May 2010
'IASB rule change could cause multi-billion pound balance sheet hole' Danny Vassiliades is quoted:
Danny Vassiliades, principal and head of employer consulting at Punter Southall, agrees that the proposed changes may cause a multi-billion balance sheet hole: 'The move to greater transparency in pensions accounting could add billions of pounds of unrecognised liabilities to some companies' balance sheets,' he says. 'The IASB's proposals to remove the ability of companies to report only a proportion of their deficit which went out for consultation (known as the 'corridor method') will ensure that deficits are immediately recognised in full. For some companies that have been employing this technique there will be an immediate impact on their balance sheet. 'About 10 FTSE 100 companies are thought to be involved and could be forced to recognise a further 14bn of liabilities if these proposals are adopted. Royal Dutch Shell is one of the most affected, with a possible 7bn of unrecognised liability that could be added to its balance sheet. 'Additionally, the banking sector is especially affected, with Barclays and Lloyds now facing the prospect of recognising a further 6bn of liabilities in total.' Pensions World Online, 29 May 2010
'Trustee briefing' Danny Vassiliades is quoted:
Danny Vassiliades, Head of employer consulting at consultancy Punter Southall Group, said the decision to close the schemes was "unsurprising" given the level of risk the DB scheme posed to Aviva's balance sheet.
He added "This episode shows that if a company has scope to offer a scheme other than defined benefits, they are sorely tempted to do so. From a strictly financial viewpoint, the certainty and risk-reducing nature of a defined contribution scheme represents a more efficient use of the employer's resources than a defined benefit scheme." Engaged Investor Online, 27 May 2010
'Pickering renews calls for pensions committee' Stuart Southall is quoted:
Stuart Southall, chairman elect of the Association of Consulting Actuaries backed this call.
"Abrogation of any real power to a separate organisation might instinctively prove anathema to politicians, but they have to ask themselves whether regularly changing government can possibly deal sensibly with the ultimate long-term saving vehicle." He said.
"Further fiscal impositions on long-term savings of any sort are no doubt tempting in our current situation, but could do more damage still to our savings culture. There is clearly going to be a difficult balancing act independent organisation would help identify sensible compromises in the crucial area of pensions" Pensions Week, 17 May 2010
'Southall set to take the top spot at ACA' Stuart Southall is quoted:
Southall said it was a "very challenging" time to take on the role as a new government shapes its plans for the new parliament.
He added: "The ACA will continue to be vigorous in arguing the case for reforms that make it easier for employers to offer attractive pension benefits, but when costs can be capped in difficult economic conditions and as longevity improves.
"Taking up my predecessor's call, it really is 'time to get positive' about pensions. It is high time politicians helped to create a stable regulatory tax and legislative framework, while resisting the temptation to add more unhelpful complexity." Professional Pensions, 13 May 2010
'Punter urges next government against simplification' Punter Southall is quoted:
It said despite the attractiveness of "sounds bite promises" on simplification "experience shows they offer no genuine simplification and often result in a heaver administrative burden".
Punter Southall also said the next government must ensure NEST is a success. It explained while the Conservative have promised a "fast and dirty review" the overall project should go ahead.
However it warned: "Early NEST retires will inevitably be older workers who will receive very small pensions. Poor publicity will result and could be compounded if benefits are reduced through means testing, which would drastically reduct further uptake from disenchanted younger generations."
It also said the politicians must actively encourage saving for retirement.
"While the government's motive for restricting the level of tax relief for higher earners is understandable it unfortunately will have a negative impact on overall pensions savings" the wish list said. Professional Pensions, 6 May 2010
'Experts predict a high price for IASB DB costs proposals' Danny Vassiliades is quotd:
Punter Southall predicted about 10 FTSE 100 companies could be affected – and could be forced to recognise a further £14bn of liabilities if the proposals go ahead.
