The FSA launches a probe into current pension rates

The FSA launches a probe amid concerns UK pensioners are getting a poor deal for their pension savings. 

The FSA investigation seeks to evaluate current pension rates offered to retirees when they sign up to an annuity, which provides them with a set income from their pension fund.

What constitutes an annuity?  In simple terms, it is the income you get from your pension once you retire.  The amount of income will depend on the total value of the pension you have saved up throughout your working life.   The more you have saved, the more money will be paid out on a monthly basis once you retire.

What many pensioners don’t consider is that they might be losing out by not shopping around for an annuity, a market that is worth today £11bn.  As per the open market option, retirees can take their pension pot and shop around amongst other providers for the most competitive annuity deal.

Is it worth it?  Absolutely!  This will be surprising to many pensioners who quickly assume that the difference may be insignificant on the basis that the underlying product is the same.  However, statistics show that there can be a variance of up to 20 per cent in the rates offered by different providers between the best and worst deals available on the market today.  This means that some retirees could be missing out on a substantial potential boost to their incomes.  In fact, an annuity purchase is one of the most important one-off financial decisions that you can make and the one that will have long-term consequences if you get it wrong.

The open market option was introduced back in 1988 however historically the take up has been low.  Only about 40 per cent of pensioners actively shop around before taking an annuity, with the majority directly accepting the rate offered by their current pension provider.   The FSA is looking to change this trend by compelling pension providers to disclose to customers that they have the right to compare different options available to them.

In reality, the insurers have been obliged to tell pension savers of their right to shop around since 2002, but the current probe will determine whether these firms are doing all they can to make this transparent and clear to their customers.  The regulator will be examining both the pricing of the annuities as well as the marketing and advertising involved in promoting these rates.  Furthermore, it will then check the individual providers to see whether their existing practices in fact help to encourage a person to shop around or actually make it more difficult for them to seek a more competitive option.

While this probe could have positive implications for those buying annuities in the years to come, it won’t provide much consolation for those unlucky ones who are seeking to purchase a retirement income now.  Adding salt to the wound, the cost to buy a retirement income has spiked in recent years due to measures implemented by the Bank of England in order to ease the financial crisis.  Maintaining the UK bank rate low at 0.5 per cent for almost four years and injecting some £375bn of new money into the economy via quantitative easing, had the effect of depressing the yield on gilts.  Because annuities are linked to the yield on 15-year gilts, it means pensioners get much less for their saved money.

You still get what you pay for!  About 40 per cent of retirees who do shop around, manage to get improved annuities after receiving financial advise.   Considering other options for an annuity can lift your income by a considerable margin, while for those pensioners who have particular medical conditions or lifestyle choices that may decrease their life expectancy below the average statistics, can increase potential retirement income even further by them qualifying for an enhanced annuity.

The market has indeed seen much innovation and increased choice for pensioners over the last few years, which means that many more potential options are available on the market to those who take time to look.  There are various options to consider such as lifetime annuities, those linked to investments, fixed term annuities, fixed and capped drawdown, phased retirement and many others.

We can only emphasise the importance of financial advice to ensure that your retirement planning is on the best track possible.  Think about it like buying a car insurance, you don’t take the first quote!

If you would like to receive more information about various pension-planning options available to you, please do not hesitate to get in touch.  We will be happy to be of assistance!

Why are QROPS providers shifting to Malta?

Since the introduction of new QROPS legislation in April 2012 we are regularly being asked why are QROPS providers shifting to Malta?

QROPS, otherwise known as Qualifying Recognised Overseas Pension Schemes, are an HMRC offshore pension scheme which can provide an individual with many advantages, including lower tax rates on benefits, no currency effects on income and greater investor freedom.

However in April 2012 the HMRC issued new rules and regulations as they felt that many of the jurisdictions which were providing these pension schemes were not doing so in the spirit of the plans. Guernsey in particular fell foul of these new regulations. The reason being was that under European Union legislation it states that  both those who are resident and those who are non-resident must be taxed at the same rate if the pension scheme is held in the same country. However in Guernsey this was not the case and the HMRC subsequently went and removed over 300 of the 313 existing QROPS plans that had previously been authorised by Her Majesty’s customs and excise.

As a consequence of this move by the HMRC the Maltese Inland Revenue has proactively moved to take advantage of the downgrading in Guernsey’s status and has introduced further guidance making sure that they fit clearly with the HMRC’s principles behind the QROPS schemes.

