High earners will see the amount of money they can save into a pension drastically reduced next year, after the Treasury confirmed on Thursday a package of cuts to pension tax relief.
From next April, people will be able to save only £50,000 a year into a pension with tax relief, down from a current annual limit of £255,000.
Higher-rate taxpayers will also be allowed to keep tax relief at their marginal rate on pension contributions up to the £50,000 limit. There had been fears the government would restrict tax relief to 20 per cent for everyone.
The lighter-than-expected measures attracted relief from the pensions industry, who had lobbied for a higher contribution limit.
“The allowance of £50,000 allows the vast majority of people to save as much as they want, when they want,” said Andrew Tully, senior pensions policy manager at Standard Life.
However, consultants warned that the annual limit could hit people in final salary schemes with unexpected tax bills if they receive a pay rise, due to the way their pension benefits are calculated. People on earnings as low as £60,000 could be affected, depending on how long they have been in their final salary scheme.
The lifetime allowance for how much each person can pay into a pension will also be reduced from £1.8m to £1.5m, though this is not expected to come into effect until April 2012.
The coalition government’s proposals on pension reform replace those of the previous government, which had proposed limiting tax relief on contributions for people earning over £150,000.
The new measures were drawn up in response to complaints from the pensions industry that the previous proposals were too complicated.
“These new proposals are a significant improvement on the approach proposed by the previous government, which was simply unworkable,” said John Cridland, deputy director-general of the CBI.
“Today’s announcement is not as bad as feared.”
Thursday, October 14, 2010
Monday, July 19, 2010
US vice president says reform of Wall St ends uncertainty
THE passage of Wall Street reforms by Congress helps the US economic recovery now under way by easing uncertainty that had been holding back investment, Vice President Joe Biden said yesterday.
Biden said financial regulation legislation passed on Thursday would encourage businesses that were hesitant about expanding to move ahead.
“The very uncertainty they had (has) now been settled by the passage of the reforms. They didn’t know which way they were going to go. They didn’t know how much was going to happen,” he said in an interview.
The Senate gave final congressional approval to the sweeping shake-up of rules designed to tighten financial industry oversight, limit risky lending practices at the root of the 2007-2009 financial crisis, and create a consumer watchdog agency.
“It’s passed. And they’re going to know how to deal with it,” Biden said.
The bill, a year in the making, is set to be signed into law by President Barack Obama on Wednesday. It joins healthcare reform as another key legislative achievement by Obama this year as the Democrats try to maintain political control in congressional elections on 2 November.
Biden said financial regulation legislation passed on Thursday would encourage businesses that were hesitant about expanding to move ahead.
“The very uncertainty they had (has) now been settled by the passage of the reforms. They didn’t know which way they were going to go. They didn’t know how much was going to happen,” he said in an interview.
The Senate gave final congressional approval to the sweeping shake-up of rules designed to tighten financial industry oversight, limit risky lending practices at the root of the 2007-2009 financial crisis, and create a consumer watchdog agency.
“It’s passed. And they’re going to know how to deal with it,” Biden said.
The bill, a year in the making, is set to be signed into law by President Barack Obama on Wednesday. It joins healthcare reform as another key legislative achievement by Obama this year as the Democrats try to maintain political control in congressional elections on 2 November.
Wednesday, June 23, 2010
British Airways merger 'back on track'
BRITISH Airways has said it has agreed a recovery plan for its underfunded pension schemes in a move which paves the way for its merger with Spanish rival Iberia.
The embattled airline said its agreement with pension trustees would avoid closure of the two final salary company pension schemes – which together have nearly 100,000 members.
It aims to pay £330m a year, rising in line with inflation, until 2023 and 2026 for the two schemes to plug a gaping £3.7bn deficit.
But members will have to either pay more to maintain the same benefits, or see their pension pots reduce.
BA, which has around 700 staff in the North East, will submit the plans to the Pensions Regulator by the end of June and Iberia now has three months to consider the pensions deal.
The pension recovery programme had been a major sticking point in the Iberia merger and Iberia still has the option to call off the tie-up if it does not agree with the arrangement.
BA struck an agreement in March with trade unions on the pension changes, which will see members accept a reduction in benefits.
However, those in the larger of the two schemes – the 68,800-strong New Airways Pension Scheme (Naps) – can pay 4.5% more in contributions to maintain existing benefits.
BA chief financial officer Keith Williams said: “The trustees understand that the airline is unable to increase its contributions in the current financial climate but we have agreed a recovery plan that avoids closing the pension schemes, gives Naps members choice over their future pension accruals, and increases the prudence of the assumptions employed in managing the scheme.”
