Latest news with #pension
Zawya
a day ago
- Business
- Zawya
Britain's biggest pension scheme to lobby governments more on climate
Britain's biggest private sector pension scheme plans to step up lobbying of governments, regulators and standard-setters to push for faster action amid a worsening climate outlook, its investment chief told Reuters. The Universities Superannuation Scheme, which manages nearly 78 billion pounds ($105.67 billion), has reduced emissions linked to its own portfolio. But Simon Pilcher said there was only so much schemes could achieve through asset reallocation. "That's why the high-value engagement is with governments and regulators to create the environment where the low-carbon action happens. It is, I would say, 90% up to them and only 10% up to capital allocation," the chief executive of USS Investment Management said. The British government in May signed an accord with pension investors to try to scale up investment in UK infrastructure and green programmes to help the country reach its net-zero goal, which is enshrined in law. Pilcher said changing the rules to make it easier for companies and consumers to overhaul their climate-damaging practices was the most effective lever for change, and the scheme had decided to "turn the dial up" on its lobbying efforts. "Corporates will change their activity when it's sane for them to do that," Pilcher said. "There needs to be a strong financial interest for those businesses to do the sensible thing; no one is going to spend money if, bluntly, they're going to be wasting that money." While USS IM has no formal arrangements with other investors, it has good relationships with the UK's local government pension schemes, and investors such as Railpen and Nest, the country's biggest auto-enrolment scheme, making it an influential voice within the sector. In the UK, lobbying would include talking to the Department for Energy Security and Net Zero about its strategy and encouraging them to, for example, reform the planning process to make it easier to connect renewables to the electricity grid. The United Nations said last October the world was on course to hit more than 3 degrees Celsius of warming above the pre-industrial average by the end of the century, based on current emissions-reduction pledges by countries, way off the world's goal of capping warming at 1.5 C. ($1 = 0.7381 pounds) (Reporting by Simon Jessop; Editing by Alison Williams)
The Independent
a day ago
- Business
- The Independent
How does Britain's pension predicament compare with other countries?
Liz Kendall announced this week that she is reviving the pension commission as the government tries to tackle what she described as a looming 'tsunami of pensioner poverty'. The work and pensions secretary said the government is setting out to 'tackle the barriers that stop too many saving in the first place' after her department found that people retiring in 2050 are on track to be poorer than those retiring today, expecting to get £800 less in private pension income. Currently, just 55 per cent of working age adults in the UK are contributing to a pension pot, and MPs have said that a UK-wide strategy is needed to address pensioner poverty. But the UK's pension dilemma is not unique. Countries across the world are grappling with similar looming crises, driven by a combination of factors including demographic shifts, low interest rates and economic instability. Here, the Independent takes a look at what action other governments are taking to stave off the impending crisis. United States In the United States, half of all private-sector workers are unable to get a retirement plan through their jobs, according to a survey published in June by Pew Charitable Trusts. The US's most common workplace retirement plan is a 401(k), which allows employees to voluntarily put money aside for retirement which is typically matched by their employers. The total employee and employer contributions to a 401(k) cannot exceed $70,000 per year. Around 27 per cent of Americans over the age of 59 have no savings to rely on in their retirement, according to a survey by financial services firm Credit Karma in 2023. Last week, the Wall Street Journal reported that the Trump administration was expected to sign an order that would open up 401(k)s to the private markets. It would order the US Labor Department and Securities and Exchange Commission to create guidance for employers on including private assets in 401(k) plans, which could, in turn, create more investment opportunities for them. Canada Currently, the key challenge for many countries remains the low rate of pension saving. More than half (59 per cent) of working Canadians do not believe they will have enough money to retire, according to a survey conducted this year by Canadian pension fund HOOPP, Healthcare of Ontario Pension Plan. However, Canada is tackling this through rate increases within their savings system. The government has expanded the Canada Pension Plan (CPP), a monthly benefit that replaces a percentage of a person's income after they retire. Between 2019 to 2025, it has increased the percentage of how much of a worker's earnings are replaced from 25 per cent to 33.33 per cent. It has also increased the maximum level of earnings protected by the CPP by 14 per cent over 2024 and 2025. Australia Australia is recognised as having one of the world's top pension schemes where employers are required to pay a percentage of their employees earnings into an account which that employee can then access once they have retired. As of this month, employers are now required to contribute 12 per cent to employees' retirement savings accounts, up from 11.5 per cent. They are also taking steps to close the gender pension pay gap with the Labor Government introducing a superannuation top up for parents taking time off to care for a newborn. The CityUK CEO Miles Celic said: 'total contributions will have to rise if we are to emulate the successes of, for example, Australia and Canada. 