Britain’s Labour Party is about to unveil a number of new reforms aimed at the pension system and Rachel Reeves, Chancellor of the Exchequer, is set to deliver the details at her first speech at Mansion House. The past few months have seen some controversial announcements being made, specifically the decision to cut down winter fuel payments, increase National Insurance Contributions (NICs) for employers, as well increase the rate employers pay from 13.8% to 15%. The increased NIC payments for employers is expected to raise over £25 billion for the UK Treasury. However, this has drawn a significant amount of criticism with many complaining that the increased taxes will translate to less money left over to pay employees and fewer new jobs that will be available.
Critics also mention that these changes could lead to minimum wage labor jobs to become “unrealistic” which would in turn put more pressure on labor-intensive industries like hospitality.
Additionally, some argue that the increased NIC payments for employers is like a penalty for hiring human beings since tech companies that are firing that staff and replacing them with AI don’t have to pay any such charges. To quote a letter from 14 UK Hospitality board members and 209 business owners, “changes to the NICs threshold are not just unsustainable for our businesses, they are regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely upon”.
With reference to pension reforms in particular, there’s a lot of expectation riding on this first Mansion House speech. If everything goes to plan, the Chancellor will have at her disposal over £2.5 trillion (lying “dormant” as of now) which carries with it the potential to revitalize the UK economy. The reason these pension funds are referred to as “dormant” is because they’re typically invested in low-risk assets and not used to fund next-generation medical breakthroughs. While we would all like that to change, turning the UK’s sprawling landscape of pension funds (many of which stagnant and even potential liabilities) into a dynamic tool for economic growth is no small task. If the Labour party does deliver on their promise to use pension funds to boost the economy, it will be a win for both the party, and the pensioners.
QROPS FAQs
When was the QROPS legislation introduced?
In April 2006, the HMRC introduced QROPS for individuals with UK pensions who are moving permanently away from the UK and would like to take their pensions with them.
What are the key benefits of a QROPS Pension Transfer?
- Tax efficiency
- Easier to keep track of taxes and regulations.
- Avoid UK income tax on pension and distribution which is as high as 40%, as well as death tax which is up to 55%.
- No capital gains taxes on investments.
- Investment opportunities
- Opportunity to invest in one of the world’s top 10 stock markets.
- Opportunity to invest in fixed interest schemes with guaranteed interest rates of up to 10.5%.
- Convenience
- No requirement to buy an annuity
- Flexible investment options with a lot less restrictions than in the UK
- No money lost due to currency exchange rates
- No Inheritance Tax