Market Monitor March

With the Brexit approaching and new changes to be taking place to UK pensions in April of this year, today we look at some of the things we might be able to expect along with some of the latest in market news.

With talks not set to start until Article 50 is triggered, probably at the end of March, the eventual impact on many crucial issues - investments, interest rates, expat arrangements and benefits - remains up in the air but what is for sure is that final salary schemes are under increasing pressure, a decision on state pension age changes is due and the lifetime allowance for UK private pensions is about to be reduced yet again with further reductions to be taking place on an annual basis going forward.

The lifetime allowance is not a limit on how much can be paid into a pension, as savers can continue paying in above it. However, people get hit with hefty tax charges when they retire of as much as an additional 55%!

Osborne might have left the Treasury, but pension tax relief continues to cost the Government £34 billion-plus a year, so it remains a tempting pot of money for his successor to raid if he needs cash for other projects.

The combined final salary pension deficit of the UK’s 350 largest listed companies more than trebled to reach £137bn in 2016, despite the stock market ending the year on a high, according to leading retirement consultancy Mercer.

Shortly before Christmas, another pensions consultancy, Hymans Robertson, warned that 2017 would be a challenging year for the UK’s final salary schemes. It said many companies would be “even less willing” than before to divert money into their schemes to plug deficits.

Yields from gilts initially slumped to record lows after Brexit, causing final salary scheme deficits to widen and annuity rates to plunge. Meanwhile, British expats abroad have taken a hit from the falling pound, and look likely to remain in limbo on other issues for the forseeable future.

A series of probes over the past few years discovered that many savers were unknowingly paying rip-off charges with UK pension companies. A review just before Christmas found that an estimated 300,000 are still paying too much. Pension and investment fund charges were also recently investigated by the Financial Conduct Authority, which said providers should disclose all fees as many are not aware just how much they are paying.