Principal and head of employer consulting Danny Vassiliades said Royal Dutch Shell could see a possible £5bn of unrecognised liabilities added to its balance sheet, while Barclays and Lloyds could have recognise a further £6bn of liabilities. Professional Pensions, 6 May 2010
'UK's Top Earners Face GBP18,000 Tax Rise' Henry Denne is quoted:
At a recent seminar on mitigating the effects of the 50% income tax rate and other forthcoming changes to UK tax laws, Punter Southall Group has commented on the ramifications of the UK's changing landscape for the country's highest paid. 'One year on from the Chancellor's April 2009 budget, in which the proposed changes to pensions tax relief were first announced, thousands of higher income earners face material reductions in their net income from April this year onwards, as the initial impact of a raft of tax changes hits corporate payrolls,' the firm said. Next year, from April 2011, the introduction of restrictions on pensions tax relief for higher earners, among other measures, will make another significant dent, the firm noted. Analyzing the effects on someone earning GBP175,000 a year, for example, Punter Southall said the effect on this group of taxpayers would be five-fold: Their personal allowance will be eroded completely; They will be paying 50% tax on income above GBP150,000; Their National Insurance Contributions will increase; They will face an effective tax charge on their employers' pension contributions; They will suffer reduced tax relief on their personal pension contributions. The firm notes that the cumulative effect of these changes will mean that an individual who earns GBP175,000 and whose employer contributes 15% of salary to their pension could be around GBP18,000 a year worse off. This change to the UK regime, Punter Southall notes, may even compel companies to identify individuals who will be affected, and review remuneration and fringe benefits accordingly. Henry Denne, Head of Private Clients at Punter Southall, commented: 'Although the changes to pension tax relief do not hit high earners until April 6, 2011, the first part of the impact of the tax changes will be felt in the pockets of many of the very people who wield most influence on the future of corporate pensions. For example, our calculations suggest an individual earning GBP120,000 will be around GBP2,400 a year worse off as result of the erosion of their personal allowance in the current tax year. This will rise to GBP3,600 next tax year as the impact of the increase to national insurance takes effect.' 'The financial impact is proportionately greater for higher earners who will also be subject to the restriction of pension tax relief and I would urge individuals to review their own finances to maximize their use of tax allowances and tax efficient investment vehicles.' Tax News (Online), 3 May 2010
Aviva consults on closing DB scheme' Danny Vassiliades is quoted:
Danny Vassiliades, Head of employer consulting at consultancy Punter Southall Group, said the decision to close the schemes was "unsurprising" given the level of risk the DB scheme posed to Aviva's balance sheet.
He added "This episode shows that if a company has scope to offer a scheme other than defined benefits, they are sorely tempted to do so. From a strictly financial viewpoint, the certainty and risk-reducing nature of a defined contribution scheme represents a more efficient use of the employer's resources than a defined benefit scheme." Engaged Investor, 1 May 2010
'Tax blow for high earners' Jane Beverley is quoted:
Punter Southall, the financial experts, said that the changes would be significant for many people. 175,000 is a good salary, but it's not one of those banker salaries that makes people horrified, said Jane Beverley, its head of research. These people will be losing 16 per cent of their take-home pay, and thats not money that can easily be replaced. This dip in income is due to five separate tax changes, with higher earners losing the personal allowance (the amount of money they can earn before paying any tax) entirely, as well as paying some tax at a 50 per cent rate. Employees will also face an effective tax charge on pension contributions from employers, and will be paying extra National Insurance. The final blow is reduced tax relief on personal pension contributions. According to Punter Southalls figures, the new tax charge on pensions would cost an employee earning 175,000, and whose employer contributes 15 per cent of their salary into their pension, an extra 7,875 a year, while the loss of personal tax relief would leave them a further 3,413 worse off. In total, the employee would be 18,000 poorer in the tax year starting in April 2011 than they were in the year starting April 2009. Ms Beverley said that, although everyone would end up paying more tax due to the changes, there were steps that could be taken now. There are some things that people should definitely be considering. The income that the tax office is considering is not just the salary you earn from doing your job, but also any income you get from interest on bank accounts or selling shares. In extreme cases you could end up paying more tax just because you have forgotten about a bank account that pays you 5 in interest, Ms Beverley said. Daily Telegraph (Online), 1 May 2010
Punter Southall warns of an increasing lack of faith in pensions