The Nation Newspaper

Tag: pensions

  • Ministers ‘concealing bad news’ on new flat rate state pensions

    Ministers are refusing to write to people to tell them how much they will lose under the new state pension over “spurious” claims that sending out such letters would breach data protection laws.

    Currently, detailed state pension estimates are available upon request, but at a meeting in Parliament on Monday, the Department for Work and Pensions (DWP) admitted that when it sent out letters to 6,000 people inviting them to apply for one, 79 responded.

    Despite fears that millions of people approaching retirement still do not know how the reforms will impact their retirement incomes, Baroness Ros Altmann, the Pensions Minister, said it would not be possible to send out a statement to everybody.

     

    At least 16 million young people worse off under new state pension

     

    Experts accused the DWP of trying to “conceal bad news” by not sending out letters, while Frank Field, the Labour MP and chairman of the Work and Pensions select committee queried the data protection claims. He pointed out that the taxman and other government departments routinely send out letters chasing debts.

    The Work and Pensions select committee is investigating claims that baby boomers get more out of the state than they put in while younger generations lose out

    Baroness Altmann also blamed the cost to taxpayers for not sending out letters on masse, while it was also claimed that the letters might pose a potential fraud risk for thousands of people, as roughly 3pc could be expected to “go missing”.

    Last week, the DWP released figures revealing that at least 16?million people under the age of 43 will be worse off as a result of the new “flat rate” state pension.

     

    Women ‘short-changed and shafted’ by state pension age changes

     

    It confirmed that 53pc of 43-year-olds will receive a lower state pension under the new arrangements when they reach state pension age in 2040. They will receive £572 a year less or £17,160 over the course of a 30-year-retirement, than they would have done under the current system.

    From April, people reaching state pension age will receive a “flat rate” worth £155.65 a week, instead of the current basic pension worth £119.30, which has additional elements. Most people will not receive the headline amounts, but will receive more or less depending on their employment circumstances.

     

    How to get the best possible pension in 2016

     

    Tom McPhail, Head of Pensions Policy at Hargreaves Lansdown, an investment specialist, said the DWP’s excuses were spurious. He described the Government’s refusal to send out letters as “part cock up, part conspiracy.” He said: “Some of the DWP’s systems were built in the 1970s and make effective communications very difficult. But there is also a deliberate effort from the department to spin the good news relating to the state pension, and conceal the bad news.”

    The Chancellor faces a stark choice in the coming months, with the outcome of a Government review of the pension tax system likely to have a dramatic impact on both public finances and attitudes toward long-term savings.

    Under today’s system, individuals are exempt from paying tax on anything they invest into a pension. Instead, pension income is taxed in retirement, creating a deferral that sees the Government forgo income tax until individuals start spending their retirement savings.

    This system is often referred to as “exempt-exempt-taxed” (abbreviated to EET), with contributions and investment growth exempt from tax, while withdrawals are subject to income tax.

    “Even with the increase in State Pension Age (SPA), it is expected that by 2037 there will only be 2.7 people of working age for every person over SPA. The figure is currently around 3.2 people.”

    HM Treasury insists the review currently being conducted may not result in any major changes to the current system. But the consensus view is that we are set for an overhaul nonetheless.

    Government have suggested moving away from the EET system in favour of a taxed-exempt-exempt approach (TEE). Under such a system, pension contributions would be paid in after income tax but with no tax on growth or withdrawals.

     

    The tax trap that’s catching home workers

     

    Individual Savings Accounts (ISAS) function this way, and some have suggested a ‘pension-Isa’ – a single account, with buckets for pre and post retirement savings, would make pensions simpler to understand.

    Crucially, however, it would also break the tax deferral that currently exists, allowing Government to benefit from income tax on pension contributions upfront, without waiting until individuals reach retirement.

    The net cost to the Exchequer from pensions tax relief in 2013-14 was £21.2bn. Bringing tax receipts forward would create a net tax gain for the Government since more income tax would be taken during savers’ working lives, when for many their rate of income tax will be greater (the majority of retirees pay no more than the basic rate of income tax).

    To introduce this system would be a catastrophic mistake for the country and future generations of savers, however.

