Latest news with #LocalGovernmentPensionScheme
Daily Mirror
3 hours ago
- Business
- Daily Mirror
EU country paying the highest pension and it's £8,000 more than the UK
Dreaming of retiring already? A stunning country just a couple of hours from the UK has one of the highest paying pensions in Europe - but there are several big catches Million of Brits could see a huge boost to their retirement, after HM Treasury unveiled plans to double the number of UK pension megafunds by 2030. As previously explained, this is where smaller local authorities and private workplaces come together, with the aim that bundling larger funds will result in a much greater return. The government states these changes will 'drive more investment directly into the UK economy for new homes and promising scale-up businesses'. "With over £50 billion secured through the recent voluntary commitment from pension funds to invest five percent of assets in the UK and new local investment targets for Local Government Pension Scheme authorities," HM Treasury added. "This tackles the gradual decline in domestic investment from UK pension funds, where around 20 per cent of Defined Contribution assets are currently invested compared to over 50 per cent in 2012." For now, Brits on the State Pension will receive just £230.25 a week (£11,973 per year) as long as they have enough qualifying years of National Insurance (NI). If your NI record started after April 2016, you will need 35 qualifying years to get the full rate of the New State Pension. But in comparison to nearby countries, the UK's state pension seems mediocre at best. According to the Organisation for Economic Cooperation and Development (OECD) - as of 2022 - the full basic pension in Iceland is valued at ISK 3,439,428, equivalent to 31 per cent of average worker earnings. This roughly converts to £20,063.08 per year - more than £8,000 compared to the UK state pension. "There is an annual allowance of ISK 300,000 (£1,751.11) for exempt income, equivalent to three per cent of average earnings," OECD added. "Above this allowance, the basic pension is withdrawn at a rate of 45 per cent against income from pension funds. It is also withdrawn at 45 per cent against employment income but only after employment income is above ISK 2,400, 000 (£14,011) in addition to the allowance. There is also an annual holiday payment of ISK 106,765 (£623) which is withdrawn at two per cent above the income limits." However, the State Pension age is currently 66-year-old for men and women in the UK - although it is slated to increase to 67 by 2028 - whereas the normal pension age in Iceland is already 67 (except for seamen who have been working for more than 25 years in the occupation, who can retire at 60). If you claim your basic pension in Iceland before you reach 67, your funds will be reduced by 6.6 per cent for each year that the pension is claimed early. Iceland also has a pension supplement which is applicable for single pensioners. The maximum value of this benefit is ISK 869,124 (£5,0712) per year, some eight per cent of average earnings. This benefit is withdrawn at 11.9 per cent, subject to the same thresholds as the basic pension. If you're tempted to ditch Britain for Iceland, you may want to think twice, as you can only receive the full basic pension if you have 40 years of residency. While Iceland's pension may seem extremely generous, it is worth considering that the cost of living here is around 40-50 per cent higher than in the UK. This means you'd be spending almost double on your weekly food shop, property, and basic goods.
Yahoo
3 days ago
- Business
- Yahoo
Government 'megafund' pension plans could give £6k boost to savers
Plans to double the number of UK pension "megafunds" by 2030 could see workers get a £6,000 boost to their retirement pot, the government has said. The UK Treasury confirmed plans on Thursday to expand the number of UK pension megafunds in the next five years. Under reforms set to be introduced through the Pension Schemes Bill, the government said that multi-employer defined contribution and local government schemes will pool to operate at megafund level, managing at least £25bn in assets by 2030. The Treasury said that evidence from Australia and Canada showed that this size enabled pension funds to invest in large infrastructure businesses and private businesses, both boosting the economy and potentially driving higher returns for savers. The government said that this would help drive more than £50bn in investment for UK infrastructure, new homes and fast-growing businesses. This comes on the back of the government's recent announcement of a new agreement, known as the Mansion House Accord, in which Britain's biggest pension funds committed to invest 5% of assets in the UK. On Thursday, the government also published the final report from its Pensions Investment Review, setting out its final policy decisions following on from feedback provided to its consultation. It said that figures from the report showed that these reforms would drive higher returns for savers, "in part by cutting waste in the system". Read more: Trending tickers: Nvidia, Salesforce, HP, Tesla and M&S According to the Treasury, these schemes could be saving £1bn a year by 2030 through economies of scale and improved investment strategies. As a result, the government said average earner who saves over their career could see a £6,000 boost to their defined contribution pension pot. That's based on its estimate that this megafund consolidation could deliver at least a six-basis-point reduction in fees, as well as an increase in allocations to "productive" assets such infrastructure projects. "We're making pensions work for Britain," said chancellor Rachel Reeves. "These reforms mean better returns for workers and billions more invested in clean energy and high-growth businesses — the Plan for Change in action." Meanwhile, deputy prime minister Angela Rayner said that the "untapped potential of the £392bn Local Government Pension Scheme is enormous. Through these reforms we will make sure it drives growth and opportunities in communities across the country for years to come" In Thursday's announcement, the Treasury also said that a "backstop power [is] set to be taken in the Pension Schemes Bill to protect the interests of LGPS [local government pension scheme] members and local taxpayers where necessary by directing an administering