News & Insights

The triple lock remains after Tory-DUP deal… but for how long?

But it still appears that supporters of the triple lock can’t rest easy. The triple lock, which was originally put in place in 2010 by the coalition government to protect pensions from inflation, has been under fire for some time because it’s deemed too expensive. And now the new welfare and pensions secretary, David Gauke, has stated his own view saying the triple lock cannot possibly last much longer as it is simply unsustainable.

Gauke said that the lock has “a ratchet effect” which sees “a greater and greater share of GDP” used to pay the state pension even when there hasn’t been an increase in pensioner numbers. This means that the baby boomer generation may get more out of the state than they put in – something viewed by many as unfair to the younger generation, as an increase in the share of GDP for pensioners means a smaller share for non-pensioners.

Gauke said, “Do I think that in 10, 20, 30 years’ time we will still have a triple lock? I cannot see in all honesty how we can,” He added that the triple lock will remain until 2020 but then needs to be “reflected” on.

Gauke’s pessimism over the longevity of the mechanism is backed up by figures from the Institute for Fiscal Studies (IFS) showing pension spending has increased by 25% since 2010-11, while earnings and prices have increased by 14% and 15% respectively. These findings led to the IFS economists labelling the triple lock as “unaffordable”.

Furthermore, the ex-director-general of the Confederation of British Industry, John Cridland, recommended it be stopped after he conducted a review of the state pension age, the results of which were published earlier in the year. Similarly, Derek Cribb, the chief executive of the Institute and Faculty of Actuaries, has said that the lock will place an “unfair burden on future working generations”.

Theresa May’s plan to scrap the triple lock became a controversial topic during her recent campaign and is one of the factors thought to have hurt the Tories in the general election, in which the party was far from achieving the landslide result it was expecting. The pledge was viewed by opposing parties as a betrayal of the older generation. But although those angered by the proposal may be happy to learn that the uprating mechanism appears safe for now, there is strong evidence that its removal is inevitable.

It’s true that not all pensioners need the security provided by the triple lock. However, some do, and if the system does indeed end up going, receiving detailed financial advice from a professional adviser will help those affected make the most of their pension pot so that they’re not faced with financial difficulty.

A Blacktower adviser can guide you through all options in respect of your pension, helping you do what’s best for your money so your finances are well prepared. For instance, whether you’re saving for retirement in the UK or as an expat abroad, a SIPP pension can give you a lot of freedom with how you manage your money and can offer you a variety of tax benefits.

Other options include transferring your pension into a QROPS or a QNUPS. You can contact one of Blacktower’s financial advisers to find out if a SIPPs pension, a QROPS, or a QNUPS is the right choice for you.

Other News

Do you hold substantial cash in Spain? If so read on….

IceHere in Spain, I hear no end of horror stories regarding the country’s financial institutions and laws. Unfortunately, I too have been on the receiving end of unscrupulous and downright unfair treatment, but last week a client of mine of over four years called me in distress. For the avoidance of doubt, this is a true story.

My client is 86 years old and, sadly, her husband died eight months ago. Over four years ago she followed our recommendation of investing in a purpose-built Spanish portfolio bond with both her husband and her as lives assured. This meant that should either partner die before the other, the bond would continue as if nothing had happened, thereby not triggering a Spanish Inheritance Tax calculation. In Spain unlike the UK, there is Inheritance Tax between spouses, however, because this particular bond is held outside Spain it avoids inheritance tax. This is a tool that we often use for clients in Spain.

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New Governor Brings Confidence to Financial Management Industry

Cayman Island FlagThe Cayman Islands has a new governor following the announcement that Martyn Roper OBE, a career diplomat and corporate leadership veteran, has been appointed to the role. He takes over from Anwar Choudhury, who had recently faced a number of complaints regarding his conduct.

The move is largely thought to be positive step for financial management services in the Cayman Islands, as Roper has said he will make it a priority of his role to “listen and learn” from those around him.

Mr. Roper brings a wealth of experience to the job. He was most recently minister and deputy head of mission for the U.K. in Beijing, China, but has worked in other notable capacities, including as the UK Ambassador to Algeria, Deputy Head of Mission in Brasilia and, of particular interest to the financial management industry in the Cayman Islands, as First Secretary for Economics and Development with the Organisation for Economic Cooperation and Development (OECD) in Paris.

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