    While it would provide a sticking-plaster for the current fiscal deficit, the gamble with tomorrow’s public finances is enormous. It would require successive Governments of whatever political hue to defer expenditure, holding back tax receipts in the short-term to fund the future costs of an ageing society.

    The problem is compounded by future demographic changes. ONS figures show a marked increase in the estimate of the old age dependency ratio due to growing numbers of elderly people.

    Even with the increase in state pension age (SPA), it is expected that by 2037 there will only be 2.7 people of working age for every person over SPA. The figure is currently around 3.2 people.

    This will also have an impact on key public services like the NHS, where average spending for retired households is nearly double that for non-retired households.

    “Worse still, without the incentive of tax-relief on contributions, those that fear the Government may renege on the promise of tax-free growth and withdrawals may elect not to save into a pension at all. ”

    With a greater proportion of the future retired population potentially paying no tax on their income, it will increasingly be down to the generations in work to provide funding for government spending.

    While it is inevitable that tax receipts from working-age households must subsidise those in retirement, removing the tax deferral in-built in the TEE system will place huge responsibility on Government to ensure they provide for the future.

     

    Hidden fees double the cost of pensions, report shows

     

    It is not difficult to foresee a scenario in which the contributions of a proportionally smaller workforce struggles to keep up with the state pension provision and other public expenditure while an aging population pays no tax on its retirement income. The full effect might be more than 30 or 40 years away, but we can see a perfect storm brewing.

    In addition to the risk of managing a tax take that will plateau and then fall in value terms, moving to a TEE system threatens consumer confidence in long-term saving. TEE asks voters to place a huge amount of trust in future governments not to retrospectively apply tax on withdrawals (a ‘TET’ approach) during hard-times.

    Pensions have historically been an easy target for quick wins to generate tax revenue and a parliamentary session or budget hardly passes without further tinkering of the pension tax system. The track record thus gives people little reason to believe policymakers will keep to their side of the deal 20 or 25 years down the line, and the temptation for savers would be to remove savings from pensions at the earliest opportunity in order to avoid a snap-tax on pension income.

    This would be a disaster for personal savings in the UK, significantly reducing the options available to individuals to secure a sustainable income in retirement.

  • Global views on pensions

    Britain may be entering uncharted territory with the biggest shake-up in pensions for decades, but there are lessons to be learnt from around the world.

    Under the pension reforms, which began three years ago, all employees will be automatically enrolled in a pension scheme. In April this year, retirees were given unprecedented freedom to spend their pension savings as they choose rather than having to buy an annuity.

    The Melbourne Mercer Global Pensions Index, which reviews pensions around the world, ranked Denmark top, because its schemes are well-funded, provide good benefits and its private pension regulations protect consumers effectively.

    Australia was second, followed by the Netherlands, Switzerland, Sweden, Canada, Chile and then the UK in eighth place out of 25. India was ranked the lowest because of funding weaknesses that throw its future sustainability into doubt.

    The report notes that all over the world pension systems are under pressure from rising life expectancies, government debt and a turbulent global economy. Japan is now experiencing a negative savings rate for the first time since it began gathering data in 1955

    The retirement landscape is also shaped by attitudes to saving and how we regard older people. In Japan, there is a strong savings habit and a cultural imperative to care for parents in old age. State benefits, relative to average earnings, are comparable to the UK.

    Whereas this country has seen the demise of final salary schemes in the private sector and an increasing number of workers moved into pensions that do not guarantee a set income for life, Japan maintained these better quality employer schemes for longer.

    Adrian Walker, retirement planning manager at Old Mutual Wealth, says: “A key worry for the UK is the fact that Japan, which has historically boasted the highest savings rates in the developed world, is now experiencing a negative savings rate for the first time since it began gathering data in 1955.

    Keeping mum: Japanese pensioners can lean on their children for help. “In some respects this is a positive, as Japan’s ageing population draws income and boosts consumer spending in a long-stagnant economy. But there are risks associated with Japan drawing its savings at a faster rate than the younger generation is putting aside for the future.”

    Australia’s retirement savings system brought in its equivalent of automatic enrolment in 1992, starting with a low minimum contribution, which will reach to 12per cent by 2025. This is much higher than in the UK, where total contributions from employees, employers and the Government began at 4per cent and will reach eight per cent by October 2018.

