Thinking to retire this year?

Thinking to retire this year?  You might need to reconsider – retirement income hits a new low!

2012 turned out to be another poor year for annuity rates which resulted in a high volume of repricings amongst annuity providers throughout the year.   Pensioners have now lost thousands of pounds in recent years as a result of decreasing annuity rates as well as the combination of high living costs and low returns on their savings.  In fact, if you are considering to retire this year, then you’ll be £3,400 worse off than if you were to have stopped working five years ago.  The drop was even steeper if we take inflation into account.  For example, the average person who retired last year was £5,900 worse off in real terms on annual basis than a worker who retired in 2008.

If we look at the general statistics, the average working person today expects to get some £15,300.   Many potential retirees will be impacted as their pension now buys a much smaller annuity than it used to despite actually saving the same amount of money.  These news will come as a big disappointment to those who have delayed their retirement hoping they will be better off when they finally give up work.  This will mean that many older workers will be forced to continue working in order to supplement and try to increase their reduced retirement income.

Why such a dire situation you might ask?  Rounds of quantitative easing trying to resuscitate falling economy have been partially blamed for sharp falls in annuity rates, resulting in thousands of pounds being wiped off the new pensioners’ incomes.  To explain the technical side, when quantitative easing takes place, it pushes down the yield on government bonds, which makes it cheaper for companies to borrow but at the same time it also reduces annuity and new retirees’ incomes.

It might yet get worse…Potential revisions to the way the Retail Price Index (RPI) is calculated may cut retirement income further as well as subsequently cause more people to continue working for longer.  To demonstrate this potential effect, one of the best RPI-linked annuities on the market on 3 January paid £3,663 a year to a 65-year-old (based on a £100,000 total sum, five-year guaranteed annuity).  If the expected change to the RPI calculation were to take place, the recipient would be some £9,500 worse off over the duration of the 20 year period.

It is not all bad news however.  Following the new gender equalisation rules for Europe which came in effect on 21 Dec 2012, women are now able to reach a retirement income nearly 3pc higher and can finally benefit from equal payment rates with men.  Beforehand, women were subject to lower rates due to average statistics of them living longer.

So is it now an equal playing field?  Not so much as it turns out.  Men’s pension annuity payments actually plunged at the steepest rate in 14 years.  The average income per year from a standard annuity for a 65 year old male decreased by 11.5pc last year, according to research published by Moneyfacts.

And is it all doom and gloom across the entire country?  What about the geographic distribution of projected pension income?  Not surprisingly across the UK there is a £5700 annual expected income difference between various regions.  Londoners are the best of the lot expecting to retire on an annual income of around £18,200 this year while pensioners in the West Midlands are the most worse off anticipating to receive closer to £12,500.

So what can be done, how can you try to secure the highest pension income in your respective situation?  We always emphasise for those in active jobs to start saving as much as possible and also as early as possible.  This will give you the best chance of building up a reasonable pension sum to help secure a comfortable retirement.   Additionally, there are also various pension products that can assist in building up a good pension situation for you to enjoy.

We are happy to assist. Ask us how you can achieve the most efficient solution in your retirement income planning here!

What does the RDR mean for you?

The Retail Distribution Review. It sounds so boring doesn’t it? It’s a bit snappier if we give it an acronym (the RDR), but nonetheless, my guess is that you don’t much care what it’s all about. For the expatriate market we can hope that it will help to influence what has historically had a poor record. With high commissions and poor advice being the order of the day.

You Should cared about it though. Why? Because the RDR is all about you. You’re the retail bit – the ordinary customrer of the financial services industry. The DR bit refers to a change in the way uou are sold financial products. And assuming it works out, that change could mean you are much less likely to be sold utterly rubbish products than in the past, something that in turn might make your retirement significantly more pleasant than it might have been.

To understand why this matters, we first need to look at how financial products have been sold until now. Most people think that financial advice is somehow free. It isn’t. when you go to a financial adviser, he gives you advice and you act on that advice. you don’t actively hand over a cheque in payment. but that doesn’t mean he doesn’t get paid. far from it – he gets paid by the product provider in commission.

Commission bias has long meant that retail clients often have not been recommended the best products for them. Instead, they’ve been offered the best payers of commission to the industry.

This is why RDR is great for the UK retail market – and by association the expatriate market. From January 2013 there will be no more commission on new sales. Advisers will continue to pocket trail for investment sold in the past, but when it comes to anything new they will have to set out their charges explicitly.

You’ll find that they don’t come cheap – no cheaper, as it happens, than other qualified professionals. A reasonable lawyer costs £150-250 an hour and so, it seems, does a reasonable financial adviser. According to The Daily Telegraph, an initial review of your finances is likely to cost around £500, and the hourly fee for subsequent advice will come in at around £150, with the low end coming in at £75 or so and the top at more like £400. That might sound like a high price, but it’s nothing compared to the long-term trail commissions you have been paying for decades.

