Making Sense of Pensions

Brian Spence

Pension simplification is becoming widely regarded as anything but simple and this impression was not helped by the recent publication of technical pages in the Registered Pension Scheme Manual on the Inland Revenue website.

Up to this point the one thing that did appear simple was that in order for a member to benefit from enhanced protection of their pre 5th April 2006 pension entitlement they could not accrue any further benefits under any arrangement post this date. However, the guidance now provided would appear to allow continued membership of final salary schemes and cash balance arrangements with additional contributions and further benefit accrual allowable within certain limits. Read more »

Brian Spence

Ostriches are notorious for burying their head in the sand when danger approaches and company directors need to be vigilant to ensure that they guard against replicating this type of behaviour in their Boardroom. Only an ostrich can have failed to notice a rise in the importance of company pension schemes to corporate activity and the commensurate increased role of pension scheme Trustees. Given the provisions of the Pensions Act 2004 and the risk based approach adopted by the new Pensions Regulator I can only see the level of Trustees’ corporate involvement increasing so any degree of optimism that it can be ignored as a passing issue is undoubtedly misplaced. Read more »

Brian Spence

The news that the planned £250m takeover of Uniq was in danger of collapse as a result of concerns over the £102m hole in Uniq’s pension fund, serves only to back up the view that pension scheme liabilities are definitely curbing M&A activity. Last year saw the collapse of high profile deals involving WH Smith and Marks & Spencer and recent research suggested that nearly half of FTSE350 Chief Financial Officers believe that deals are being adversely impacted. Read more »

Brian Spence

I read with great interest the news that Government ministers had bowed to pressure from local authorities and found an extra £1bn to plug this year’s budget shortfalls, £300m of which was necessary to fund their collective pension scheme deficits. The move followed lobbying by the Local Government Association in an attempt to stave of what would have been a politically unpalatable 10 per cent rise in council tax in the run up to the general election. Read more »

Brian Spence

From 6 th April 2006 scheme trustees, administrators and members must be aware that the level and type of benefits which will be permitted to be paid on the death of a member in an occupational pension scheme will change significantly. Should employers and trustees agree to amend the rules of their schemes to avail of the changes it will present many scheme members with the option of greater flexibility as well as the potential for IHT planning. Read more »

Brian Spence

We’ve been being asked a lot recently to confirm in what circumstances charities and not for profit organisations with final salary pension funds need to provide full FRS17 disclosures in their company accounts.

The first requirement is to establish if the company is a “stand alone” scheme or is part of a “multi-employer” scheme. If the body has its own pension fund in which it is the only participating employer and which has separately identifiable assets and liabilities then there seems little doubt that full disclosure will now be required. Read more »

Brian Spence

The increased pension flexibility likely to be available after April 2006 may well provide an unexpected lifeline for the sponsoring employers of many of the UK’s beleaguered final salary pension schemes as well as result in increased choice for their scheme members. It is likely that the new regulations will permit occupational pension schemes to provide higher levels of tax free cash, for a significant number of members, than would be available under current regulations, which could in turn mean that the cost of providing the total benefits is lower. Read more »

Brian Spence

At a time when the prospects for the future success of many business’ is now affected by the level of their pension scheme deficit, companies are employing ever more innovative solutions to address the problem with which they are faced. The changes which the government imposed in June 2003 mean that it is now extremely difficult for solvent employers to escape from the liabilities they have already accrued. However, what is still possible is to control the timescale over which deficits are met and the finance methods used to fund them. One potential solution currently being employed is the use of bank lending to cap off the liability level as this re-financing can reduce cost, control risk and provide a degree of increased certainty for shareholders and employees alike. Read more »

David Davison

From next month, most members of final salary pension schemes will be able to sleep that bit more peacefully, secure in the knowledge that new legislation will significantly improve the level of protection their benefits receive. Yet one particular section of the public – the spouses of pension scheme members in the midst of divorce proceedings – will miss out on any benefits from these changes.

The most common method of dividing assets is for the party with the most pension (often the husband) to retain it with the other party (often the wife) receiving a higher proportion of the other assets to compensate. This seems like a sensible and pragmatic approach for many divorcing couples. Read more »