    Relative to average wages, state pension benefits are much more generous than in the UK. Retirees are not required to buy an annuity and the products are barely used.

    “Stories about Perth having more taxi drivers aged 75 and over than anywhere else need to be put into context, however,” says Mr. Walker. “The current compulsory savings system was in its infancy when those taxi drivers retired and may be a reflection on the previous regime rather than a need for compulsory annuitisation.”

    Surprisingly, state pension provision in the US is more generous than the UK relative to average salaries. The US is an interesting comparison because there is no NHS and those approaching retirement must therefore consider how they will replace workplace medical insurance.

    Yet, surprisingly, state pension provision is more generous than the UK relative to average salaries.

     

  • Ex-Kogi top appointees threaten to sue govt for unpaid pensions

    Ex-Kogi top appointees threaten to sue govt for unpaid pensions

    Five retired Kogi State Heads of Service (HOSs) and 52 permanent secretaries have threatened to sue the government fot the non-payment of their harmonised statutory pension allowances.

    The 57 aggrieved pensioners, under the aegis of Association of Retired Heads of Service and Permanent Secretaries, expressed their displeasure in a letter to Governor Idris Wada  yesterday in Lokoja, the state capital.

    The letter by the aggrieved pensioners’ Chairman, J. O. Mesole and Secretary, John Ausa, accused the government of placing them on 50 per cent pension since December, 2011.

    They said the government was owing them N11.3 million monthly.

    The retired senior civil servants regretted that nine of their members had died since 2012 while waiting for their pensions.

    According to them, they had reached the limit of their patience and would take legal action to protect their rights, as enshrined in the Constitution.

    The pensioners said their counterparts, who retired after December 2011, were receiving their full pensions, while 57 of them, who retired before the 2011 harmonisation, were placed on 50 per cent part-payment.

    The letter reads: “Heads of Service and Permanent Secretaries are in the management cadre. They are also on consolidated pay (not on salary grade level) and earn 100 per cent of their total emoluments as pension for life.

    “For this reasons, their pensions are to be automatically harmonised to be at par with the pay of their serving counterparts with effect from the date there is pay rise for them. Their own case of harmonisation is different.”

    The association noted that withholding pension or part of it violated Section 210(2) of the Constitution, which states that a pension shall not be withheld or altered to the disadvantage of a pensioner.

    They said: “Asking us to wait until the finances of government would have improved before our request could be granted is as good as saying we should wait indefinitely or that we should forget about the request.”

    The retirees said they were not unaware of the financial position of the state, adding that they would not ask for payment of arrears from December 2011 till date but the approval for full implementation from July 1, 2015.

    They said: “All we are requesting is for Your Excellency to kindly approve, with effect from July 1, 2015, payment of the fully consolidated and harmonised pension of the five retired HOS and 52 permanent secretaries.”

    The Secretary to the State Government (SSG), Prof. Olugbemiro Jegede, acknowledged receipt of two letters from the association on the arrears of 50 per cent of their harmonised pension.

    He called for their understanding, saying the state was going through “a very difficult, excruciatingly painful financial crunch at the moment”.

     

     

  • Ambode assures retirees on prompt payment of pensions

    Ambode assures retirees on prompt payment of pensions

    Governor Akinwunmi Ambode of Lagos State says his administration will be in the forefront of ensuring efficient and effective pension scheme administration to make life comfortable for retirees.

    Ambode, who was represented by the Deputy Governor, Dr Idiat Adebule, made the pledge at the 18th Retirement Benefit Bond Certificate Presentation Ceremony in Lagos on Thursday.

    He said that Lagos was the only state government that was up-to-date in pension contribution remittances.

    ”Our employees are our greatest assets and this is why we are not only committed to ensuring that they enjoy good conditions of service, but to also ensuring that their entitlements are paid promptly when they retire.

    ”We are aware that some parastatals have not fully complied with the provisions of the State Pension Reform Laws in terms of regular remittances of contributions into employees’ Retirement Savings Account.

    ”This will not be tolerated by this administration as the resultant effect of non-conformity is that many will retire without any provision made for the payment of their terminal entitlements.

    ”We are also aware that we still have backlog of retirees who are yet to receive their entitlements, especially at Local Governments and SUBEB.