These guidelines, which have been introduced with immediate effect, to the Maltese QROPS legislation include;

  • Any person benefiting from a QROPS in Malta must notify and be listed with the Maltese Income Tax and Revenue Office – submitting an annual taxation return.
  • The annual tax return needs to inform the Maltese Tax office if any tax has been held back at source or if there is a double taxation agreement held with another country. Malta holds over 60 double taxation agreements with European countries.
  • In the annual submission the individual of the scheme must provide detailed information of the double taxation agreement as well as detailing the tax residency of the scheme holder – i.e. a tax residency certificate.
  • Any money which is paid from the Qualified Pension Scheme must be made as a retirement benefit.

By changing the guidelines and by taking a proactive approach the Maltese Offshore Pension market has seen an significant rise in the number of people looking for a Maltese QROPS. Furthermore there has been a significant increase in the number of providers who are looking to establish their own Maltese QROPS scheme.

However you need to be careful when looking into transferring your pension into a Maltese QROPS as there are many countries where Malta does not hold a double taxation agreement with. As a consequence you could be liable to pay the 35% tax on benefit in Malta and then be held accountable to pay the tax where you are resident.

It is always our recommendation to seek professional advice when deciding on where to move your UK pension. If you would like to speak to one of our qualified, offshore pension specialists please don’t  hesitate to get in touch with us at


Weekly Update 10 August 2012

If markets could only follow the Olympic spirit that currently pervades London we might see a reflection between value and perception, something that still evades most asset classes at the moment. Let us start with European Bond prices, in particular those of Spain and Italy which yet again saw a significant spike last week well beyond the 7% “point of no return”. Is this price deserved? Perhaps not, however it was not helped by rumours of Spanish officials privately talking about seeking a €300 billion bail out. The problem is that we seem to be stuck in some sort of Euro policy ground hog day type scenario, the difference being that as each economic crisis re-occurs the policy makers make the same reactive mistakes as opposed to learning and adjusting. Until this cycle is broken, we see the Euro as an unsafe bet and I would expect to see it drop on both the sterling and the dollar in the medium term.

In the UK data continued to be weak with a variety of innocuous events being blamed, from Jubilee weekends to the dismal British summer. We expect another rate cut this year and would be surprised if it didn’t come sooner rather than later and yet again we are hearing sabre rattling from the Bank of England over the amount of loans being dished out to SME’s, designed to stimulate economic growth at a more grass roots level, the traditional path out of any recession. As such we are once again looking at stocks and funds that specialize in this section of the economy, for those with a medium to long term buy and hold strategy we feel confident that this will deliver returns.

Meanwhile in the US the bullish attitude seems to be hanging on, validating our stock picks last month and offering a comfortable short term profit taking opportunity, always a satisfying moment to say “I told you so”. With important pay roll numbers coming out this week we remain confident on US exposure and feel that there is a plethora of undervalued assets still available. Given what US deposits are earning we’d encourage those with the appetite to consider getting back into the market now more than ever.

If you would like more information on anything of the above please don’t hesitate to get in touch with us at


Weekly Update 11 July 2012

The rally that we witnessed last week has yet again proved to be a dead end and there has been a small pull back in most markets as a result. Yet again Europe seems to remain rudderless and after countless summits and conferences, the only real result seems to have been some €30 billion released to Spanish banks and a further entrenchment of policy by Germany and now even Finland against a Eurozone bond type of undertaking and coordination. This has driven the Euro lower and, we feel, it still has some distance to go, whether it can last even in to the medium term in its current format is a debate for a much longer article than this one but we would encourage clients with large Euro deposits to get in touch and discuss a wider portfolio of currencies.

Further to the worry with the Euro, we also feel that the Swiss Franc is coming under almost unbearable pressure too and could possibly see itself being re-pegged, again in the not too distant future.

After last week’s lower than hoped for non-farm payroll numbers out of the US the market is watching Mr Bernanke’s every move as he has previously committed to a further round of Quantative Easing should the US recovery slow any further. This has happened and now we’re waiting with baited breath. However, in our opinion this has given a buying opportunity for some targeted purchases. With some early signs of life in the US housing market we would still perhaps not advise jumping back into property development companies per se but, as with our oil and gas industry strategy, look at supporting and ancillary sectors with wider revenue streams that are not only pegged to one “commodity” price. They are underpriced in our mind and will, in the medium to long term, provide ample growth with relatively low volatility.

China has shown signs of a “slowdown” but given its traditional blistering pace of growth and hawkish behaviour of policy makers we remain bullish on the country, its appetite for consumer and luxury products seems to know no end providing perhaps well priced buying opportunities for the companies here in Europe and the US that cater to this appetite.

