published this week.

The five biggest pension pots of FTSE 100 directors are worth more than £84m combined – nearly 600 times greater than the £150,000 that the average retirement fund of five working Britons would come to.

The sheer size of the funds set by for their retirement could give four of the five top directors annual incomes of more than £1m.

The findings illustrate a widening gulf between high earners and their workers. The growth in directors' pension pots has more than doubled that of the average Briton over the same period – which has gone from about £23,000 in 2003 to £30,000 today – a 30 per cent rise.

The news provoked angry reactions yesterday, with pensioner groups branding the gold-plated pension pots "obscene" and trade union leaders condemning them as a "scandal". Details of the pensions enjoyed by some of the country's top directors will be published in the TUC's annual PensionsWatch survey on Wednesday.

Details of the hefty increases come as employees are being warned that rising inflation and stock market volatility have wiped billions off the value of their pensions.

The National Association of Pension Funds warned last month that more than £120bn had disappeared from funds in only four weeks as the FTSE 100 index dropped below the 5,000 level. Prudential warned that rising inflation threatened to cut the real value of funds by 60 per cent.

Public-sector workers including nurses and teachers will have to work longer and pay more to close a "black hole" expected to widen from £3bn in 2010 to £7bn by 2015-16.

Twenty years ago, the average CEO of a FTSE 100 company earned 17 times the average employee's pay. Now it is more than 75 times, said Tory MP Jesse Norman last week. 

"Most of this is not merit-related and is a matter of serious public concern."

Alan MacDougall, managing director Pensions Investment Research Consultants, said:

"There's a basic unfairness [in] that most of these companies have been shutting final salary schemes or winding them down, as well as the disparity between the values inherent in direct contribution schemes that employees are being forced into, and what directors are effectively paying themselves in terms of pension provision."

Jeroen van der Veer, former boss of Royal Dutch Shell, tops the list with a staggering £21.5m pension pot, which can pay out £1.4m a year. Former Barclays boss John Varley has a fund of more than £18m, which can yield £1.2m. Sir Frank Chapman, CEO of BG Group, has a fund of more than £16.5m, and David Brennan, CEO of AstraZeneca, a fund of £14.7m, both worth more than a million a year. Diageo's CEO Paul Walsh has a fund worth £13.4m, which could pay out more than £930,000 a year if he retired today.

Chris Ward, chairman of Pensioners Campaign UK, called on the Government to control "obscene" private-sector funds, while TUC general secretary Brendan Barber said: 

"This survey highlights the real pension scandal in Britain today." 

Unison's general secretary, Dave Prentis, complained that two-thirds of private companies 

"do not pay a single penny towards their workers' pensions".

Michael Johnson from the Centre for Policy Studies said executive pay had 

"outstripped in an unreasonable way the remuneration of the man in the street". 

He added. 

"Executive pay is hugely excessive, and pension is a component of it." 

A report released earlier this year by the High Pay Commission predicted that FTSE 100 chief executives will be paid 214 times more than the average wage by 2020.

The scale and growth of pension funds of directors are "alarming", said Ian Mulheirn, director of the Social Market Foundation. 

"In most cases, such rewards are more likely to be a reflection of unhealthily cosy relationships between boards and senior executives than they are of the latters' stellar performance," he said.

The financial crisis and a long-term deficit in public-sector pensions caused a government-commissioned review of the system by former Labour minister Lord Hutton of Barrow-in-Furness last year. His blueprint for tackling the £1.1trn deficit in funds needed to pay for future public-sector pensions will require later retirement, larger contributions and the end of final-salary schemes.

Just getting by...

Alan Copson

A retired drinks industry employee, he lives in Swanage, Dorset. He gets by on an annual pension of £8,160 from a scheme administered by Diageo. Mr Copson describes the levels of top private-sector pensions as obscene and reflective of "an ethic of greed and incompetence".

Tony Constable

A retired BT worker, from Colchester, his work pension is £90 a week. He cannot afford to replace his old car and is seeing his savings whittled away by hundreds each year to make ends meet. He says there is a "gross disparity" between top pension pots and what most retired people get.

Rita Young

A retired market researcher living in Peterborough, she survives on the state pension and relies on pension credits to make ends meet. She lives on about £300 a month after rent and bills have been paid and "has to go for the basics of everything". She describes the levels of directors' pensions as "an insult".

... living life to the full

Jeroen van der Veer

The former chief executive of Royal Dutch Shell now sits on its board of directors. His pension fund could pay out more than £1.4m a year.

John Varley

Former chief executive of Barclays. He has two homes – a four-storey townhouse in west London and a mansion in Hampshire's Bourne Valley.

Sir Frank Chapman

The chief executive of BG Group got £10.4m in pay, pension and share awards last year – making him one of the highest-paid bosses in the FTSE 100.

www.independent.co.uk

If you are interested in converting upto 50% of your Private Pension into a cash lump sum the remainder being re-invested in a S.A.S. (Self Administered Scheme) please click HERE

WHO TOOK MY PENSION?

Poor performing pensions with high charges are called "dog funds" and can take a very high percentage of the investors pension pot over its lifetime.