    ”This administration is a people-oriented government. We understand that you have spent the better part of your lives in service of this state and you deserve to live in peace and comfort in retirement, ” he said.

    Ambode said that the government would ensure that retirees get paid their terminal entitlements as and when due.

    Also speaking, Mrs Folashade Onanuga, Director-General, Lagos State Pension Board, said that the gesture was a continued testimony of the successful administration by the state government.

    Onanuga said that the government had taken the bull by the horn by first releasing the sum of N11 billion to immediately bring succour to those retirees on the waiting list.

    ”It is your right to live in comfort at retirement, having utilised the better part of your active lives serving the state government.

    ”Today, a total sum of N2.2 billion has been paid into the Retirement Savings Account of 658 retirees. The rest of the fund will be paid accordingly to systematically clear the outstanding pension shortfall.

    ”This, in essence, brings the total number of retirees under the Lagos State Government Pension Scheme to 7, 099, ” she said.

    Onanuga also urged retirees and beneficiaries to spend their money wisely.

    In her remarks, Mrs Grace Uzoro of the National Pension Commission said that pension scheme was aimed at putting smiles on the faces of those who had laboured to serve the country.

    Uzoro commended the Lagos State Government for being at the forefront of championing the scheme.

    According to her, Lagos State has made Nigeria proud as the government is a government of action in terms of retirees’ welfare.

    Uzoro urged other state governments to emulate Lagos State to ensure their employees retire with peace of mind.

    Mr. Leo Onayemi, who spoke on behalf of the retirees, said that the gesture was unexpected as most of them thought they would never get their entitlements.

    ”It is a great day for all of us. Gov. Ambode has not spent up to four months in office and he has been able to achieve this.

    ”We will continue to support him in every way for making us reap the fruit of our labour, ” he said.

    The News Agency of Nigeria (NAN) reports that 658 retirees were presented with the Retirement Benefit Bond Certificates.

    It would be recalled that on Aug. 5, Governor Ambode directed that pension cash assets in the sum of N11billion be immediately deployed to offset pension liabilities in arrears since year 2010.

     

  • Life pensions to presidents and others condemnable

    SIR: The Socialist Party of Nigeria (SPN) condemns the recent passage into the constitutional amendment the granting of life pensions for Presidents, Vice President, Senate Presidents and House of Representatives Speakers by the National Assembly. It is another attack on an average Nigerian who has been made to wallow in poverty in spite of the stupendous wealth of the country. It is absolutely immoral and wicked of National Assembly whose members claim to be the representatives of the common people to elect to defraud the nation by committing public resources to the already rich few. Currently, Nigerian politicians, and especially National Assembly members, are the highest paid in the world. It is clear that the insatiable quest of politicians to loot the better part of the nation’s wealth is not quenched by the humongous amount politicians award for themselves at all levels, thus the new attempt to give politicians permanent wages, even after they have left offices.

    We call on Nigerian labour movement to reject this latest fraud, and mobilize its members, civil society and oppressed and poor Nigerians out in mass movement against this fraud. This should be linked with building mass movement against all anti-poor capitalist policies.

    It is worrisome that the same National Assembly members that found it difficult to legislate mere N30, 000 minimum wage for workers, found it easy to award several millions to bourgeois politicians as salaries and life pensions. Today, the education sector is in ruin as a result of chronic underfunding, but the National Assembly sees no reason to commit public resources to public education. Why should they, when they can easily send their children to the best schools around the world using public resources? Is it then accidental that Nigeria is one of the most unequal countries in the world with just one percent of the population cornering up to 80 percent of the nation’s wealth? According to statistics, more than 40 percent of the working population is jobless while poverty rate is more than 70 percent. Yet, every year, less than 18, 000 politicians in power take as much as over N1.3 trillion as salaries, allowances and perks of office; an amount that is more than four times the total budgets for health.

    It is condemnable that the same politicians who have severally and collectively ruined the nation’s economy and destroyed the country’s social fabrics, as a result of their corrupt and pro-capitalist rule, are now the one getting the choicest part of our economy. Today, most state governments and even federal government owe workers’ salaries, using the excuse of fall in oil revenue, itself a product of the gross mismanagement of Nigeria’s economy by successive governments. Yet, the same excuse is not applicable to salaries of politicians, and now life pensions for leading politicians.