The Naps scheme has a deficit of around £2.7bn, while the Airways Pension Scheme (Aps) – with around 31,000 members – is some £1bn in the red. They both closed to new members years ago – Naps shut in 2003 and Aps in 1984. But they have been under threat amid mounting funding pressure from falling stock markets and increasing liabilities as members live longer.
An Iberia spokesman said BA’s pension agreement was “a positive step forward in the merger process. The next step will be Iberia’s decision on the pension recovery plan.”
The embattled airline said its agreement with pension trustees would avoid closure of the two final salary company pension schemes – which together have nearly 100,000 members.
It aims to pay £330m a year, rising in line with inflation, until 2023 and 2026 for the two schemes to plug a gaping £3.7bn deficit.
But members will have to either pay more to maintain the same benefits, or see their pension pots reduce.
BA, which has around 700 staff in the North East, will submit the plans to the Pensions Regulator by the end of June and Iberia now has three months to consider the pensions deal.
The pension recovery programme had been a major sticking point in the Iberia merger and Iberia still has the option to call off the tie-up if it does not agree with the arrangement.
BA struck an agreement in March with trade unions on the pension changes, which will see members accept a reduction in benefits.
However, those in the larger of the two schemes – the 68,800-strong New Airways Pension Scheme (Naps) – can pay 4.5% more in contributions to maintain existing benefits.
BA chief financial officer Keith Williams said: “The trustees understand that the airline is unable to increase its contributions in the current financial climate but we have agreed a recovery plan that avoids closing the pension schemes, gives Naps members choice over their future pension accruals, and increases the prudence of the assumptions employed in managing the scheme.”
The Naps scheme has a deficit of around £2.7bn, while the Airways Pension Scheme (Aps) – with around 31,000 members – is some £1bn in the red. They both closed to new members years ago – Naps shut in 2003 and Aps in 1984. But they have been under threat amid mounting funding pressure from falling stock markets and increasing liabilities as members live longer.
An Iberia spokesman said BA’s pension agreement was “a positive step forward in the merger process. The next step will be Iberia’s decision on the pension recovery plan.”
Thursday, June 3, 2010
US dollar gains as the Euro wanes
The past two days the markets have been looking to today’s US employment report for clues as to the next direction these markets will likely take. With that we have seen the return of a certain amount of risk appetite with respect to equity markets, with both the Dow and S&P500 just failing to break above their respective 200 day moving averages yesterday.
Positive US retail sales data, (up 2.5%) and the solid ADP report helped boost this positive mood amongst investors yesterday.
This appetite for risk however has been less resilient with respect to currencies, with the US dollar continuing to remain fairly buoyant.
US non farm payrolls are expected to come in at around 525k for May, which would be the biggest increase since 1983, so any disappointment here, could well provoke a sharp reaction, considering the ambient bullishness of some investors about these numbers.
The reason the forecast is expected to be so high is due to census hiring boosting the numbers.
The US dollar continues to attract safe-haven buying on the back of continued concern in the euro zone about sovereign debt and credit market liquidity with European banks remaining extremely nervous with respect to their lending between each other. European Central Bank data suggests that these European banks have parked just over €320bn in the overnight deposit facility in preference to lending to other banks at higher rates.
This continued reliance on the ECB coupled with the news that Hungary was at risk of a Greek like crisis, has continued to dampen sentiment and increase the likelihood that the European Central Bank will need to hasten further liquidity measures ahead of, or at its rate meeting, next week.
Economic data hasn’t been of any help either as Euro zone retail sales released yesterday showed a slump by 1.2% in April, against an expectation of a small rise of 0.1%.
With the market focus on the US employment report it should also be noted that Euro zone Q1 GDP is due out today as well with an expectation of a 0.2% rise.
The dollar has also been helped by various comments by Kansas City Fed hawk Thomas Hoenig who suggested that the Fed Funds rate may have to rise to 1% by the end of the summer and by Dallas Fed President Richard Fisher, who suggested that the time for tightening monetary policy was getting closer.
The election of monetary dove Naoto Kan as Japanese Prime Minister has also served to further weaken the yen as he is reputed to be an advocate of further monetary easing measures in order to stimulate the Japanese economy.
EURUSD – the single currency continues to find each rally off its recent lows shallower with each passing attempt. Yesterday we stalled at 1.2330, the day before 1.2350 and last Friday the rally stalled at 1.2455.
