Is your UK defined benefit pension safe!!!

Pension protection fund explained

High in everybody’s news feed in the last few days is the relatively surprising collapse of Britain’s second-biggest construction company – Carillion.

For many people that are currently in employment with some of the UK’s largest companies day to day work is generally something that is assumed as a given – It is only when something like this happens out of the blue that it brings home just how delicate our working and financial lives can be at times.

The ongoing job roles of the approximately 20,000 British-based employees are under huge threat, but what of their other hard earned benefits? Well luckily their pension rights should largely be preserved, thanks to the Pension Protection Fund (PPF), a private scheme funded by a levy on member companies.

When a firm with a salary-linked pension scheme goes to the wall without enough assets to carry on paying retirees, the PPF steps in. Those already in retirement get their pensions met in full, although future increases may be limited, while those who have yet to reach retirement age receive 90% of their benefits, up to a cap of around £35,000 (€39,500) a year.

The role of the PPF is to protect millions of people throughout the United Kingdom who belong to similar defined benefit pension schemes. If their employers go bust, and their pension schemes cannot afford to meet their liabilities and pension promises, the PPF will compensate the employees for their lost benefits. Tens of thousands of people are already in receipt of compensation from the PPF and hundreds of thousands more will do be in the future. The PPF is a public corporation, set up by the Pensions Act 2004, and is run by an independent Board.

This kind of collapse has huge knock on effects on both the wider markets as well as the multitude of small firms supplying services to the ‘Big Boys’.

Conservative MP Craig Mackinlay warned of a “domino effect” with subcontractors further down the supply chain that have already been waiting for up to six months for payments, may now receive nothing at all for the work they carried out.

Transfer values for Defined Benefit pensions are currently very high, due to a quirk of low interest rates. This could mean a higher transfer value might offset some of the risk you will be taking on if you chose to transfer your benefits.

Should I transfer? Am I in the best scheme for me? Is my scheme underfunded? There are many questions that need to be asked and Pennick Blackwell are happy to assess your personal situation and scheme position and if required walk you through all the potential pitfalls and options available to you.

Financial tips for the New Year

Financial tips for the New Year

Instead of Gyms, Drink and Cigarettes, think about giving your finances the resolution treatment this year

Another year has ended, 2018 has begun with many people looking to make a fresh start, new beginnings and change their lives for the better.  While this is a worthy goal, too many people forget to consider the financial implications of resolutions or their personal finances full stop.  So, while the idea of change for the better is in your mind, why not consider ways to make your finances healthier this year.

These ideas, unlike some of the other resolutions people make at the start of the year, don’t have to be done straight away, many of them can’t.  Rather, use this guide to consider how some or all of the points mentioned can help you manage your finances a bit better with the goal being to either save more or pay less to the bank and get the benefit of extra money down the line.

1: Decide on your goals

First and foremost, consider what you need to tackle and look to how you may achieve your desired effect.  Are you looking to start a savings plan, pay off some debt or loan, discover new investment options or could you do with consolidating debt to save interest payments?

Writing down your financial requirements and situation may allow you to consider what you need to do in order to accomplish your goals, seeing can be believing.

2: Get your mortgage into shape

If you already have a mortgage, there are three things you should be thinking about this year. The first is checking you’re on the right rate; after all, one thing we’ve learned from the Clausula Suelo scandal is we can’t rely on the banks to get it right for us.

The second is to consider a switch to another product or competitor. A short term outlay that comes with switching banks could save you in the long run.  If your conditions are not favourable, a switch could save you a noticeable amount on a monthly basis.

Thirdly, pay extra. Crazy right!  It may not be.  If your mortgage allows it and has no charge to make one off payments, a little saving through the year can work wonders on the long term cost of a mortgage.  While you could be doing something else with your money, inching away at your mortgage is hard to beat. A little effort can, over time, produce substantial returns.

By overpaying an amount every year you’ll reduce what you owe the bank and reduce future payments or cut the term of your mortgage. It also means you’ll cut your interest bill. And paying less interest to the bank is something everybody can appreciate!

3: Consider your pension

If you have one, take the time to read your annual pension benefit statement and figure out how your retirement is shaping up. You owe it to yourself.

And if you don’t have a pension, is it time to think about getting one?

If you have spare cash you can make extra contributions, increasing your pension and your tax benefits. But if your pension is going nowhere, why reward your non-performing fund manager even more?  So many UK Pensions are underfunded and in danger, is leaving it with them the right thing to do?

4: Bump up your savings

Deposit rates may be on the floor but the banks will still charge you a handsome amount to borrow from them so why give them your hard earned money for nothing?

A look at alternative investment options to the banks could increase your return substantially without having your money tied up for a number of years.

Using an investment management company comes with a cost but if you can earn 4% on a well-run investment, after costs, it will still give you more than double what you could probably earn in a bank deposit account.

5: Take control of your debt

While mortgages may account for most of a person’s debt, expensive, short-term debt is also a factor, for example, more than one-third (36 per cent) of credit cards have balances of between 75 and 100 per cent of their limits.

If you have too much debt weighing on your credit card, try and make some inroads this year.

If you have a high amount sitting on your credit card at a rate of around 20 per cent, cutting that down would be one of your best resolutions this year.  Instead of just paying the minimum every month, try to add something every month off the debt.  With the amount of interest charged on cards, a little goes much more than a long way!

If you want more information on any of the above topics or anything else related to your financial needs, please feel free to contact us on any of the following ways in order to set up an appointment for a free financial health check and see how a financial advisor can assist you.

Prepare with Pennick Blackwell and minimise the risks to your money (and health!)