    All of this shows that Nigeria’s capitalist political class, organized in the major political parties are united in their pro-rich, anti-poor neo-liberal policies that put public wealth in the pockets of the rich few. While they tell us to tighten our belts for economic prudency, they award themselves the juiciest of salaries and allowances, while committing public policies towards their private businesses.

     

    • Segun Sango

    Socialist Party of Nigeria

    Wuse II, Abuja      

  • Sell your pensions for cash in retirement, Steve Webb says

    The United Kingdom Pension’s minister Steve Webb, wants to extend freedoms announced in the Budget to give up to five million existing pensioners the chance to trade in their annuities for cash.

    Millions of retired workers would be given the power to sell their pensions, under major plans to relax annuity rules being drawn up by ministers.

    Up to five million pensioners would stand to benefit from the proposals, if they would rather have money in their bank accounts than a guaranteed income every year.

    Reforms announced in last year’s Budget will mean working people, who retire in future will be able to cash-in their pension savings for a lump sum which they will be free to spend as they wish.

    But an estimated five million pensioners, who have already retired will miss out because they are locked into their contracts until they die.

    Steve Webb, the Pensions Minister, said he wanted to change the law to enable these pensioners sell their annual lifetime incomes known as “annuities” to the highest bidder at any time after they have retired.

    Pensioners may decide they would rather have cash than a guaranteed income stream to give money to children, to pay for home renovations or to invest.

    The plan will be particularly appealing to those, who have more than one pension as a result of working for several employers, and who would prefer to have money “up front” than to receive a small amount from a low-value pension each year.

    The reform would also create a new market  in “second hand” pensions, as  insurance firms and other companies buy up individuals’ annuities, bundle them together and sell them on in bulk.

    Webb said he had been urged by pensioners to introduce the reforms, while several major pensions companies and insurers had also expressed “considerable interest and enthusiasm” for the plan.

    “I want to see people trusted with their own money wherever possible,” he said. “I have already heard from people around the country who would like to see this change made.

    “I want to see if we can get these freedoms extended to those who are receiving an annuity, but who might prefer a cash lump sum.

    “No one would be obliged to do so, but for those who would prefer upfront capital to regular income, I can see no reason why this should not be an option.”

    An estimated 400,000 people who retire each year use the money they have saved while working to buy an annuity – an insurance product which pays an annual income for the rest of their lives.

    For many people, it is the biggest financial decision they will ever make.

     

    However, in recent years annuity rates have plunged, trapping many pensioners in poor-value schemes that have destroyed the value of their lifetime savings.

    Culled from The Telegraph

     

     

     

  • PAL Pensions extend financial literacy campaign

    Pension Alliance Limited (PAL) has taken its financial literacy campaign to more schools in Lagos and other parts of the country, having successfully completed phase one of the project, which kicked off on Children’s Day.

    In a statement, the company’s Executive Director Finance and Operations, Godwin Onoro, said the second phase took place at Baptist Academy, Obanikoro, Lagos, Holy Cross Catholic Primary School, Lagos Island with 39 other schools across the country, on 30 October 2014. It was attended by pupils and staff of these schools, as well as representatives from PAL.

    According to him, being a financial institution, the company believes that inculcating the tenets of good financial management into the young generation at an early stage of life would build in them the savings culture that seem to be a problem in this present generation.

    Thus, the company takes its experts to primary and secondary schools in Nigeria to give them practical financial and economic information on how to get and use money prudently.

    He described financial literacy as one of the most crucial things that young people need to learn and understand. He said: “The organisation is a financial institution and it understands the importance of saving culture, planning and its overall effect on other aspects of life. We encourage them by giving those in primary school piggy banks, which everybody knows as ‘kolo.’ We open their minds to using their piggy banks to save now, and later open an account with the savings with a view to sustaining the saving culture eventually.” He added that they are taught the importance of planning for money and investing.

  • FRSC says pensions going smoothly

    FRSC says pensions going smoothly

    Pensioners of the Federal Road Safety Commission (FRSC) under the old pension scheme, the Pay As You Earn (PAYE) are being paid their pensions, gratuities and other benefit  as and when due, Deputy Corp Marshall, Admin and Human Resources, Chidi Nwachukwu, has said.