'This will involve difficult political choices alongside technical changes to policy and regulation.' France In 2023, French President Emmanuel Macron raised the age of retirement from 62 to 64, which sparked massive public backlash and protests. Macron's administration argued that the reform was essential to prevent long-term deficits in the pension system. At the time, Macron said he did not enjoy passing the reform but called it a necessity, saying 'the longer we wait, the more (the deficit) will deteriorate.' As well as increasing the age of retirement, France has also hiked the minimum contributory requirements by 2 per cent this year across all bands. The minimum contribution applies to retirement pensions under its Pension Insurance scheme. Germany In Germany, the retirement age is gradually being raised from 65 to 67. Like many governments across Europe, it is trying to reduce pressure on the pension system created by aging populations. Last year, it approved pension reform and its new government has set out a series of policies that include maintaining the amount paid to retirees each month - which is 48 per cent of the average monthly salary.
Reuters
a day ago
- Business
- Reuters
Britain's biggest pension scheme to lobby governments more on climate
LONDON, July 24 (Reuters) - Britain's biggest private sector pension scheme plans to step up lobbying of governments, regulators and standard-setters to push for faster action amid a worsening climate outlook, its investment chief told Reuters. The Universities Superannuation Scheme, which manages nearly 78 billion pounds ($105.67 billion), has reduced emissions linked to its own portfolio. But Simon Pilcher said there was only so much schemes could achieve through asset reallocation. "That's why the high-value engagement is with governments and regulators to create the environment where the low-carbon action happens. It is, I would say, 90% up to them and only 10% up to capital allocation," the chief executive of USS Investment Management said. The British government in May signed an accord with pension investors to try to scale up investment in UK infrastructure and green programmes to help the country reach its net-zero goal, which is enshrined in law. Pilcher said changing the rules to make it easier for companies and consumers to overhaul their climate-damaging practices was the most effective lever for change, and the scheme had decided to "turn the dial up" on its lobbying efforts. "Corporates will change their activity when it's sane for them to do that," Pilcher said. "There needs to be a strong financial interest for those businesses to do the sensible thing; no one is going to spend money if, bluntly, they're going to be wasting that money." While USS IM has no formal arrangements with other investors, it has good relationships with the UK's local government pension schemes, and investors such as Railpen and Nest, the country's biggest auto-enrolment scheme, making it an influential voice within the sector. In the UK, lobbying would include talking to the Department for Energy Security and Net Zero about its strategy and encouraging them to, for example, reform the planning process to make it easier to connect renewables to the electricity grid. The United Nations said last October the world was on course to hit more than 3 degrees Celsius of warming above the pre-industrial average by the end of the century, based on current emissions-reduction pledges by countries, way off the world's goal of capping warming at 1.5 C. ($1 = 0.7381 pounds)
The Sun
a day ago
- Business
- The Sun
New Inheritance Tax rule change makes it harder for grieving families when a loved ones dies
A HUGE change to Inheritance Tax and pension has been confirmed this week in a blow to grieving families. The Government has confirmed that it will bring pensions into the scope of Inheritance Tax from April 6, 2027. 1 Currently, money that is left in your pension after you pass away can be passed on to a loved one without needing to pay Inheritance Tax. But the loophole meant pensions were being used to avoid Inheritance Tax, instead of planning for retirement. The plans, which were first announced last October, are expected to pile more pressure onto grieving families. Loved ones of the deceased will now need to report and pay any Inheritance Tax on money left in pension funds and death benefits. But under previous proposals it would be up to the executor of the estate to find out how much money was left in each pension and calculate how much Inheritance Tax would be due. The measures will also force thousands of families to pay Inheritance Tax for the first time, while reducing the amount of money they will receive from a loved one. The government estimates that of around 213,000 estates that will inherit pension wealth in 2027/28, around 10,500 will now be forced to pay Inheritance Tax. Meanwhile, approximately 38,500 will have to pay more death duties than would have previously. As a result, the average Inheritance Tax bill is expected to increase by around £34,000. The news comes as Inheritance