UK pension deficits deepen further

The pension deficits of Britain's biggest companies have deepened over the past year despite the sharp rise in stock markets, new research shows.

The combined pension deficits of companies in the FTSE 100 reached £73bn at the end of April, up from £52bn a year earlier. For the FTSE 350, the deficit had increased to £88bn from £60bn.

Unsure about your UK pension? Let us help you arrange an evaluation of your existing UK pension schemes.

In the first meeting of our new cabinet George Osborne told colleagues that the need to get the budget deficit under control 'overshadows everything'. Some spending cuts have already been announced (all ministers are taking a 5% pay cut) but the scale of our national debt means much tougher measures are needed to balance the books.

The preliminary coalition agreement published recently suggested capital gains tax will rise. The expectation is an emergency Budget before the end of June when further tax rises could be announced. So far here is what we know:

Capital gains tax

The CGT rate might rise from the current flat rate of 18% and the annual £10,100 exemption could be reduced. This means any tax shelters, such as ISAs, pensions (SIPPs) will become even more valuable. Within an SIPP all gains are tax-free.

Income tax

It looks likely the tax free personal allowance for those earning less than £100,000 will rise to £10,000 over time, but the 50% tax rate for those earning over £150,000 will remain.

Tax relief on pensions

The Tories are happy with the current system, whilst the Lib Dems want to abolish higher rate tax relief. We believe higher rate taxpayers who are considering making a pension contribution this tax year might want to bring forward contributions.

Act now - secure your tax shelters

We believe it is vital that investors organise their affairs as tax efficiently as possible. Changes in tax are rarely retrospective. No one can say for certain what will happen, but you might want to play it safe by making use of your SIPP allowances sooner rather than later.

It couldn’t be easier to open a SIPP.

Please note this email is not advice and once invested within a SIPP the money can’t be accessed until retirement. Before you invest please speak with one of our recommended SIPP experts.

The pension deficits of Britain's biggest companies have deepened over the past year despite the sharp rise in stock markets, new research shows.

The combined pension deficits of companies in the FTSE 100 reached £73bn at the end of April, up from £52bn a year earlier. For the FTSE 350, the deficit had increased to £88bn from £60bn.

Unsure about your UK pension? Let us help you arrange an evaluation of your existing UK pension schemes.

The minimum age at which benefits can be taken was raised from 50 to 55 with those taking benefit under 55 prior to April 6 2010 able to continue to do so, if they do not transfer.

If people taking benefits transfer into a new scheme, whether a QROPS, SIPP or any other pension, they may be penalised for making an unauthorised transfer and could be hit with a 55% charge.

Roger Berry, managing director of QROPS provider Concept Group, who is also chairman of Guernsey’s QROPS industry panel, said HMRC had sought to confirm their interpretation of the legislation and had confirmed a strict approach. Further, HMRC had not committed to when or if it would alter them nor pledged not to penalise people who make transfers in the meantime.

He said he had stopped accepting transfers that would be caught by the change – and urged industry colleagues to do the same – estimating the numbers of such transfers could run into hundreds.

“A lot of this will be down to interpretation but in our opinion this is unfair and unjust and until the legislation changes we will be able unable to accept transfers from those in drawdown aged between 50 and 55 until HMRC review this policy and amend the legislation.”