The Nation Newspaper

Tag: Steve Webb

  • 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

     

     

     

  • Steve Webb threatens law to end pension’s rip-off

    Steve Webb threatens law to end pension’s rip-off

    Steve Webb, the Pensions Minister, has told The Telegraph he  is ready to change the law to force pension firms to end rip-off fees if they fail to scrap “jaw dropping” charges of up to three per cent  yearly.

    Pensions companies have been told they must draw up urgent plans to end “jaw dropping” charges to more than a million customers, after a major report found £26 billion worth of savings is at risk from rip-off fees.

    Webb, the Pensions Minister, said he was ready to change the law to stamp out high charges if companies responsible fail to take action as he was not prepared to wait for them to give customers a better deal.

    He will be calling representatives from the major pension companies to urgent talks in the New Year in an attempt to reach a voluntary solution.

    But firms that refuse to end the charges will be named and shamed and will face new laws to protect customers’ retirement savings from the “shocking” fees, he warned.

  • Steve Webb threatens new law to end ‘shocking’ pension’s rip-off

    Steve Webb threatens new law to end ‘shocking’ pension’s rip-off

    Steve Webb, the Pensions Minister, says he is ready to change the law to force pension firms to end rip-off fees if they fail to scrap “jaw dropping” charges of up to three per cent per year

    He told The Telegragh that Pensions companies have been told they must draw up urgent plans to end “jaw dropping” charges to more than a million customers, after a major report found £26 billion worth of savings is at risk from rip-off fees.

    Webb, the Pensions Minister, said he was ready to change the law to stamp out high charges if companies responsible fail to take action as he was not prepared to wait for them to give customers a better deal.

    He will be calling representatives from the major pension companies to urgent talks in the New Year in an attempt to reach a voluntary solution.

    But firms that refuse to end the charges will be named and shamed and will face new laws to protect customers’ retirement savings from the “shocking” fees, he warned.

    A year-long inquiry into the pensions plans offered to staff by companies found savers were exposed to 38 different fees that depleted their funds.

    Researchers found almost a quarter of all the money held in workplace pensions run by insurance companies – or £26 billion across 1.5 million separate pots – was at risk.

    In some cases savers were paying more than three per cent a year in annual fees. Calculations showed these people stood to lose as much as two-thirds of their money to fees over the course of their lives.

    Webb welcomed the report, from the Independent Project Board of regulators, consumer watchdogs and industry representatives, for exposing the scale of the problem.

    But he rejected the review’s proposed two-year timetable for action as “much too slow”.

    Instead, he announced that he would call the major pension companies to urgent talks early in the year.

  • Pension tax breaks favours the rich, minister claims

    The Pension’s Minister, Steve Webb, is calling for a flat rate of tax relief on pension savings, claiming tax breaks favour the wealthy.

    According to The Telegraph,Webb, the Liberal Democrat MP, said  there should be a flat-rate of tax relief on pension savings set between 20pc and 30pc.

    This would end a system in which savers get relief at their highest marginal rate which effectively means higher rate taxpayers pay just 60p to put each £1 into a pension.

    The Treasury spends £54billion a year on this relief and both the Labour Party and Liberal Democrats have suggested they will seek to reform it, should either enter government following the 2015 general election.

    In an interview with financial publication Money Marketing, Webb said this would help reduce Britain’s deficit.

    “We know the cost of pensions tax relief is a very large number and the benefits are heavily skewed towards high earners,” he said.

    “In the real world a government will want to spend less rather than more on pensions tax relief.”

    Successive governments have tinkered with pensions, clawing back the incentives handed to savers through lower allowances.

    Webb said this would continue “as long as we fail to address the unfairness of the current structure”, which he said would be solved by introducing a flat rate for all.

    The Pensions Policy Institute (PPI), a think tank, has suggested a 30pc flat-rate of relief would be cost-neutral to the Treasury. The effect would be redistribution of the incentive to save to the less wealthy, taking the tax on contributions to pensions made by higher earners and effectively putting it into the funds of those who pay 20pc tax only. In retirement, three-quarters of the fund would still be subject to income tax on withdrawal.

    Webb said the think tank’s research “just shows you how skewed ( the tax relief system) is towards the higher earners”.

    His proposed level of flat-rate tax relief would “a standard rate north of 20pc but south of 30pc.”

    It is the second time since the Budget Webb has spoken out on pensions tax relief, which has become a pre-election battleground. In doing so, he has commented on legislation for which his government department is not responsible. The Treasury, which is headed by the Conservative Chancellor, George Obsorne, is ultimate responsibility for changes to the way pensions are taxed.

    A spokesman for the Treasury said: “Pensions tax relief provides strong incentives for everyone to save; however this needs to be balanced against the need to protect the public finances from the growing cost of pensions tax relief.

    “Although the Government keeps all taxes under review, there are no plans to make any changes to pensions tax relief.”

    In April, another think tank, the Centre for Policy Studies, said pension tax breaks were “ineffective” and “inequitable”, and should be replaced with a state handout of 50p for every £1 saved. Michael Johnson, the academic behind the report, said his proposals would also cap the amount of income tax refunded on pension savings at £4,000 a year. At this level savers would only need to pay £8,000 to put £12,000 into a pension equivalent to a relief of 33pc.

  • Pension charges cap shelved until 2015

    Pensions Minister, Steve Webb supported the plan, which capped charges above 0.75pc, as it would protect millions of people from high fees after they were automatically enrolled in their company’s pension scheme.

    The introduction of the cap has now been pushed back from April until next year at the earliest, the Financial Times claimed.

    Last October, Mr Webb vowed to crack down on pension scheme charges, pointing to a report by the Office of Fair Trading “identifying no fewer than 18 different sorts of charges which can be taken from people’s pensions”.

    He told The Telegraph: “For too long, private pension savers have been at the mercy of their pension provider. Apparently ‘low’ charges such as 1pc per year can mount up to a huge sum over the course of a working life.”

    The Department for Work and Pensions found that just 24pc of people in their 20s were saving into a company pension before the Government started automatically enrolling workers in 2012.

    Government believed plan to cap charges above 0.75pc would protect millions of workers from high fees.