In the UK we see, in conjunction with the additional quantative easing a further possible rate cut occuring. This would punish savers and deposit holders even further and with the average interest rate already being so low it’s easy to see that cash is losing value now even faster. Those with fixed term deposits and large cash holdings should be diligent to check on their rates and when each one matures to avoid waste.

With cash rates so low there has been a rush to the “safe haven” of bonds producing lower yields, for those seeking to add value to the portfolios we would encourage, where possible, a longer market view or a focus on dividend stocks which still offer higher returns than most fixed instruments but with the combined advantage/disadvantage of possible price movements.

Politically there is not a lot on the immediate agenda so the markets can get back to focusing on actual results as opposed to sentiment driven reactions, a welcome change in our view!

For more information on the above and anything else which might be of interest please don’t hesitate to get touch with us at


Weekly Update 17 June 2012

Seven more days pass and turmoil in the markets continues. Following the carnage of two weeks ago and global stock markets tentative rebound on hopes of a fresh stimulus from central banks and Spain’s €100bn bailout last week. Their rally swiftly evaporated as markets digested what the deal actually meant.

However, the Bank of England announced on Thursday that it is announcing a dual stimulus package. One, in combination with the Government the Bank of England will provide cheap credit for the UK Banks – consequently UK Banking shares rose sharply on Friday – including the R.B.S. which rose by over 8%, Lloyds TSB rose by over 5% and Barclays Bank rose over 4%. Secondly the Central Bank announced the Extended Collateral Term Repo Facility which was suggested back in December 2011 has now been enacted. This means that UK Banks will now have access to short term money to deal with exceptional market pressures. Therefore banks are able to borrow at least £5 billion every month to cover any shortfalls in ready cash which they will then be able to lend out to borrowers including individuals and companies.

As well as anxiety about the burden it would add to Spanish sovereign debt, bondholders were unsettled about where the cash will come from. If the New European Stabilisation Mechanism is used, existing bondholders would become junior debtors – raising the chances of sizeable “haircuts” in the event of a default or restructuring. The jitters pushed yields on Spain’s ten year bonds above their pre-bailout level to a euro-era high of 6.81%. The deal left Ireland, Greece and Portugal questioning the terms of their own, more stringent, bailout terms.

There was further evidence of flagging growth in BRIC (Brazil, Russia, India and China) countries. Furthermore US factory output figures in May fell 0.4% against a rise in April of 0.7% in statistics released by the US Federal Reserve last week. This compounds the statistical concern emanating from the United States where retail sales also have fallen by 0.2% in May. Consumption accounts for around seventy percent of total economic output in the USA and consequently these figures are watched very closely by not just the US but by global markets.

Furthermore in the US the unemployment rate increased from 8.1% to 8.2% in April this is despite a recent report by the US Federal Reserve which has stated that US growth is growing.

China cut interest rates for the first time since 2008, ahead of figures showing that manufacturing and consumer spending had flagged in May. For borrowing the Chinese central bank deposit rates were cut by .25% from 3.5% to 3.25% and loans were reduced from 6.56% to 6.31%. Furthermore they have held back from implementing stricter rules to prevent this from impacting further on the Chinese economy as China is concerned about the state of the World economy and subsequently is determined to try and stimulate the Chinese domestic economy through domestic consumer spending.

Standard & Poor’s warned it may downgrade India’s credit rating. The Bank of England ignored IMF advice and kept interest rates on hold at 0.5%, and made no move to introduce further quantitative easing.

Preliminary estimates of Jubilee sales looked good: Tesco reported its biggest ever week outside Christmas, with £1 billion  in sales. They came too late to affect its Q3 figures, which showed a 1.5% sales decline.

For more information on above or anything else in finance please contact us here at


The week that was….

During the past week the global equity markets have enjoyed a small period of calm following large falls in the previous week as an apparent fallout to the potential “Grexit” situation. Whereby  the markets have become more and more used to the potential of a Greek exit from the European single currency, the Euro. This has now been more and more priced into the markets with them far down on a few months back.

On Tuesday markets rallied strongly when the Organisation for Economic Development (OECD) backed proposals from the United Kingdom and France as well as the majority of the 17 other member states of the European Sincgle Currency  for the introduction of a Eurobond. But then markets plunged again ahead of the European Union summit on Wednesday as Germany’s Chancellor, Angela Merkel, made it clear that she and Germany were whole heart-idly against the move. The Germans believe that 1. introducing Euro Bonds would remove the motivation of the struggling countries’ to reform and improve their financial position. Furthermore by combining the debt of the strugglers and the strong members would mean that the weaker countries would lower their debt charges whilst the strongest would see their borrowing charges rise.

