Almost every financial publication are covering the public sector pension reforms right now, and amid reports of further sweeping to come following the General Election in May, it is a story that is unlikely to go away any time soon. So exactly what is going on in the public sector? Why are there such a raft of rule changes, benefit reductions and restrictions on the horizon?
The answer is simply that the deficit between what each fund has, and what it needs to fulfill the retirement obligations it took on when each individual began contributions, is now unmanageable and too far gone to pull back.
As a result we have already seen new legislation introduced, the most pertinent being the restriction on any transfer out of the sector. Although it’s been accepted, this is due to begin in April 2015 and will essentially lock pension holders into the system for good.
The reason for the introduction of this restriction is to stop the thousands each year opting to place their pensions into more stable, better performing and secure funds overseas.
QROPS providers have been reporting a mad rush amongst those working in the public sector specifically, as the clock ticks down on the end to their freedom of choice.
Currently eligible to take advantage of the benefits offered by overseas schemes such as QROPS, are those working in the following sectors:
A QROPS can provide many benefits for a UK pension holder now residing abroad or planning to retire overseas. While HMRC initially created QROPS to allow the growing number of expatriates to be closer to their retirement savings, it has since been discovered that the tax benefits available, the currency options and the investment flexibility of QROPS make them an obvious choice for the majority of pension holders for whom they are an option.
Once the door shuts on the transfer of public sector schemes into QROPS, regardless of personal circumstances, your pension will stay in the UK. This opens it up to all manner of potential changes.
With every Budget announcement comes more legislative amendments and austerity measures, causing the threat of strike action as benefits are gradually reduced and age extensions are proposed.
There is far too much uncertainty for most now in the UK, with even the best-laid retirement plans cast into doubt. We have heard Prince Charles comment that the UK pension system is “not fit for purpose” and industry analysts casting further aspersions over the future for those soon to be locked into the deficit-laden UK forever.
Quite simply, now is the time to take control of your own future. Make an enquiry and weigh up whether QROPS is the right option for you.
After April 2015, there will no longer be any alternative options remaining, and your retirement will be at the mercy of a constantly changing landscape where it would appear there are no guarantees anymore.
About John Cassidy