Furthermore all adviser will now have to meet a basic standard of education in the UK. That basic level is higher than the current norm, and means there is a good chance that a relatively high percentage of new style advisers might actually know what is going on in the investment world. However, some 20% of advisers have still not passed the right exams.

He will also now be going to have to classify himself as independent or restricted. if he is independent he will be looking at the entire market to find the best products for you. if he is restricted he won’t be: instead he will just look at products offered by a limited number of providers; you probably don’t want that.

We welcome these changes taking place in the UK retail market and we expect that the international market will follow suit over the medium to long term. Critical to ask yourself is; are you being charged a fair fee, is the advice being given by a qualified individual and has your adviser looked at the whole market for you?

If you require more information on this or anything else to do with the financial services industry please don’t hesitate to get in touch with us here.



Gibraltar returns to the QROPS market

The HMRC has announced that “there is no HMRC objection to Gibraltar QROPS commencing or resuming the acceptance of transfers from UK registered pension schemes”. This follows a number of years of uncertainty within the QROPS market where a number of jurisdictions have had many of their QROPS registered plans removed as a consequence of them not meeting with the strict requirements laid down by the UK revenue and customs authorities.

The Gibraltar Association of Pension Fund Administrators have been working hard with both the Gibraltar Government and UK HMRC to ensure that their own QROPS pension rules meet all the requirements stipulated by the UK government. The principle amendment made to Gibraltese legislation was that Gibraltar QROPS must be taxed at a similar rate to local Gibraltar tax rates – even if the policy holder does not live in Gibraltar. Furthermore in the recently passed pension legislation they have now stipulated that all new cases can only take out a lump sum of up to 30%. Pension holders can only crystallize their pensions after reaching the age of 55 – except in the most severe of cases of incapacitation.

It is not usual for the HMRC to deliver such a categorical message of support for a QROPS jurisdiction. It is felt that this was provided because of the current uncertainty in the QROPS market caused by the removal of many previously approved schemes. From the statements issued by the Gibraltar Pension Fund Administrators and Gibraltar Government they appear to be taking a more mature approach to the jurisdictions which are taking a proactive approach to fitting in with the new HMRC guidelines.

We saw the effects on Guernsey when they weren’t willing to fit their QROPS schemes into the spirit of the QROPS regulations being decimated as a consequence.

This is all good news for Gibraltar and their faltering industry. For more information on this and any other questions you might have, please don’t hesitate to get in touch with one of our advisors below.



Cyprus QROPS no longer HMRC approved

The UK HMRC has without warning de-registered all of the QROPS which were registered in Cyprus. This has come as a complete surprise to the Cypriot pension industry which thought that it had escaped the strong arm of the HMRC.

New regulations brought in by the UK tax authorities back in April 2012 resulted in 300 Guernsey registered QROPS being immediately removed from the HMRC approved list. This was as a consequence of residents and non-residents being taxed differently on their pensions in Guernsey. This was in contravention of the rules laid down by the HMRC whereby from April 2012 all residents and non-residents must be taxed the same.

It can only be assumed that HMRC has taken a similar stance now with Cyprus. Because up until last month all benefits received under a Cypriot QROPS was taxed at 5% for non-residents only. Non-residents in Cyprus were defined as individuals either living abroad, non Cypriot passport holders or those who were not conducting economic activity in Cyprus. If you have already registered and transferred your UK pension into a Cypriot QROPS your position will not have changed.

The best option we believe now for individuals looking to transfer their UK pension into a QROPS remains Malta. This is for a number of reasons including the double taxation agreements which are held with over 60 countries with Malta. Furthermore you will not be liable to pay the UK inheritance tax of 55% on death and income tax of up to 50% on benefits. With a Maltese QROPS you will be able to benefit from 0% tax on income and capital gains. If you are then still wanting to live in Cyprus you will then only be liable for 5% income tax. In some circumstances it may be better to transfer your pension into a QROPS held in another country such as Gibraltar – please contact us for more information.

In summary we shouldn’t be surprised that the UK authorities have removed the Cypriot QROPS – there are still many options still available to you.

Please don’t hesitate to get in touch and speak to one of our specialist QROPS advisers here.


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 30 June 2012

Another week passes and it seems that the markets took centre stage over the politicians this week, albeit briefly, with a lack of direction or impetus appearing from any political camp. The new Greek government, which gave a brief market rally, seems to have mostly collapsed with varying ailments, apparently without a sense irony. In the US the expected round of economic stimulus seems to have failed to appear despite weakening economic data which has pulled the S&P back from its brief foray into the 1360 territory, the first since May. This has largely quashed growth in the US equities market though the continued uncertainty with oil prices offers some good value stocks, not so much in oil companies directly but in oil servicing companies, an area we would advise to be bullish in.