The Organisation for Economic Development has predicted that Britain would grow 0.5% in 2013 and increase its 2013 prediction to 1.9%. The better economic news was that inflation, measured on the consumer prices index, dropped to 3% in April – lowest rate since February 2010. This follows the UK going into a double dip recession over the last 2 months.

The Court of the Bank of England caved into pressure by announcing three separate reviews of the Bank’s role during the financial crisis. None however will cover the key issue of the run on Northern Rock.

In China, their largest ecommerce provider, Alibaba, bought back a 20% stake in its bucinsess which was owned by Yahoo! for $7.1bn.

Ryanair unveiled record full year profits – up 25% to €502.6m – but warned the strong run was unlikely to last. Marks a nd Spencer posted a 1.2% fall in full-year underlying profit, its first decline in 3 years. Tesco Chief Executive Officer, Philip Clarke, has opted not to take a £372,000 bonus following the retailer’s poor UK performance.

For more information on what’s going on in the global markets please contact us at


UAE introduces new regulatory body

A new organization, called the Financial Services Authority, is to be established in the United Arab Emirates in one of the biggest changes made to their financial and banking system in over 30 years. The regulations were brought in as a consequence of the UAE Government wishing to strengthen their regulations to help protect the sector from another international financial crisis. The change is in the regulations is designed to enhance management of the financial market and prevent any future economic downturn from resulting in mismanagement of the financial sector within the UAE.

The UAE Establishment has opted to shift to a duel regulatory model. It will mean you have two authorities for the finance industry – a prudential regulator and a conduct-of-business regulator.

Responsibility for the day to day operation and conduct of business within the financial sector in the UAE will transfer from Central Bank to a strengthened up Securities and Commodities Association. This has been re-labeled as the Financial Services authorities.

This new authority will have management of customer security protection, guarding against unlawful and unethical behaviour and the day to day operation of the financial system within the UAE. As with the SCA, it will be centred in Abu Dhabi and the organisation will take on more personnel to satisfy its new mandate.

The SCA will work in harmony with the UAE’s Central Bank and will stay as the prudential regulator, which will continue to take a strategic view of the economic situation and help to manage the finance sector together with the previous old encumbent. Plans to renovate the 1980 financial act were declared by the UAE’s Central Bank last month, but information of the changes are only now being released. Authorities anticipate a first writing of the new bill by the end of the year with it becoming law hopefully within the next 18 months.

It is a vital aspect of a wider strengthening of the laws surrounding bank lending in the UAE which have been given as one of the principle reasons behind the international financial meltdown of 2007-8. They believe that their proactive stance will stand the country and region in good stead in the future.

Experts believe the UAE have based their duel regulatory approach on the system that is being used in Australia, which has been able to withstand much of the global economic crisis. It is felt that by giving authority to only two organisations rather than a plethora of self interested parties as seen in the USA, this will put them in the best position to act quickly and effectively.

However the UAE has not completely based its system on the Australian style as the Central Bank in the UAE will not be overseeing the regulation of the retail banking sector during the handover period for up to 4 years. Investment Banks, the insurance industry and all other financial organisations in the UAE will however be regulated by this new authority. Authorities say the new Financial Services Authority will not overlap with the Dubai Financial Services Authority, which controls how the financial services industry operates in the Dubai International Financial Centre.

The shift to set up this new system and organisation confirms the UAE’s Government is intent on enhancing the perception of Abu Dhabi as a safe, professional, advanced economy. The Financial Services Association within the UAE sees this as a change for good. For more information on this and anything else going on within the international financial services sector. Please contact us here at


UK Inflation Rises to 3.5%

UK inflation rates have unexpectedly risen to 3.5% despite rising unemployment and stagnating economic growth. This is another blow to the embattled Conservative Chancellor, George Osborne who continues to take a hammering following his budget last month. Furthermore it will require the Bank of England’s Governor, Sir Mervyn King, to have to write a letter to the Prime Minister, David Cameron, detailing why UK inflation is above the Governments target of 2%, a figure that the Bank has failed to meet for almost 5 years.

Since 1997 when Labour came to power under Gordon Brown the Chancellor, the Bank of England have been required to maintain inflation under the Governments target of 2% using only interest rates and through quantitative easing which the Bank has done since the financial crisis of 2007. The inflation figures measure the difference between current prices and prices of a basket of goods and services from 12 months ago.

The Office of National Statistics published the poor results, much to the surprise of City experts. The majority of whom believe that this small rise will only be a slight blip in the downward trend in UK inflation that has been seen since September last year.