If you are interested in converting upto 50% of your Private Pension into a cash lump sum the remainder being re-invested in a S.A.S. (Self Administered Scheme) please click HERE

The UK's private pensions scam (21July10)

Notice the bits missing in this report. They don;t tell you that when you put in money you get tax breaks, but it's all clawed back when you take the pension. They don't tell you the money is NOT yours, it belongs to the company, so if you have one week to live, good luck to ever getting that money to spend it. They don't tell you that the pension companies take a massive amount in commission for themselves, for doing absolutely nothing.

Recorded from BBC2's Money Watch, 21 July 2010.

If you are interested in converting upto 50% of your Private Pension into a cash lump sum the remainder being re-invested in a S.A.S. (Self Administered Scheme) please click HERE

EU stealth raid on British pensions

By: Sarah O'Grady
Published: Tue, November 5, 2013

PENSION savings face being wrecked by a stealth raid to fund a controversial European financial watchdog, experts warned last night.

It would leave the UK facing a multi-million pound bill. Retirement pots and taxpayers risk being hit with the move. It could also mean the end of generous final salary schemes as employers would be burdened with extra costs.

The European Parliament’s Committee on Economic and Monetary Affairs has published a report that recommends granting the European Insurance and Occupational Pensions Authority an independent budget.

Its current budget is a staggering £16million but this would rise under the plans with the cash coming from “contributions from market participants and the Union budget”.

Dave Roberts, of management services group Towers Watson, warned: 

“Market participants is code for pension schemes and insurance companies, while Union budget means taxpayers.”

Pension expert Malcolm McLean, of consultants Barnett Waddingham, said: 

“Having to contribute to a European regulator might well be the final straw for those employers already struggling to keep their final ­salary schemes open.”

Pension pots could also be hit by extra costs, he warned.

The move could also jeopardise automatic enrolment into a workplace pension scheme if ­people felt it was no longer worthwhile. Britain already has two ­pension watchdogs – the Pensions Regulator and the Financial Conduct Authority. Mr McLean said: 

“The last thing we need is another imposed on us from Europe.”

Former Government pension adviser Ros Altmann hit out at EU “meddling”. She said: 

“To ask UK pension providers, pension savers and taxpayers to pay for an EU regulatory body that could actually damage our industry could add insult to injury.” 

The move also reinforces the Daily Express crusade to get Britain out of the EU.

James Walsh, of the National Association of Pension Funds, said: 

“This is not magic money. Higher costs have to be covered by raising the contributions paid by employees and their employers or by reducing the pensions paid when people retire.

“However you look at it, British workers and savers would pay the bills in the end.”

Mark Wood, of JLT Employee Benefits, added: 

“This undermines our Government’s drive to minimise unnecessary charges and maximise UK pensions.

“The European levy will take away money set aside by UK ­savers today and reduce the rate at which a pension is built up.”

www.express.co.uk

If you are interested in converting upto 50% of your Private Pension into a cash lump sum the remainder being re-invested in a S.A.S. (Self Administered Scheme) please click HERE

Pensions - how fund management charges swipe 50% of your pension

The government and the pension industry are continually preaching to us that we are saving too little. They deploy vast advertising and advisory budgets to get this particular gospel across to us. You’ll be doomed if you don’t save, they tell us, but there is a nagging suspicion that we will be doomed if we do save too.

It would be unfair to say government and pension fund managers are entirely in cahoots. Each have their own separate reasoning for their common cause:

a) The government, so it can transfer the blame for pensioner poverty to the pensioners, for not saving enough. A low cost and curt “I did warn you!” is much cheaper than actually doing something about it. It’s a tactic from the same handbook as putting “Smoking Kills” on packets of cigarettes – nothing to do with warning the smoker, everything to do with providing an “I told you so” defence in compensation court.

b) The pension industry so it can rip us off. The impact of pension fund charges, which typically range between 0.5% and 5%, can slash your savings by over 50%. For a prudent young person planning for the future thus;

• 25 years old, planning to contribute for 40 years until they are 65
• £100 per month, increasing by 3% each year
• Fund growing at 6% per year

A report by the RSA (Royal Society for the encouragement of Arts, Manufactures and Commerce) found that a reasonable charge would be 0.5%, and that excessive charges in the UK meant:

"If a typical Dutch and a typical British person save the same amount for their pension, the Dutch person can expect a 50% higher income in retirement. "

Let’s put the government to one side and focus on the pensions industry, for now. The government will wait for another time. You need a bit of mathematics to explain what is possibly the widest reaching, most chronic, and most ruthless rip-off of them all. To be more precise, widest reaching, most chronic, and most ruthless sequence of rip-offs. “Sequence”, because you are ripped off during every stage of your life.

STEP 1. As a worker: to get the tax benefits you are required to save for your pension with ‘regulated’ providers. If you take all the money you save, plus the returns on the investment, over a working life of 40 years, you will find the provider takes up to half of it in charges.