In our opinion the most interesting development in the market this week is the mass downgrade of some of the highest profile “brand” banks. This seems to have been largely priced into the market already with a muted reaction across the board apart from Morgan Stanley, who having managed to avoid the worst of results experienced a jump in share price.

We live in interesting times when easy profit can be sought through second guessing rating agencies. However, we feel that this move was merited and whilst it hasn’t helped returns this week at least re-enforces the role of rating agencies in the markets, a welcome change from the controversy that surrounded them a few short years ago.

The major area of weakness to keep an eye on is Spain and its banks. The Spanish government formally requested a €100bn bailout for its banks;an independent report found it need €62bn to provide a buffer from further bad debts. Yes admittedly Spanish sovereign borrowing has pulled back from the brink, a re-assuring sign but here at we remain unconvinced that the Spanish government can really see this plan through. Senor Rajoy, we feel, is not being as forthcoming perhaps as he should be and we would, as last week, continue to advise clients to move out of the Euro if possible or go short. Gold has again seen a rally as has the USD and even Sterling as safe haven investments away from the Euro.

We shall see what comes from the EU summit but we cannot help but feel now that the real fly in the ointment is rapidly becoming Germany. Mrs Merkel is appearing more and more politically paralysed at home and the far reaching reforms that are needed to save the Euro perhaps would not be acceptable to a population that has never actually had a referendum on the Euro itself.

In Britain Moody’s the credit rating agency downgraded the credit ratings of all of Briatin’s high street banks as part of a major worldwide downgrade of bank ratings, which also saw those of Goldman Sachs, Morgan Stanley, UBS and Credit Suisse slashed.

Oil price remains rather muted, giving a welcome break to inflationary figures, particularly in the UK where we await the decision regarding further quantative easing and the ensuing market rally.

If you require more information on anything describe above please don’t hesitate to get in touch with us and the team 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


Inflation Anticipation Rises

The new Bank of England Inflation Attitudes survey has just been released suggesting that inflation expectations within the country are continuing to rise this is despite the continued fall in the Consumer Price Index to 3.0% over the last 3 months, the lowest it has achieved in the last 2 years. This will continue to give cause for concern to the already embattled Bank of England which has a government appointed target of 2%.

However for the last 2 and a half years the Bank of England has been unable to achieve this rate. This consequently has led to satisfaction in the way in which the UK Central Bank has been able to handle the UK monetary policy reducing from 20% to an all time low of 11%.

The Bank of England Governor, Mervyn King and his Monetary Policy Committee decided last Thursday that the continued fall in inflation did not merit a restart in their Gilt Purchase Scheme. Which has seen the Threadneedle Street institution hold off from expanding its £325 billion quantitative easing programme began back in March 2009 when the bank injected £75bn into the economy. This method of the central bank buying assets, such as government or commercial bonds. This has not had the desired effect of increasing the willingness of banks and institutions to spend, even though they have greater liquidity as a consequence of the quantitative easing policy. Although in a Bank of England report they claim that it has helped increase the UK’s Gross Domestic Product from 1.5% – 2%.

Interest rates continue to be held at a historic low of 0.5%. These were in the past used as a method of stimulating the economy. As the lower the interest rate the more disposable income individuals had as the cost of borrowing would decline.

The NOP report commissioned for the Bank of England surveyed some 1,966 people and the results not only showed that short term inflation was predicted to decline, but also the medium forecast the survey predicted would rise to 3.4%  from 2.9%. This is despite the fact that the Bank of England believes that by Quarter 3 in 2013 inflation will have returned back to 2%.

With inflation currently standing at 3.0% it is felt that with food inflation flat lining and commodity prices  slackening off this has helped to offset rising distribution and property costs which continue to expand.

There are many negative effects associated with rising inflation. Firstly inflation can adversely impact on savers, for if they are saving when interest rates are at 3.5% but inflation is at 3.7% they will be in effect losing 0.2% annually. Secondly international competitiveness can be effected if one country’s inflation rate is significantly different from its neighbours as their prices will be rising at a higher rate than their opposite numbers consequently impacting on their trade balance.

For businesses, higher inflation rates make it harder to budget and plan for the future when they don’t know how prices will hold in the future. Lastly for businesses higher inflation rates can place greater pressure on wage demands and expectations because their employees will expect to be paid at least in line with inflation.

If you require more information on this or anything else to do with the UK economy please don’t hesitate to get in touch with us here at