authority to participate in a specific investment pool." According to a Financial Times report, officials confirmed that this could include specific targets to UK assets. A spokesperson for the Treasury had not responded to Yahoo Finance UK's request for comment at the time of writing. Matt Tickle, chief investment officer at Barnett Waddingham, said: "The main concern for schemes following the government's wide ranging pension announcements is the looming threat of 'mandation'. "While the chancellor's 'backstop' power – which could compel funds to back British assets – appears to have deterred that threat for now, any move towards mandated investment is a blunt tool, leaving members and society as a whole at risk of poorer outcomes." "That said, the fact that there is time gives some of the government's better policies, around planning reform, value for money and retirement pathways more space to succeed," he added. "If they do, they could generate opportunities that pension schemes will willingly invest in. Efforts to improve the flow of investable opportunities are certainly positive, however there is still an urgent need to focus on reforms rather than enforcing mandates." Helen Morrissey, Yahoo Finance UK columnist and head of retirement analysis at Hargreaves Lansdown, said: "While scale is important in delivering better outcomes for savers, it must not come at the cost of reducing competition, member choice and much needed innovation. This has the ability to really drive up member engagement with their pensions, improve decision making and boost outcomes." "It's important to pick through the detail of the report and later regulation to see how this is supported," she said. "For instance, detail needs to be fleshed out on how the transition pathway for providers looking to reach scale by 2035 will work. "If the market is to thrive, then there needs to be space for smaller, innovative providers. It's a lesson learned in the retail banking market where competition from smaller challenger banks has put pressure on larger incumbents to improve user experience and product offerings." Read more: Odds of more Bank of England interest rate cuts fall as food inflation rises UK 'bargain' stocks that have outperformed the market long-term Trump tariffs to hit UK economy next year, says IMF
Yahoo
4 days ago
- Business
- Yahoo
Government 'megafund' pension plans could give £6k boost to savers
Plans to double the number of UK pension "megafunds" by 2030 could see workers get a £6,000 boost to their retirement pot, the government has said. The UK Treasury confirmed plans on Thursday to expand the number of UK pension megafunds in the next five years. Under reforms set to be introduced through the Pension Schemes Bill, the government said that multi-employer defined contribution and local government schemes will pool to operate at megafund level, managing at least £25bn in assets by 2030. The Treasury said that evidence from Australia and Canada showed that this size enabled pension funds to invest in large infrastructure businesses and private businesses, both boosting the economy and potentially driving higher returns for savers. The government said that this would help drive more than £50bn in investment for UK infrastructure, new homes and fast-growing businesses. This comes on the back of the government's recent announcement of a new agreement, known as the Mansion House Accord, in which Britain's biggest pension funds committed to invest 5% of assets in the UK. On Thursday, the government also published the final report from its Pensions Investment Review, setting out its final policy decisions following on from feedback provided to its consultation. It said that figures from the report showed that these reforms would drive higher returns for savers, "in part by cutting waste in the system". Read more: Trending tickers: Nvidia, Salesforce, HP, Tesla and M&S According to the Treasury, these schemes could be saving £1bn a year by 2030 through economies of scale and improved investment strategies. As a result, the government said average earner who saves over their career could see a £6,000 boost to their defined contribution pension pot. That's based on its estimate that this megafund consolidation could deliver at least a six-basis-point reduction in fees, as well as an increase in allocations to "productive" assets such infrastructure projects. "We're making pensions work for Britain," said chancellor Rachel Reeves. "These reforms mean better returns for workers and billions more invested in clean energy and high-growth businesses — the Plan for Change in action." Meanwhile, deputy prime minister Angela Rayner said that the "untapped potential of the £392bn Local Government Pension Scheme is enormous. Through these reforms we will make sure it drives growth and opportunities in communities across the country for years to come" In Thursday's announcement, the Treasury also said that a "backstop power [is] set to be taken in the Pension Schemes Bill to protect the interests of LGPS [local government pension scheme] members and local taxpayers where necessary by directing an administering authority to participate in a specific investment pool." According to a Financial Times report, officials confirmed that this could include specific targets to UK assets. A spokesperson for the Treasury had not responded to Yahoo Finance UK's request for comment at the time of writing. Matt Tickle, chief investment officer at Barnett Waddingham, said: "The main concern for schemes following the government's wide ranging pension announcements is the looming threat of 'mandation'. "While the chancellor's 'backstop' power – which could compel funds to back British assets – appears to have deterred that threat for now, any move towards mandated investment is a blunt tool, leaving members and society as a whole at risk of poorer outcomes." "That said, the fact that there is time gives some of the government's better policies, around planning reform, value for money and retirement pathways more space to succeed," he added. "If they do, they could generate opportunities that pension schemes will willingly invest in. Efforts to improve the flow of investable opportunities are certainly positive, however there is still an urgent need to focus on reforms rather than enforcing mandates." Helen Morrissey, Yahoo Finance UK columnist and head of retirement analysis at Hargreaves