As said before the 1.2135 level remains the proverbial line in the sand, and we need a daily close below here to set off a move towards the 1.1700 level, and 2005 lows.
There is minor resistance around the 1.2350 area but to break higher significantly we would need to see a break above the 1.2450/60 level for a move towards 1.2700 to unfold.
GBPUSD – the pound has so far been unable to re-test the 1.4780 level of earlier this week. While we stay above trend line support which is now at 1.4570, the odds continue to favour another test of the 1.4780 level, and possibly even 1.4850. A break below 1.4535/45 would re-target the lows around the 1.4430/40 area.
Key support level remains around the 1.4230/50 level and remains the key barrier to any further sterling declines in the short term. The 1.4000 level remains a key support on a monthly close.
EURGBP - the Euro continues to find rallies difficult to sustain failing just short of the breakout level that was the previous 18 month lows. The next target remains the 0.8250 level on the way towards the 0.8170 level.
The 0.8170 level is a 50% retracement of the up move from the 2007 lows at 0.6537 to the 2008 highs at 0.9801.
USDJPY – the election of Naoto Kan as Japanese Prime Minister this morning continues to weigh on the yen, falling back yesterday from the 92.80 level, which remains the next obstacle for a move above 93.00 towards the 93.30 area. With short term indicators looking a little overbought we could see a slip back towards the 91.45 area on a break below the support at the 92.20/30 area.
Recent range support remains around the 90.70/80 area.
Positive US retail sales data, (up 2.5%) and the solid ADP report helped boost this positive mood amongst investors yesterday.
This appetite for risk however has been less resilient with respect to currencies, with the US dollar continuing to remain fairly buoyant.
US non farm payrolls are expected to come in at around 525k for May, which would be the biggest increase since 1983, so any disappointment here, could well provoke a sharp reaction, considering the ambient bullishness of some investors about these numbers.
The reason the forecast is expected to be so high is due to census hiring boosting the numbers.
The US dollar continues to attract safe-haven buying on the back of continued concern in the euro zone about sovereign debt and credit market liquidity with European banks remaining extremely nervous with respect to their lending between each other. European Central Bank data suggests that these European banks have parked just over €320bn in the overnight deposit facility in preference to lending to other banks at higher rates.
This continued reliance on the ECB coupled with the news that Hungary was at risk of a Greek like crisis, has continued to dampen sentiment and increase the likelihood that the European Central Bank will need to hasten further liquidity measures ahead of, or at its rate meeting, next week.
Economic data hasn’t been of any help either as Euro zone retail sales released yesterday showed a slump by 1.2% in April, against an expectation of a small rise of 0.1%.
With the market focus on the US employment report it should also be noted that Euro zone Q1 GDP is due out today as well with an expectation of a 0.2% rise.
The dollar has also been helped by various comments by Kansas City Fed hawk Thomas Hoenig who suggested that the Fed Funds rate may have to rise to 1% by the end of the summer and by Dallas Fed President Richard Fisher, who suggested that the time for tightening monetary policy was getting closer.
The election of monetary dove Naoto Kan as Japanese Prime Minister has also served to further weaken the yen as he is reputed to be an advocate of further monetary easing measures in order to stimulate the Japanese economy.
EURUSD – the single currency continues to find each rally off its recent lows shallower with each passing attempt. Yesterday we stalled at 1.2330, the day before 1.2350 and last Friday the rally stalled at 1.2455.
As said before the 1.2135 level remains the proverbial line in the sand, and we need a daily close below here to set off a move towards the 1.1700 level, and 2005 lows.
There is minor resistance around the 1.2350 area but to break higher significantly we would need to see a break above the 1.2450/60 level for a move towards 1.2700 to unfold.
GBPUSD – the pound has so far been unable to re-test the 1.4780 level of earlier this week. While we stay above trend line support which is now at 1.4570, the odds continue to favour another test of the 1.4780 level, and possibly even 1.4850. A break below 1.4535/45 would re-target the lows around the 1.4430/40 area.
Key support level remains around the 1.4230/50 level and remains the key barrier to any further sterling declines in the short term. The 1.4000 level remains a key support on a monthly close.
EURGBP - the Euro continues to find rallies difficult to sustain failing just short of the breakout level that was the previous 18 month lows. The next target remains the 0.8250 level on the way towards the 0.8170 level.
The 0.8170 level is a 50% retracement of the up move from the 2007 lows at 0.6537 to the 2008 highs at 0.9801.
