Julian Knight: Barnardo's pension plan closure will not be the last
The charity's decision to end a career average pension scheme, just a few years after ditching final salary, is a warning to us all
Sunday 20 January 2013
Barnardo's has announced it's closing its career average pension plan and shunting staff into a far less generous and much riskier money purchase scheme. Such an occurrence would normally not merit comment apart from the fact that this is the second time Barnardo's has cut its pensions.
In the past it closed its final salary scheme in favour of career average. With the introduction of auto-enrolment into workplace pensions – pushing up employer costs and potential liabilities – and the advent of the Nest pension, Barnardo's move could be part of a further levelling down of workplace pension provision.
This is something I have been warning about for the past couple of years. We had the flight away from final salary in the last decade (apart from the cossetted public sector) and in this one we could see the disintegration of the "middle way" schemes, such as career average and replacement with money purchase, where what you pay into a pension, combined with performance, dictates how much you get out.
Hot on the heels of Barnardo's announcement, the Office of Fair Trading has said it will investigate money purchase schemes. The problem is that many such schemes levy very high charges, have poor growth records and are not transparent.
Employers, weary of the issue, are just glad to have somewhere cheap to park their staff and this means not only are pension benefits in effect being cut but the replacement schemes people are not up to scratch. This is mis-selling on a grand scale.
I have experience of this. I was considering becoming a member of an employer money purchase pension to top up my final salary scheme. I was shocked to discover, in the small print, that the pension provided by one of the world's biggest fund management groups had an annual charge about three times the level I could expect to pay on a standard personal pension I could set up myself.
I went straight to the company's trustees and they were unaware of this discrepancy. A year later, the fund management group lost its contract to supply the pension but it had enjoyed, by my reckoning, a decade of rip-off fees. I'm glad that the OFT has finally decided to look at these schemes and their charges.
At last some good pension news
We Britons are a miserable bunch. The biggest single reform to the state pension in our lifetime, which will benefit millions, was greeted with the tired old "work longer, pay more" line.
For the past decade we have been on course to wait longer and pay more for the state pension, but what the white paper, see right, promises is some reward for this new reality. A beefed-up state pension replaces a miasma of credit and top-up pensions – cutting through the chaff and letting people know precisely where they stand now and in the future.
The previous system – much of it constructed in a rush by Gordon Brown – relied on pension credits to top up a very variable state pension. These credits were only claimed by around two-thirds of those eligible and also meant people with a small savings pot faced an effective marginal tax rate of 40p in the pound. Unfair and giving out totally the wrong message.
There has been some gnashing of teeth over the requirement to contribute national insurance for 35 years rather than 30 under the old scheme. But it should be remembered that the 30- year limit was only brought in a few years ago and prior to that contributions had to be made for 39 years.
Overall, the pensions white paper is good news – it sweeps away complexity, guarantees a higher basic pension, while at the same time sticking to the idea that to qualify you have to make a fair contribution. Now, finally, we can move on.
Confused by your self assessment form? You're not the only one it seems. I received a HM Revenue & Customs press release the other day outlining acceptable reasons for failing to file your return online. The bods at HMRC said not receiving the online activation code, ID or password is an acceptable reason for late filing but further down the page they state that it most definitely isn't.
Advice wasteland woes
My comment last week on how it's ridiculous that changes to the rules governing how financial advisers are paid means we now have a choice of either paying a fortune or taking pot luck through execution-only has caused quite a stir.
There were offers of help for my friend – who had 10 grand to invest but couldn't find an adviser who would touch such a "small" amount – and support for my argument. I'd love to hear more from readers, who like my friend, are being turned away when looking for advice.
Simon Read: Timeshare owners accuse Macdonald Resorts of land grab
Five Questions: Changes to car tax discs
How to save money: UK is crashing down the European league table for putting money away
A student's guide to financial survival: You don't have to drown in debt at university
Bargain Hunter: Win a new iPhone 6
- 4 Iranian blogger found guilty of insulting Prophet Mohammad on Facebook sentenced to death
- 5 New Tricks: Dennis Waterman to leave the show after a decade of crime-solving
Scottish independence referendum: A nation divided against itself
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Plebgate MP Andrew Mitchell called officer a 'little s**t', claim court documents 'exposing ex-Chief Whip's 'record of abusing police'
Archbishop of Canterbury admits doubts about existence of God
iJobs Money & Business
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...
Day In a Page
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize