Latest news with #HymansRobertson
Telegraph
30-05-2025
- Business
- Telegraph
Final salary pensions at risk from Labour tax raid
Labour is set to remove restrictions that currently protect pension savings from being funnelled into risky investments. Under new plans the Government will allow pension funds to draw down money that is surplus to the amount required to cover a scheme's liabilities. But critics have warned the move would put millions of final salary pensions at risk, and may even see businesses dipping into pension pots to improve their cash flows. The reforms, announced on Thursday, will allow 'surplus' funds to be invested back into businesses, removing existing safety measures that protect pensions from riskier investments. Approximately 8.8 million people are members of defined benefit schemes, which currently have a collective surplus of £160bn, according to consultants Hymans Robertson. Under the plans, any money drawn down by businesses would instantly be hit with a 25pc tax charge, providing a much-needed boost for the Chancellor as she seeks to avoid breaching her own fiscal rules. If the full £160bn were drawn down using the new freedoms it could raise as much as £40bn for the Treasury. Critics have urged ministers to rethink the plans. Dennis Read of Silver Voices, part of the new campaign group Pension Security Alliance, said: 'If a company has cash flow problems it will be tempting to raid the pension fund, claiming that the purpose is investment, so leaving the scheme underfunded and unstable if the company collapses.' Options for using the cash include paying more to shareholders, increasing spending on their business or making investments elsewhere. Schemes can already distribute their surpluses, but strict rules designed to protect pensions at all costs make it rare. However, any access to surplus funds must first be approved by the trustees, who in turn will need to ensure actions are in 'members' best interests' which could place a high bar on when the new powers can be used. The Pensions and Lifetime Savings Association welcomed the announcement, adding that surplus release by schemes could provide an opportunity to improve member benefits, boost contributions into defined contribution schemes, and support new types of investment. However, the association said measures needed appropriate protections for savers. A former pensions minister, Sir Steve Webb, now a partner at firm LCP, said the changes could result in spare cash being used to improve benefits for existing members, for example by providing better inflation protection on schemes relating to service before 1997. John Ralfe, independent pensions consultant and chair of two pension schemes, added: 'The detailed regulations that ministers are proposing must make sure member security is the absolute priority. 'Surpluses must be defined on a tough basis. Scheme assets must also match liabilities to minimise the risk of market movements causing any future deficit.' The Government's plans were set out last year in a Department of Work and Pensions paper that said ministers would consult on the details of surplus extraction plans. The reforms come as the Government announces it is legislating for a reserve power within the upcoming Pensions Schemes Bill that will allow it to mandate pension scheme investments to drive capital into UK assets and boost growth. The Treasury was approached for comment.
Yahoo
05-02-2025
- Business
- Yahoo
UK interest rates set to fall at Bank of England meeting on Thursday
The cost of borrowing is expected to fall to its lowest point in more than 18 months on Thursday. Senior economists at the Bank of England will announce whether they are cutting the UK's base interest rate, which currently sits at 4.75%. Most experts predict a quarter point reduction to 4.5%, continuing a series of cuts which started last summer. The base rate helps dictate how expensive it is to take out a mortgage or a loan, while it also influences the interest rates offered by banks on savings accounts. Hikes in recent years, designed to combat skyrocketing inflation, have left mortgage rates much higher than was normal for most of the last decade. The base rate rose as high as 5.25% in late 2023, but the Bank's policymakers cut it to 4.75% over the course of several months last year. The Bank typically raises interest rates when inflation is high to discourage people from spending money, thereby slowing the rate of price rises. Now, inflation – which measures how fast prices are rising across the economy – is much lower than the highs of recent years, at 2.5% per year. And economic growth is stagnating across the UK, leading to predictions of another rate cut, which would encourage more spending and stimulate the economy. However, some recent announcements have indicated that inflation could be on the way back up, albeit more gradually, posing a potential problem for the Bank. On Wednesday, a survey of companies in the service sector, which includes everything from shops and pubs to finance firms and lawyers, found that cost inflation in the industry nudged up in January. Most economists think these signs of rising inflation are unlikely to put policymakers off cutting rates on Thursday, but it could lead them to be more cautious at future meetings in March and May. Chris Arcari, an analyst at finance firm Hymans Robertson, said the Bank will have to 'walk a tightrope' when it comes to more rate cuts later this year. He said that while the economy currently leaves space for a 'modest reduction', the Bank will likely 'adopt cautious messaging' about the future. The rise in cost inflation is partly to do with the effect of policies announced at the October Budget. Chancellor Rachel Reeves raised national insurance contributions (NICs) for companies in October. The move was designed to give the Government more money to spend on public services like the NHS. But some companies have complained it is pushing up costs and contributing to rising inflation. Matthew Ryan, an analyst at finance firm Ebury, added that with economic growth stagnating but inflation rising, the Bank 'will have to make a judgment call about which risk is likely to dominate over the course of the year'.
The Independent
05-02-2025
- Business
- The Independent
UK interest rates set to fall at Bank of England meeting on Thursday
The cost of borrowing is expected to fall to its lowest point in more than 18 months on Thursday. Senior economists at the Bank of England will announce whether they are cutting the UK's base interest rate, which currently sits at 4.75%. Most experts predict a quarter point reduction to 4.5%, continuing a series of cuts which started last summer. The base rate helps dictate how expensive it is to take out a mortgage or a loan, while it also influences the interest rates offered by banks on savings accounts. Hikes in recent years, designed to combat skyrocketing inflation, have left mortgage rates much higher than was normal for most of the last decade. The base rate rose as high as 5.25% in late 2023, but the Bank's policymakers cut it to 4.75% over the course of several months last year. The Bank typically raises interest rates when inflation is high to discourage people from spending money, thereby slowing the rate of price rises. Now, inflation – which measures how fast prices are rising across the economy – is much lower than the highs of recent years, at 2.5% per year. And economic growth is stagnating across the UK, leading to predictions of another rate cut, which would encourage more spending and stimulate the economy. However, some recent announcements have indicated that inflation could be on the way back up, albeit more gradually, posing a potential problem for the Bank. On Wednesday, a survey of companies in the service sector, which includes everything from shops and pubs to finance firms and lawyers, found that cost inflation in the industry nudged up in January. Most economists think these signs of rising inflation are unlikely to put policymakers off cutting rates on Thursday, but it could lead them to be more cautious at future meetings in March and May. Chris Arcari, an analyst at finance firm Hymans Robertson, said the Bank will have to 'walk a tightrope' when it comes to more rate cuts later this year. He said that while the economy currently leaves space for a 'modest reduction', the Bank will likely 'adopt cautious messaging' about the future. The rise in cost inflation is partly to do with the effect of policies announced at the October Budget. Chancellor Rachel Reeves raised national insurance contributions (NICs) for companies in October. The move was designed to give the Government more money to spend on public services like the NHS. But some companies have complained it is pushing up costs and contributing to rising inflation. Matthew Ryan, an analyst at finance firm Ebury, added that with economic growth stagnating but inflation rising, the Bank 'will have to make a judgment call about which risk is likely to dominate over the course of the year'.