USDJPY – the election of Naoto Kan as Japanese Prime Minister this morning continues to weigh on the yen, falling back yesterday from the 92.80 level, which remains the next obstacle for a move above 93.00 towards the 93.30 area. With short term indicators looking a little overbought we could see a slip back towards the 91.45 area on a break below the support at the 92.20/30 area.
Recent range support remains around the 90.70/80 area.
Tuesday, May 25, 2010
'Unfair' bank charges to be banned, government proposes
Last year, the Office of Fair Trading suffered a high profile legal defeat in its attempts to regulate bank charges.
The government's plans also include powers to ban "excessive" interest rates on credit and store cards.
Among the other measures are a promise to give homeowners more protection against "aggressive" bailiffs.
Courts will also be told that repossessions must always be a last resort.
Continue reading the main story I expect pressure, especially on the state-owned banks, to sharply reduce their charges
Martin Lewis
Moneysavingexpert.com
'Historic' deal
The plans policy-by-policy
Under another proposal, people taking out a store card for the first time will be given a seven-day cooling off period, which is aimed at stopping some people getting into debt in the first place.
Reaction
Marc Gander of the Consumer Action Group, a leading campaigner on bank charges, welcomed the government's commitment, but said it would be important to see the detail.
"It [the government] does not define 'unfair' or say what protections will be granted overall," he said.
Martin Lewis of Moneysavingexpert.com also welcomed the new policy.
"I expect pressure, especially on the state-owned banks, to sharply reduce their charges," he said.
"If they don't play ball, the government needs to legislate to make this happen."
The British Bankers' Association played down the implications of the government's threat.
"The OFT has already looked into bank charges and in March this year reported that 'real progress' is being made by the industry in making current accounts work well for customers," said a spokesman.
"Competition is driving down the cost of other accounts that provide a whole range of different features as part of the package," he added.
Advice and debts
The expanded policy programme of the new government adopts two policies that had already been set in train by the previous Labour administration.
Firstly, there will be a free national financial advice service. A similar policy was announced in March after three years of planning and pilots.
The version being suggested by the coalition will be funded by a new levy on the financial services industry, rather than by the government and the Financial Services Authority as planned by Labour.
Secondly, the coalition will also halt the ability of creditors to get a court order allowing them to seize and sell the homes of borrowers who have unsecured debts.
In February, the Ministry of Justice said it was looking at setting a minimum level of debt before a court order could be obtained.
Now, the coalition government says it will ban court orders for the sale of properties where the unsecured debt is below £25,000.
Pensions
The coalition programme adds some extra pension policies to those first announced by the new government on 11 May.
It says it will look at giving people "flexibility" to get their hands on part of their personal pension pots early - in other words drawing lump sums to spend before retirement.
And in response to pressure from the pension industry, the government says it will "simplify" the rules and regulations that surround pensions to "reinvigorate" company pension schemes.
This is usually taken to mean relaxing the current requirements to offer spouses pensions and some form of index-linking, to make final-salary schemes less expensive for companies to fund.
Joanne Segars, of the National Association of Pension Funds, said the government should be very cautious about letting people have early access to pension savings.
But she welcomed the idea of genuine simplification.
"There have been 800 changes to pension regulations since 1995 - flexibility will slow the exodus from defined benefit schemes in the private sector we are seeing at the moment," she said.
The government's plans also include powers to ban "excessive" interest rates on credit and store cards.
Among the other measures are a promise to give homeowners more protection against "aggressive" bailiffs.
Courts will also be told that repossessions must always be a last resort.
Continue reading the main story I expect pressure, especially on the state-owned banks, to sharply reduce their charges
Martin Lewis
Moneysavingexpert.com
'Historic' deal
The plans policy-by-policy
Under another proposal, people taking out a store card for the first time will be given a seven-day cooling off period, which is aimed at stopping some people getting into debt in the first place.
Reaction
Marc Gander of the Consumer Action Group, a leading campaigner on bank charges, welcomed the government's commitment, but said it would be important to see the detail.
"It [the government] does not define 'unfair' or say what protections will be granted overall," he said.
Martin Lewis of Moneysavingexpert.com also welcomed the new policy.
"I expect pressure, especially on the state-owned banks, to sharply reduce their charges," he said.
"If they don't play ball, the government needs to legislate to make this happen."
The British Bankers' Association played down the implications of the government's threat.
"The OFT has already looked into bank charges and in March this year reported that 'real progress' is being made by the industry in making current accounts work well for customers," said a spokesman.
"Competition is driving down the cost of other accounts that provide a whole range of different features as part of the package," he added.
Advice and debts
The expanded policy programme of the new government adopts two policies that had already been set in train by the previous Labour administration.