Lansdown, said: "While scale is important in delivering better outcomes for savers, it must not come at the cost of reducing competition, member choice and much needed innovation. This has the ability to really drive up member engagement with their pensions, improve decision making and boost outcomes." "It's important to pick through the detail of the report and later regulation to see how this is supported," she said. "For instance, detail needs to be fleshed out on how the transition pathway for providers looking to reach scale by 2035 will work. "If the market is to thrive, then there needs to be space for smaller, innovative providers. It's a lesson learned in the retail banking market where competition from smaller challenger banks has put pressure on larger incumbents to improve user experience and product offerings." Read more: Odds of more Bank of England interest rate cuts fall as food inflation rises UK 'bargain' stocks that have outperformed the market long-term Trump tariffs to hit UK economy next year, says IMF
Business Mayor
19-05-2025
- Business
- Business Mayor
Gauging Reform UK's pension power
Unlock the Editor's Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter. One of FTAV's greatest assets is its indefatigable readership. Not satisfied with a couple of thousand words on Reform UK's incipient membership of local authority pension committees, and what this might mean for what Richard Tice — its deputy leader — labels 'woke investments', some of you wanted even more detail about the extent of this newfound influence. Our answers were all buried deep in the original piece's dataviz. But, admittedly, extracting those answers involved a fair bit of mouse-hovering and having a spreadsheet to hand. So let's take another tilt at it. Reform won control of ten councils on 1st May. But as we wrote on Tuesday: Controlling some councils pretty much translates into control of their pension funds, while others give maybe a single seat on the pensions committee — if that. As anyone who has sat on a decision-making committee knows, there's significant power in a single seat. A majorly dissenting voice can be enough to change a group's dynamic, especially if held by someone who might air any disagreements with the rest of the committee in public. By framing reservations around decisions using just the right language it's not hard for someone to craft themselves the equivalent of a look-back option. But will Reform now have just a single seat on ten pensions committees? No. We reckon their electoral gains translate into some representation on the pension committees of 18 different Local Government Pension Scheme administering authorities, collectively overseeing more than £100bn. Furthermore, we estimate that they will have majority control of the pensions committees in four administering authorities, overseeing £29.2bn. And it looks like they will have a controlling plurality on a further five administering authorities overseeing £25.4bn. Here's how our estimates break down across councils that held elections this month. (NB, we've grouped together West Northamptonshire and North Northamptonshire into a single Northamptonshire column): To arrive at these estimates, we took a look at the Governance Compliance Statements of LGPS fund associated with each council. These set out how many seats on the pensions committee go to elected councillors, how many seats each council gets for multi-council funds, who gets to vote, etc. For example, despite Reform UK winning a stonking two-thirds of the seats and overall control of Doncaster Council, Doncaster is just one of the four councils that club together into the £11bn South Yorkshire Pension Authority. Doncaster gets three seats on its pensions committee. Barnsley and Rotherham get two seats apiece, while Sheffield gets five seats. So, having won two-thirds of Doncaster's council seats, Reform UK will be asked to provide two elected councillors to South Yorkshire's twelve-strong pensions committee. No direct control, but a voice at the table. Lincolnshire County Council, which flipped from Conservative to Reform UK, is a different kettle of fish. Lincolnshire Pension Fund had just over £3.4bn of assets as of March 2024. Its administering authority is Lincolnshire County Council. And the council's constitution gives it eight seats on a pensions committee of twelve. Reform UK will take five of these, in accordance with the Local Government and Housing Act of 1989 that requires political balance across committees to reflect electoral balance. Here's how they show the split in the fund's annual report: Why doesn't the council have all twelve seats? Partly, it's because Lincolnshire County Council is not the only employer in the Lincolnshire Pension Fund. At the risk of triggering PTSD among survivors of our long read earlier this year — which culminated in an examination of the funding position of the 787 different employers in the West Midlands Pension Fund — LGPS funds are multi-employer funds. The council is probably always the largest employer, but not the only one. In the case of Lincolnshire, the council made less than a third of the fund's contributions last year — a decent proxy for their claims on the fund. Who are the others? Further education colleges, academy schools, housing associations, private-sector contractors — all sorts. The chart below shows the degree to which electoral success translates into pensions committee representation. The size of each bubble denotes the size of assets overseen by each administering authority associated with each council: It shows that even Reform UK's modest electoral positions in places like Wiltshire and Cambridgeshire have won them representation at the pensions table. Let's bring this altogether in simple line chart: Did we say simple? It's probably still worth explaining. The line shows total LGPS assets influenced by a given level of Reform UK pensions committee representation. So, if you want to know how many assets are overseen by LGPS funds with pension committees whose voting members consist of at least 50 per cent Reform UK councillors, you can go to the 50 per cent mark on the x-axis and find the answer: £29.2bn. Each step is a different LGPS fund and you can hover your mouse over it to see what it is, how large it is, etc. We won't know what this will all mean in practical terms for some time. But we'll be keeping an eye out for any activity.
