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Panama Papers and the banks

According to the Panama Papers, banks set up 15,600 offshore companies. HSBC alone set up more than 2,300. HSBC is the bank that nearly lost its US licence a few years ago when it was discovered that one of its clients was one of the most murderous and wealthiest drugs barons in Mexico. It would appear that they didn’t learn from their past mistakes and that the lure of wealth and huge profits made them forget their moral, ethical and legal obligations.

But the Panama Papers could be just the tip of the iceberg –  let’s not pretend for a minute that there was anything unusual about Mossack Fonseca, because there was not. This is just one of a host of law firms in tax havens doing remarkably similar things. The need is for the FCA to demand that banks put on record all their connections with secrecy jurisdiction lawyers, accountants etc.

This could all lead to hefty fines for the banks, on top of the fines they have already had for fixing the FX markets, gold prices, Libor – the list goes on and on. Plus, hopefully it will help ensure investment banks are a lot more transparent on what they are doing and with whom in the future.

With this in mind, be cautious as to where you place your money as some banks may struggle to survive.

If you want to know what your options are, I am here to help you find the right solution to make your money work for you in the most tax-efficient way possible. You can find out more about our financial management services here and get in touch with me directly by filling in an enquiry form.

This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

Other News

Dealing with scams

Blacktower Financial Management

You may have seen emails alerting you to a new fraud specific to the financial services advice industry. We are not aware of any of our clients having been targeted in the way described below, but it is our responsibility at Blacktower to do everything we can to educate our clients about these scams to avoid any harm coming to them.

The fraudsters claim to be from the Financial Conduct Authority or local law enforcement and are targeting clients of investment management firms. They are advising clients that the investment manager, adviser or firm is under investigation. The fraudster specifically asks the client not to speak to their investment manager, adviser or firm, or even close connections, claiming this would be considered tipping off. The client is then advised to encash their portfolio and move the cash to the client’s bank account. Once this is done, the fraudster then ‘recommends’ an investment which is actually a scam.

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Final salary pensions – why now is a good time to cash in

Juicy lottery-sized sums are being offered to savers to tempt them out of gold-plated workplace pension schemes and into personal plans. We’ve explored whether you should consider taking a final salary pension, as well as the benefits and drawbacks of withdrawing.

What is a final salary pension?

A final salary pension, sometimes referred to as a gold-plated pension, is a special style of retirement fund that is based on your final or average salary.

The main difference between this and a defined contribution pension is that a final salary scheme gives you a guaranteed sum annually for the rest of your life when you retire.

To work out the value of your final salary scheme, consider a few factors: 

  1. Your final or average salary at your place of employment (confirm this with your employer)
  2. Your length of service
  3. The final salary scheme’s accrual rate (this is often 1/80th)

Your final salary pension will take each factor into account, and the resulting figure will be the guaranteed annual sum you are entitled to.

For instance, if you worked somewhere for ten years, and leave on a salary of £100,000, with an accrual rate of 1/80th, you will have a guaranteed retired annual income of £12,500.

It is possible to undertake a final salary pension transfer. Depending upon how long you expect to enjoy retirement, this could be a favourable choice. However, it’s important to consult a financial advisor to make your final salary pension transfer values work harder.

What are the benefits of transferring a final salary pension?

Assessing your final salary pension transfer value, you might consider it worthwhile to withdraw. We’ve outlined the main benefits of taking your final salary pension:

Receive the cash value of your final salary pension

Withdrawing from a final salary scheme allows you to receive a cash lump sum in return for forfeiting your guaranteed income in retirement. This final salary pension transfer value is the main reason to withdraw from a scheme, as it offers you financial freedom.

Remove ties with your employer

This is an especially important point if you’re concerned that your employer may not exist throughout your full retirement. For most, the pension protection fund (PPF) will cover your pension, but, for especially high earners, there is a PPF ceiling of £41,461 (as of April 2020).

Enjoy a flexible income in your retirement

A final salary scheme entitles you to a guaranteed annual income when you retire, but if you go down the route of transferring your final salary pension you will be able to enjoy a little more flexibility in how you receive your income. Usefully, by withdrawing from your final salary scheme, you can choose to take more out in your younger years.

Choose how you want to invest your pension

A final salary scheme is controlled tightly to accommodate all employees and their interests. When withdrawing from the scheme, however, you can take complete control over how your pension fund is invested.

The considerations you should make before transferring your final salary pension

While there are certainly benefits of going down the route of transferring final salary pension funds into various other pots, it’s important to consider what you’ll be giving up:

  • Entitlement to a fixed annual income for the rest of your life
  • A safe income that doesn’t fluctuate with volatile markets and share prices
  • Spousal and family benefits that come with a final salary scheme

 Example: Should I cash in my final salary pension?

An example is Mrs Dee (not her real name), 4 years ago she asked for her final salary transfer values, which came in at £250,000 – a nice sum, you may think. After reviewing all the facts and figures available, however, I advised Mrs Dee to leave her final salary pension where it was, which she duly did.

Towards the end of last year, because of favourable market conditions, I applied again to see the value of transferring her final salary . This one came in at just under £600,000.

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