Firstly, there will be a free national financial advice service. A similar policy was announced in March after three years of planning and pilots.
The version being suggested by the coalition will be funded by a new levy on the financial services industry, rather than by the government and the Financial Services Authority as planned by Labour.
Secondly, the coalition will also halt the ability of creditors to get a court order allowing them to seize and sell the homes of borrowers who have unsecured debts.
In February, the Ministry of Justice said it was looking at setting a minimum level of debt before a court order could be obtained.
Now, the coalition government says it will ban court orders for the sale of properties where the unsecured debt is below £25,000.
Pensions
The coalition programme adds some extra pension policies to those first announced by the new government on 11 May.
It says it will look at giving people "flexibility" to get their hands on part of their personal pension pots early - in other words drawing lump sums to spend before retirement.
And in response to pressure from the pension industry, the government says it will "simplify" the rules and regulations that surround pensions to "reinvigorate" company pension schemes.
This is usually taken to mean relaxing the current requirements to offer spouses pensions and some form of index-linking, to make final-salary schemes less expensive for companies to fund.
Joanne Segars, of the National Association of Pension Funds, said the government should be very cautious about letting people have early access to pension savings.
But she welcomed the idea of genuine simplification.
"There have been 800 changes to pension regulations since 1995 - flexibility will slow the exodus from defined benefit schemes in the private sector we are seeing at the moment," she said.
Monday, April 26, 2010
Split mortgage offers borrowers some flexibility
WITH experts divided on when and how quickly interest rates may eventually start to rise, HSBC has thrown a new option into the ring for borrowers to consider.
The new two-year split mortgage offers three options in the way you divide up your mortgage borrowing. You can opt for half at tracker rate and half at fixed rate, 75% tracker and 25% fixed or 25% tracker and 75% fixed.
The rates on offer are very competitive, but the higher the fixed portion the higher the overall rate becomes.
This is not surprising because it mirrors current pricing patterns in the mortgage market as a whole.
A 75% fixed/25% tracker deal is priced at 2.99% for a 70% loan to value ratio (LTV) and 3.89% to 80% LTV, with rates as low as 2.49% for the 25% fixed/75% tracker 70% option. All deals come with a £999 booking fee and the split loan mortgage is available to a maximum of £500,000.
This product also gives borrowers the option to pay their booking fee now and delay drawing down the mortgage for up to six months, therefore customers with deals due to end before October 31 this year have the option to lock in now.
The flexibility of this product may also manage to tempt some of those consumers still sitting on the standard variable rate (SVR) fence who have not been sure which way to jump.
The beauty of this combined mortgage product is that you have the ability to fix the bulk of your borrowing but at the same time can overpay without limitation on the variable rate element of your loan, and this flexibility will certainly appeal to those who receive regular bonus payments or are looking to pay down their mortgage quickly.
Mortgage lending remains subdued and with the current levels of economic and political uncertainty things are unlikely to pick up markedly in the short term. However, this innovative move from HSBC which gives borrowers more choices is a positive step and should be applauded.
The new two-year split mortgage offers three options in the way you divide up your mortgage borrowing. You can opt for half at tracker rate and half at fixed rate, 75% tracker and 25% fixed or 25% tracker and 75% fixed.
The rates on offer are very competitive, but the higher the fixed portion the higher the overall rate becomes.
This is not surprising because it mirrors current pricing patterns in the mortgage market as a whole.
A 75% fixed/25% tracker deal is priced at 2.99% for a 70% loan to value ratio (LTV) and 3.89% to 80% LTV, with rates as low as 2.49% for the 25% fixed/75% tracker 70% option. All deals come with a £999 booking fee and the split loan mortgage is available to a maximum of £500,000.
This product also gives borrowers the option to pay their booking fee now and delay drawing down the mortgage for up to six months, therefore customers with deals due to end before October 31 this year have the option to lock in now.
The flexibility of this product may also manage to tempt some of those consumers still sitting on the standard variable rate (SVR) fence who have not been sure which way to jump.
The beauty of this combined mortgage product is that you have the ability to fix the bulk of your borrowing but at the same time can overpay without limitation on the variable rate element of your loan, and this flexibility will certainly appeal to those who receive regular bonus payments or are looking to pay down their mortgage quickly.
Mortgage lending remains subdued and with the current levels of economic and political uncertainty things are unlikely to pick up markedly in the short term. However, this innovative move from HSBC which gives borrowers more choices is a positive step and should be applauded.
Tuesday, March 30, 2010
Subscribe to:
Posts (Atom)