Are you willing to turn to ‘robo-advice’?

There’s quite a buzz around pensions at the moment – and rightly so, as they provide the backbone of our income in our later years. But currently, pension deficits are hitting the news, and figuring them out can still prove difficult.

Pension deficits concern what are commonly known as “final salary pensions” or Defined Benefit schemes.   Final salary or defined benefit (DB) schemes are essentially occupational pension schemes that provide a set level of pension at retirement, the amount of which normally depends on your service and earnings at retirement or in the years immediately preceding when you retire. Because your pensionable salary is used as one part of the formula in order to calculate your pension, a final salary scheme is commonly referred to as a ‘salary related’ scheme. Two common examples of ‘final pensionable salary’ would be your last year’s pensionable earnings or an average of your last 3 years’ pensionable salary.

Recently, there have been high-profile failures of these systems, such as the folding of Monarch Airlines – and the collapse of their pension fund. Initially, it appeared that owners could still walk away with a profit (after new hands tried to turn the airline into a more accessible and “Ryanair-like” product) by offloading debts, and this included dropping the pension fund. Ironically, this was once a major credit to the business. The fund, which is now in the Pension Protection Fund (PPF), had been under speculation of being left short when the business first began to struggle back in 2014, after years of asset-stripping.

As it stands, its been nearly a year that expat retirement transfers of pensions have incurred a charge when moving to or between Qualifying Recognised Offshore Pension Schemes (QROPS), with only expats living within the European Union or a select group of 13 other countries immune to this charge.

However, British expats across the world have recently joined forces to question the fairness of the charge and to lobby parliament for its removal.

It’s easy to see why they have taken this course of action – the charge for overseas expat retirement transfers comes in at 25% of the value of the pension fund; plainly a crippling and punitive amount for people who have already worked hard and paid their taxes in order to prudently fund their retirement.