    Nwachukwu made this known to  The Nation while talking about the welfare of its pensioners. He said the Commission has produced 166 pensioners since its inception under the old pension scheme.

    He said: “The Commission adopts best practices in all of its action. We have a nominal roll of all our pensioners as obtained in some other agencies and parastatals of the government.

    “We have 166 pensioners and we do not have any arrears of gratuity and others, and our Board of Trustees meet quarterly.”

  • Ogun pays N17b as pensions, gratuities

    Ogun pays N17b as pensions, gratuities

    Over N17 billion has been paid as pensions and gratuities since the inception of the Senator Ibikunle Amosun-led administration came on board in Ogun State in May 2011, the state Head of Service, Mrs Modupe Adekunle, has said.

    Speaking in Abeokuta during the Ministerial Press Briefing to mark the third anniversary of the Amosun government, Adekunle said over N12.2 billion had been paid to pensioners while gratuities totaling over N5.5 billion, including the back-log owed by the immediate past administration, had  been paid to date.

    She added that the government had implemented the Contributory Pension Schedule for officers employed since January 1, 2008 till date.

    On employment, Adekunle said 10,504 unemployed citizens of the state were recruited or empowered  as at May, 2012; 967 last year while 296 candidates who were successful during the Civil Service Selection had been issued letters of appointment.

    “In the same vein, the Civil Service Commission recruited 459 officers into various cadres as replacement of those that retired from the service so as to beef up the staff strength in special areas,” Adekunle added.

    The Head of Service noted that promotions of public servants had been done promptly, revealing that no fewer than 2,141 officers were promoted duirng last year’s promotion exercise, adding  that 742 of their counterparts in the parastatals were also moved up.

    Meanwhile, the state government has assured that improvement in resource management and budget discipline towards increasing the level of productivity and accountability would continue to be given utmost priority.

    The state Commissioner for Budget and Planning Mrs. Oluwande Muoyo, said this was to ensure a reduction of the cost of governance in state.

    The commissioner said at  the briefing that this necessitated the launch of the state Public Financial Management (PFM) Reform Agenda in May, last year.

    She said since the launch of the reform, significant achievements had been recorded in the control and preventive vigilance on payroll preparation in which a substantial amount had been recovered while the certification of pay analysis reports and nominal roll by the accounting officer of each agency of the government was strictly adhered to, which enhanced integrity of the pay roll.

    Muoyo said despite the short fall in the receipt from Federal Account, coupled with harsh economy environment, the state 2014 budget has achieved a first quarter performance of 61.87 per cent.

  • UK pensions make top 10 in global index

    UK pensions make top 10 in global index

    Sustainability of Britain’s pensions system has improved as millionth member joins largest auto-enrolment scheme

    Reforms, such as the introduction of auto-enrolment took the United Kingdom (UK) up the rankings in the Allianz Global Investors Pension Sustainability Index (PSI), introduced in 2009, from 12th place in 2011 to 10th in 2014.

    Auto-enrolment was launched in 2012 and it is being rolled out to more and more employers. By 2016, all workers will automatically be put into a scheme and will save an eventual eight per cent of their earnings.

    The National Employment Savings Trust, (Nest), set up by the government to provide auto-enrolment schemes to companies without their own, has just passed the one-million-member landmark.

    The Allianz report also cited the sweeping changes to accessing pensions announced in last month’s Budget.

    Head of Pensions, Europe at Allianz Global Investors, Andreas Hilka, said: “With the introduction of Nest, a simple yet sophisticated auto-enrolment scheme, the UK took an important step towards enlarging the share of people saving for their retirement.

    “Further reform is clearly on the agenda, as the overhaul of the annuities market and the decision to cap auto-enrolment charges show.”

    Australia takes the top spot in the latest rankings, with its two-tier system of lean public and highly developed funded pensions putting the country under the least pressure to reform. Australia is followed in order by Sweden, New Zealand, Norway and the Netherlands in the tables.

    The report said western European countries benefited from their “comprehensive pension systems based on strong, funded pillars”. Sweden and Norway scored well thanks to their “comparatively solid public finance situation”, with Norway’s high legal retirement age and moderately ageing population also helping the country to a high ranking.