Pension freedoms are being compromised

The defined benefit scheme – whereby the employer promises the employee a specified payment upon retirement, the amount of which is calculated based on several factors including the years the contributor has been in the scheme, their age, and their salary at retirement – is no longer viable in today’s world.

Recently, the high-profile collapse of the construction firm Carillion has served as yet another example of why this is the case.

The collapse means that, just like in the heavily reported case of retail giant BHS, thousands of employees are likely to have their carefully laid out retirement plans affected. Now that the company has gone into liquidation, it cannot afford to pay employees their expected pension amount, leading to yet another sizeable pensions black hole with a deficit of around £580 million (although the BBC reports that the final figure could be as high as £900 million).

The structure of your wealth and your tax affairs should always depend on the particular laws and regulations of where you reside in the world as well as the nature of your long-term goals. The expat financial services market has evolved in order to help cater to these considerations and in some cases this includes helping ensure clients meet the demands of wealth tax.

The notion of wealth tax is an easy one to understand – a tax levied on personal capital above a certain threshold or thresholds – but it is by no means universally embraced as economic good sense, not least because it often may serve only to keep high net worth individuals from emigrating to a high wealth tax jurisdiction.