Yahoo
13-05-2025
- Business
- Yahoo
Farage promises war on ‘woke' council pensions
Reform could block 'woke' net zero investments made by the country's largest public sector pension scheme. The Right-of-centre political party swept to victory in the local elections this month and now controls 10 councils across England. It means councillors will hold key roles overseeing more than £100bn of assets within the Local Government Pension Scheme (LGPS), which pays for the retirements of millions of council workers. Around half of the funds within the LGPS have established net zero targets that aim to invest more money in low-carbon initiatives, such as renewable energy. But Nigel Farage, Reform UK leader, told The Telegraph he wanted pension fund managers to prioritise maximising return on investments instead. 'We want the money invested for growth not for political posturing.' Richard Tice, deputy leader of Reform UK, told the Financial Times that the party would 'be looking closely' at the scheme's investment in net zero. LGPS assets can include shares in companies, bonds, property, transport and energy infrastructure, as well as private equity deals. These investments are spread across 87 autonomous funds controlled by town halls in England and Wales, with investment managers reporting to committees made up of local councillors. Reform is projected to have at least one councillor on committees that together control more than £100bn in assets, of which £30bn is estimated to be overseen by committees where the party's councillors will hold a majority of seats. The analysis, which was first reported by the Financial Times, shows the party stands to have significant influence in deciding how pension pots are invested. Mr Tice said: 'The MP's pension fund is riddled with net zero investments that are underperforming and has 32pc of its assets invested in illiquids that are probably overvalued.' He said that a 'net zero obsession leaves the taxpayer on the hook for tens of millions of pounds.' The pension scheme for MPs is worth £862m and is currently in surplus. One low-carbon fund the parliamentary scheme has invested in, managed by BlackRock, had a return of 22.1pc in 2024 and 17.3pc in 2023, slightly better than the target benchmark. 'We are going to be looking closely at this and I'll be very grumpy if these pension schemes have bigger deficits because they've been underperforming because of woke investments,' Mr Tice added. So-called environmental, social and governance (ESG) investment funds are usually made up from shares in companies belonging to sectors such as renewable energy and low-carbon technology. Investors withdrew a record $8.6bn (£6.5bn) from ESG funds in the first quarter of the year after Donald Trump was re-elected US president and politicians in Europe shifted their focus to economic growth and defence spending. Many of the individual funds within the LGPS have set out plans to shift investment to support net zero, which could include investing in more ESG funds. Analysis by consultancy XPS Group last year showed 49pc of LGPS funds were aiming for a net zero investment portfolio by 2050. Just over a quarter had directly invested in green initiatives like reforestation and renewable energy. The LGPS has 6.7 million members, of whom 2.1 million are paying between 5.5pc and 12.5pc of their yearly salary to the scheme, while councils contribute as much as 18pc. The latest market valuation of the LGPS said it was worth £391bn in total. Steve Webb, a partner at Lane Clark & Peacock, a pensions consultancy, said investing in companies that support net zero targets was a good strategy for growth. 'The basic idea is that climate change is happening, whatever you may think the causes are, and that it makes sense to invest knowing that this is the case. For example, if you think demand for solar panels is going to increase, then investing in solar panel firms makes commercial sense, whatever your views on net zero. 'Likewise, money will need to be spent on mitigation or adaptation to deal with climate change, [for] example spending more on flood defences, so there may be a case for investing for a return in businesses which specialise in climate adaptation, not for ideological reasons but for commercial reasons.' He added: 'In short, there's a risk in not investing sustainably, and Reform councillors need to think about that as well.' Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