Tax receipts for April to June 2025 hit £2.2billion, which is £0.1billion higher than in the same period last year. How does Inheritance Tax work? Inheritance Tax is currently charged at 40% on the property, possessions and money of someone who has died if they are worth more than £325,000. Fewer than one in 20 estates currently pay death duties as most fall below this threshold. But the tax is forecast to bring in around £9.1billion in 2025-26. Under the plans pensions will form part of an estate over £325,000 too. What are the different types of pensions? WE round-up the main types of pension and how they differ: Personal pension or self-invested personal pension (SIPP) - This is probably the most flexible type of pension as you can choose your own provider and how much you invest. Workplace pension - The Government has made it compulsory for employers to automatically enrol you in your workplace pension unless you opt out. These so-called defined contribution (DC) pensions are usually chosen by your employer and you won't be able to change it. Minimum contributions are 8%, with employees paying 5% (1% in tax relief) and employers contributing 3%. Final salary pension - This is also a workplace pension but here, what you get in retirement is decided based on your salary, and you'll be paid a set amount each year upon retiring. It's often referred to as a gold-plated pension or a defined benefit (DB) pension. But they're not typically offered by employers anymore. New state pension - This is what the state pays to those who reach state pension age after April 6 2016. The maximum payout is £203.85 a week and you'll need 35 years of National Insurance contributions to get this. You also need at least ten years' worth to qualify for anything at all. Basic state pension - If you reach the state pension age on or before April 2016, you'll get the basic state pension. The full amount is £156.20 per week and you'll need 30 years of National Insurance contributions to get this. If you have the basic state pension you may also get a top-up from what's known as the additional or second state pension. Those who have built up National Insurance contributions under both the basic and new state pensions will get a combination of both schemes. The change could cause a huge shift in how people plan for retirement and spend their savings. Julie Hammerton, managing partner at Hymans Robertson Personal Wealth, said: 'With pensions coming into the Inheritance Tax Regime from April 2027, it's more likely pensions will be accessed for an income in retirement, rather than a means through which wealth can be passed on to future generations.' She added that the changes may change the order in which people access their long-term savings. Meanwhile, it could cause pensions to be 'spent' more in retirement or could cause more gifting of withdrawn pension funds to dependents. She added that it may also cause an uptick in annuity purchases, which give you a guaranteed income when you retire for the rest of your life. This is because annuities remove pension pots from the deceased person's estate. Meanwhile, former pensions minister Steve Webb has warned that the measures could make it harder to wind up a person's estate. 'The person dealing with the estate will need to track down all of the pensions held by the deceased which may have any balances in them, contact the schemes, collate all the information and put it into an online calculator and then work out and pay the Inheritance Tax bill,' he said. 'All of this has to be done before a probate application can be made, potentially substantially slowing down the process of winding up an estate.' Probate is the legal process of dealing with a person's death. Obtaining probate itself can take many months, which means finalising the financial affairs of a loved one can be a drawn out process. Steve Webb added that complications will no doubt arise when a family member can't track down all of the deceased person's pensions. They may also face complications if a provider is slow to give the information needed to work out the Inheritance Tax bill. He added that HM Revenue and Customs (HMRC) may need to consider the rules around the penalties for paying Inheritance Tax late to make sure that grieving families are not hit with fines due to delays that are not under their control. Unmarried partners could also be at a disadvantage due to exemptions for estates, which mean married couples can pass wealth on to one another tax-free. What will the new process be? According to the the Government's consultation, where the deceased person has one or more pensions which form part of the estate, the process will be as follows from next April: Loved ones already need to report and pay Inheritance Tax on the deceased's estate, including for certain pension schemes. They will now need to report and pay the Inheritance Tax due on discretionary pensions but all parties will need to work together to do this. Personal representatives will need to collect and share information from all the deceased's pension schemes and pension beneficiaries. They already need to contact all the pension schemes, but will now need to collect information if needed for filing an Inheritance Tax account. The loved one will also need to report the amount of tax attributable to each pension scheme. HMRC said it will give family members, pension scheme administrators and beneficiaries clear guidance, a calculator to advise if Inheritance Tax is due and a straightforward system to pay the tax liability. .