The rise has been put down to the growth in food, clothes (in particular women’s clothing) and soft drinks in comparison to prices a year ago, in March 2011. Supermarkets 12 months ago were involved in a particularly strong price war which suppressed food prices, mainly meat, fruit, vegetables and bread. To a lesser extent, but still importantly computer games, clothing and DVDs also affected the rise in UK inflation. This rise will add additional pressure to the Government as inflation affects consumer confidence places additional strains on households whose salaries are not rising at the same rate as their household costs.

Fortunately, fuel prices (gas/electricity) were markedly lower than 12 months ago due to energy companies reducing prices against raising prices a year ago.

Whilst the consensus in the City is that this rise is not in line with the downward trend the fear is that it will motivate the Bank of England’s Monetary Policy Committee to hold off from another period of quantitative easing. Between March 2009 and May this year the Bank has established a £325 billion quantitative easing program. The fear is that this has not had the required effect and any high inflation rate will dissuade the Bank to reduce interest further and subsequently increase its quantitative easy program any more.

These results follow on the back of the average annual salary growth rate figures of only 1.4% in the UK and average prices have only been growing by a paltry 0.3%. All leading to a squeeze in consumer spending further stifling the economy. It is hoped that with the upcoming Diamond Jubilee and London 2012 Olympics that this will provide a boost to the economy, however these are only a few lights on the horizon.

The recent poor economic data will not be helping the Coalition’s beleaguered government and as a consequence it is predicted that both the Liberal Democrat and Conservative parties are going to find it challenging in the upcoming local elections on 3 May 2012.

For more information on the current state of the UK economy please click here.


King of the Miners resigns

“King of the Miners”, Ian Hannam has been forced to quit in allegations brought against him by the Financial Services Authority. He stands accused by the FSA of breaching market rules in October 2008, claims that he fiercely denies and has already fought over a years legal battle to clear his name.

Ian Hannam has had a fascinating career starting back with the Special Air Service, one of the United Kingdom’s premier special forces regiment (only surpassed by the Special Boat Service and Royal Marine Commandos) to now heading up JP Morgan Casenove’s Capital Markets Team as the Chairman.

He became known as the “King of the Miners” as a consequence of his ability to bring many of the major miners to the London Stock Exchange and also has played a critical part in putting together the major mining deals of the last decade. The Xstrata deal was mainly put together by the ex SAS soldier and also played a critical part in the floatation of both SABMiller and Vedanta Resources. All of which have helped to make him a very rich man. This is a long way away from his humble beginnings in the corporate world where he started his career with Taylor Woodrow the house builder. He moved into banking in the early 1980’s with Solomon Brothers before moving onto Fleming’s which was ultimately bought by Casenove’s.

The current case stems back to a deal in October 2008 when Hannam was working on a deal for buying Heritage Oil for another client and, according to the FSA, sent an email which contained 11 words which could cost the ex-soldier turned banker £450,000. “PS – Tony, has just found oil and it is looking good”. Prior to that in September an email was sent from Hannam stating that there could be a potential bid for Heritage Oil.

This was deemed as “inside” information by the financial regulator and as a consequence took action over a year ago. Hannam rejected the initial decision and instead took it to the Regulatory Decisions Committee – an independent body of City of London experts that acts like an interim or small tribunal, they decided to keep the original fine of £450,000. Hannam rejected this decision again and as a consequence the FSA has taken the case to a Upper Tribunal to be happening later this year.

Hannam was quoted as saying that he maintains his “fit and proper” status by the FSA and it has always accepted that he acted in the interests of the client, acting with honesty and integrity.

Hannam went on to state that he tendered his resignation to prevent this overshadowing his clients and team who continue to conduct good, honest work.

Needless to say Hannam will remain on in his post until the £50bn Xstrata-Glencore merger is complete later on this year.

To date out of the 24 cases that have come to the Upper Tribunal, only 2 have found against the Financial Services Authority. Hannam is happy to take this risk to defend his name.

For more information on this and anything else that is in the news please contact us here.


Head of FSA Quits

Head of FSA Hector Sants Quits

Hector Sants, a man of honour and integrity, who oversaw the FSA during some of it’s most turbulent years has decided to leave in June this year. The decision comes at a time when the FSA is soon to be broken up. Sants had hoped that his role in the FSA would have been the springboard to one of the top jobs at the Bank of England – Deputy Governor.

Sants moved to a life in the public sector after over 30 years in the City in 2004. An intensely private man he decided on a change in career path as a matter of principle, using his experience to give something back to society. His resignation is seen as a significant loss to the Coalition. He has been at the forefront of the changes to regulatory control in the UK and implementing RDR and it is unclear how the Coalition will react to his sudden departure.

For more information on this and other news stories click here.