STEP 2. On retirement: or by the time you are 77, you are required to buy an annuity. You take all the money you saved during your life, and you give it to a pension company. In return they will give you an annual amount which will be as paltry as they can get away with. The pension company will, by default, give you a terrible return. They will try to bamboozle you with ‘future proofed’ pensions that grow with time. Omitting to tell you that 'future proofing' means you start with about a third less monthly income, and it will probably take a couple of decades to catch up with amount you would have got with a non-future-proofed pension. The maths, which I will explain in a future post, shows that if you take your future-proofed pension at 65 you could be over 90 before you see any extra cash.

STEP 3. On passing away: Having retired and bought an annuity, when you die your pension stops and your pension fund is taken by the provider. If you invested £500,000 with them, and you lived for 1 day or for 10 years drawing at a rate of £25,000 a year – then when you die, the remaining money becomes the property of the pension provider.

STEP 0 (this rip-off is cyclical). As a child: the wealth your parents built up for their retirement, their savings built up by skimping on your holidays, sweeties, birthday presents, and private education, is grabbed when they pass away. Not a farthing of the money they used to buy the annuity for their old age will you find in the inheritance carve-up.

For this week, I will concentrate on STEP 1, the charges, leaving STEP 2, 3 and 0 for future weeks. Fund management is perhaps one of the greatest financial rip-offs in current times. If the government is actually serious about reining in bankers’ bumper bonuses, they don’t need to put caps on remuneration. They simply need to control the contribution rip-offs make to bank profits – deflating that particular balloon would go a long way to bringing the bonuses down to earth.

Investment funds in the UK typically charge anything between 0.5% and 5% per annum to provide their service. At first it doesn’t sound so much. After all, at a restaurant you would typically leave a 10% service charge for the waiter. But the investment fund takes their service charge every year. It’s as if the waiter is sitting at the table with you eating your lunch. In the world of pension funds, you pay for your meal during the meal, but only get to eat your share once the waiter has finished – that is to say when you retire and get your pension payments.

For those who do invest in pension and other funds, taking a closer look at the mathematics of a mid-level 2% per annum investment fund charge reveals the catastrophic impact of the charge on a 40 year investment. The maths also reveals a further well hidden cost of the charges, on top of the charges themselves:

• You earn interest on the amount you have invested.
• When you pay a charge, the amount you have invested is reduced.
• Therefore the cost to you is not only the accumulated charges, but also the lost investment income that would have accrued had those charges not been made.
• Effectively, the money you are charged has moved to someone else’s account and is earning them interest instead of you.

To keep things simple, here is an illustration if you made a single £1,000 investment and made no further contributions.

After 40 years, earning 6% and paying a charge of 2% per annum, the £1,000 is worth £4,584 and the accumulated charges over this period have been £1,848. However, the removal of the £1,848 over the 40 years has also resulted in a loss of a further £3,854 in investment income if you had kept that £1,848. So the total cost to you is £1,848 + £3,854 = £5,702 – more than halving what your investment would have been worth without any charges.

Could it be that the fund manager is worth the cost of his hire? There is an ongoing debate around whether passive Index Tracking funds can be beaten by actively managed funds in which ‘clever’, i.e. highly paid, fund managers duck and dive between stocks and cash striving to win extra profits. However the overall statistics show that over a period of 5 years, Index Tracking beats the great majority of actively managed funds. Standard & Poor’s (S&P), a financial research company, produces a quarterly report the S&P Indices versus Active Funds Scorecard (SPIVA). The SPIVA report for North American funds in the year 2008 stated

• Over the five year market cycle from 2004 to 2008, the S&P 500 index outperformed 71.9% of actively managed large cap funds, S&P MidCap 400 outperformed 79.1% of mid cap funds and S&P SmallCap 600 outperformed 85.5% of small cap funds. These results are similar to that of the previous five year cycle from 1999 to 2003.
• The belief that bear markets favor active management is a myth. A majority of active funds in eight of the nine domestic equity style boxes were outperformed by indices in the negative markets of 2008. The bear market of 2000 to 2002 showed similar outcomes.
• Benchmark indices outperformed a majority of actively managed fixed income funds in all categories over a five-year horizon. Five year benchmark shortfall ranges from 2-3% per annum for municipal bond funds to 1-5% per annum for investment grade bond funds.
• The script was similar for non-U.S. equity funds, with indices outperforming a majority of actively managed non-U.S. equity funds over the past five years

The Financial Services Authority provides comparison tables, including tables for pension providers. The charges that our prudent 25 year old saving £100 per month and planning to retire at 65 range from £40,000 to £124,000 depending on the rapaciousness of the fund manager's fee. The Financial Times market data service lets you see the performance of one of the most expensive providers on the list compared to the FTSE All Share Index:

Over the last 10 years the FTSE Index has matched or outperformed the expensive fund’s own index tracker as well as its actively managed fund.

All the talk by government and the pensions industry about Ripped-off Britons working longer and living leaner is missing one big point. By stopping the fund managers ripping out 50% of the value of pension funds, you can at a stroke make a giant stride towards dealing with the pension crisis. And also make a giant stride towards dealing with excessive pay in the financial services industry.

www.blog.rippedoffbritons.com

If you are interested in converting upto 50% of your Private Pension into a cash lump sum the remainder being re-invested in a S.A.S. (Self Administered Scheme) please click HERE