Daily Mail
a day ago
- Business
- Daily Mail
A pension at 18 is a pipe dream - but even £50 could give younger workers a six-figure pot, says HELEN CRANE
When did you first pay in to a pension? If you were born in the 1990s or later, there is a fair chance it was when you were 22. That is because of the launch of pension auto enrolment. Ever since October 2012, a 22-year-old starting a new job and earning above £10,000 could join their work pension by simply… doing nothing. Prior to that, doing nothing would have seen them excluded. In this famous example of nudge theory in action, the Government was taking blatant advantage of people's distaste for money admin and tendency to take the easy option, and it worked. It was nothing short of a pension saving revolution. A huge 88 per cent of workers who can save into a work pension do, according to Department for Work & Pensions figures from 2023. That is up from just 55 per cent in 2012. But now, we're told it didn't go far enough. Retirement fund: Young people have been told to start saving for a pension at 18 - but it will be hard to get motivated amid reports they might not retire until 74 This week, young people found out they should supposedly be saving for their retirement even earlier, at the tender age of 18. That's according to the boss of pension firm Legal & General Antonio Simoes – who would of course benefit greatly from people stuffing cash into their pensions for longer. It won't come as a welcome suggestion to young people for several reasons. Not least, that it is easy to suggest that you put more of your hard-earned pay packet towards retirement savings when you earned £10.6million last year like Simoes. It is also hard to feel motivated to save for retirement when, as a report published by the Institute for Fiscal Studies suggests, you may be working until the age of 74. This is the age it warned the state pension may have to rise to. Furthermore, a lot of 18-year-olds are now at university racking up debt and in no position to be saving any money at all. But even if they wanted to save more, young workers are having their finances stretched in all directions. If they have been to university, a 21-year-old starting their first job will have an average debt of £53,000, according to the latest Student Loans Company figures. Their rent will cost an average of £665 per month for a room in a shared house, according to Spareroom. They might get pay rises as they move through their twenties, but by that time they are hit by another wave of more pressing financial demands. If they want to put down a deposit on a home, they need to find an average of £34,500, according to UK Finance. If they dare to think about starting a family they will need to save up for maternity leave, for most of which they will probably be paid the statutory £187.18 per week. What young people do have on their side is time. If you can put even £50 into a pension each month, this can have huge benefits After that, childcare costs an average of £238.95 per week in England, according to MoneyHelper. It is no wonder this group is the most likely to opt out of their work pension. Last year, research by Barnett Waddingham found 55 per cent of 18 to 24-year-olds had previously opted out of their pension, and over a third of 25 to 30-year-olds. But opting out entirely isn't the only option. Auto enrolment requires you to pay in 4 per cent of your salary, after which the Government will provide 1 per cent in tax relief and your employer will pay in 3 per cent. If they are generous, they might pay more. If you're struggling, you may be able to pay in less. While your employer's contributions might reduce or stop, you'll still get the benefit of compounding gains on investments. What young people do have on their side is time. If you can put even £50 into a pension each month, this can have huge benefits. Even if you never increased your contribution, paying in £50 per month from the age of 22 to 67 would deliver a £172,000 pension pot. That is based on an annual return on your pension investments of 6 per cent. This is also helped by Government tax relief on pension contributions, which would instantly turn your £50 into £62.50. If you can pay in £100 a month instead, this would give you a pension pot of £276,000 after 45 years. And if you managed to boost that later, for example when you get a pay rise, your pot would grow even more. This week, the Government launched a Pensions Commission to address the poor pension prospects of those not included in auto-enrolment – including low earners and the self-employed. The Government also lamented the fact that, while auto enrolment boosted participation in workplace pensions, many workers 'only' put aside the minimum contribution level. That's a tougher ask than it sounds for many – but if it is going to change, spelling out how even a small pension contribution can turn into £172,000 might be a good place to start. And if you are older and feeling generous, consider paying £50 a month into a pension for your children or grandchildren. One day, they'll be very grateful.
