News

The Budget speech on 19th March announced some major changes affecting pensions in the future.

The biggest change will take place in 2015, when the intention is to remove the requirement which currently exists under a defined contribution (DC) pension scheme to buy an annuity (a bond which is guaranteed to pay out a fixed income for the rest of a person’s life, regardless of how long they live) with the pension pot that builds up in a DC scheme. This means that when they come to retire (after age 55), DC scheme members will be able to cash in as much or as little of their pension pot as they want, with some tax implications.

The Pensions Office has had some queries from pensioners – and members with a deferred pension – about how this affects them and whether they can now “cash in” their pension. As the changes will only affect those with a DC pension, the answer is that for Coats Plan members, there is no change. Members of a defined benefit (DB) Plan like ours do not build up a “pot” of money, their pension is based on their service and salary. In any case, this change will only affect those whose pensions aren’t yet drawing their pensions. Similarly, the announcement made about changes to ‘drawdown’ also applies only to DC pensions.

The other change relates to trivial (small) lump sum limits, and this may have an impact on the options available to Plan members. We are waiting for formal guidance from our advisers, which will follow further clarification from the Government. As so much is currently unknown, we cannot confirm anything at this time. We will update you when we have more information.

The Lifetime Allowance (LTA) is the limit on the amount of pension saving which you can accrue over your lifetime without triggering a tax charge. The LTA will reduce from its current value of £1.5 million to £1.25 million from 6 April 2014. Depending on your circumstances, this change may have an impact on any pension benefits due to you which are not already in payment. To help those who have already made pension saving decisions based on the previous LTA limit, HM Revenue & Customs has announced that two new forms of transitional protection will be made available.

Update: please refer to more recent news articles for up to date information – News.

You may have seen the reference in the June 2013 Pensions News or the recent (November 2013) press coverage concerning the UK Pensions Regulator’s investigation into the Guinness Peat Group plc’s UK defined benefit pension schemes, which includes the Coats Plan. The investigation is ongoing and there is little that can be added to what is already in the public domain, other than to reconfirm the Trustee’s view that this action does not affect the current position of the Plan.

The latest edition of Pensions News is being issued to all our members and should be delivered in early December. Please click here to read Pensions News 31.

Also distributed with this edition is the Summary Funding Statement, which provides an update on the valuation results – you can view this online by clicking here.

If you are still receiving your copy of Pensions News by post, please remember that you can save the Plan money by choosing to receive future editions of Pensions News and other general correspondence electronically. If you have already given us your email address, thank you.

In Pensions News 30 we alerted members to “pension liberation schemes”. Briefly, these are bogus pension schemes set up by unscrupulous companies to encourage you to transfer your pension rights, usually at a real cost to you – not only in excessive charges but you could lose your pension altogether. The pension industry has been clamping down on these schemes, with both the Pensions Regulator and HMRC involved. The latest update from the HMRC is they will now conduct a risk assessment before they decide to register any pension scheme. In addition HMRC will now work closer with schemes such as the Coats Pension Plan when we contact them questioning the validity of the potential receiving scheme.

The changes above are welcomed by the Trustee and the Pensions Office. This is an ongoing battle but please be assured that the Pensions Office team will continue to carry out very strict checks and will bring any suspicious cases to the attention of Regulator.