FCA warns it may intervene as millions take pension cash early

Many savers are apparently moving money out of pension pots into other savings vehicles, which could be ‘disastrous’. Photograph: Andrew Brookes/Getty Images/Cultura RF

The TUC has warned that millions of workers risk being “plunged into insecurity in old age” after an official report revealed a surge of people grabbing their pension cash early without taking advice.

More than two years after the government brought in a range of pension freedoms, the Financial Conduct Authority concluded that accessing pension pots early had become “the new norm”. The regulator warned that early intervention may be needed to ensure this multibillion-pound market worked well.

The FCA’s study of the retirement market also found that in more than half of the cases where all the money was taken out of a pension pot, the cash was not spent on cars or holidays, etc; instead it was shifted into other savings or investments, partly because of a “mistrust of pensions”.

For many people the freedoms introduced in April 2015 effectively abolished the requirement to convert a pension pot into an annuity – a product that provides an income for life. Instead, older people are free to do whatever they like with their retirement cash – although those withdrawing large sums may well incur a considerable tax bill. Earlier this year it emerged that the reforms had raised five times more tax for the Treasury’s coffers than was originally forecast, suggesting that people were withdrawing larger sums than expected.

The FCA found that almost three-quarters (72%) of the pots accessed since the freedoms came in were held by people under 65. Most are choosing to take lump sums rather than a regular income. Meanwhile, more than half (53%) of the pots accessed had been fully withdrawn.

“Several factors motivated consumers to access their savings early, including a perception that ‘everyone is doing it’ and a general climate of mistrust,” stated the report. Meanwhile, moving cash from a pension into another savings or investment vehicle “can result in consumers paying too much tax, missing out on investment growth or losing out on other benefits”.

The report also found that income drawdown, which allows savers to take out regular amounts of money while the majority of their savings remain invested, had become much more popular. However, the proportion of drawdown plans bought without advice leapt from 5% before the freedoms to 30% now. “Drawdown is complex … There is a question about whether further support and protection is needed to manage drawdown effectively,” said the FCA.

Responding to the findings, Frances O’Grady, the TUC’s general secretary, said: “This is a damning verdict on so-called ‘pensions freedom’. Workers who are facing insecurity in their working lives now risk being plunged into insecurity in old age. Savers are increasingly dipping into their pots early. And others are following the path of least resistance and risk buying rip-off products.”

Moving retirement cash into other investments “can have disastrous long-term consequences”, said investment firm Old Mutual Wealth. Another firm, Retirement Advantage, said that to do this was “frankly bonkers”.

[“Source-theguardian”]

7th Pay Commission: Changes In Pension, Defence Pay Matrix And More

The Cabinet had in June last year approved implementation of 7th pay commission recommendations

he Union Cabinet chaired by Prime Minister Narendra Modi approved important proposals relating to modifications in the 7th pay commission recommendations on pay and pensionary benefits including those of defence forces. The benefit of the modifications will be available with effect from January 1, 2016, the date of implementation of 7th pay commission recommendations. The Cabinet had in June last year approved implementation of the 7th pay commission’s recommendations with an additional financial outgo of Rs. 84,933 crore for 2016-17 (including arrears for 2 months of 2015-16). With the increase approved by the Cabinet, the annual pension bill alone of the central government is likely to be Rs. 1,76,071 crore.

Here are highlights of some of the important decisions of the Cabinet:

The Cabinet approved modifications in the recommendations of the 7th pay commission relating to the method of revision of pension of pre-2016 pensioners and family pensioners based on suggestions made by the committee chaired by Secretary (Pensions).
The modified formulation of pension revision approved by the Cabinet will entail an additional benefit to the pensioners and an additional expenditure of approximately Rs. 5,031 crore for 2016-17 over and above the expenditure already incurred in revision of pension as per the second formulation based on fitment factor.

It will benefit over 55 lakh pre-2016 civil and defence pensioners and family pensioners. In order to provide the more beneficial option to the pensioners, the Cabinet has accepted the recommendations of the Committee, which has suggested revision of pension based on information contained in the Pension Payment Order (PPO) issued to every pensioner.

The Cabinet also approved the retention of percentage-based regime of disability pension implemented after sixth pay commission, which the 7th pay commission had recommended to be replaced by a slab-based system. The decision which will benefit existing and future defence pensioners would entail an additional expenditure of approximately Rs. 130 crore per annum.

The Cabinet has approved further modifications in the pay structure and the three Pay Matrices, i.e. Civil, Defence and Military Nursing Service (MNS).

The 7th pay commission had recommended a compact Pay Matrix for Defence Forces personnel keeping in view the number of levels, age and retirement profiles of the service personnel. The Ministry of Defence raised the issue that the compact nature of the Defence Pay Matrix may lead to stagnation for JCOs or junior commissioned officers in Defence Forces and proposed that the Defence Pay Matrix be extended to 40 stages. The Cabinet decision to extend the Defence Pay Matrix will benefit the junior commissioned officers who can continue in service without facing any stagnation till their retirement age of 57 years.

Index of Rationalisation or IOR for Levels 12 A (Lt. Col. and equivalent) and 13 (Colonel and equivalent) in the Defence Pay Matrix and Level 13 (Director and equivalent) in the Civil Pay Matrix has been increased from 2.57 to 2.67: Variable IOR ranging from 2.57 to 2.81 has been applied by the 7th CPC to arrive at Minimum Pay in each Level on the premise that with enhancement of Levels from Pay Band 1 to 2, 2 to 3 and onwards, the role, responsibility and accountability increases at each step in the hierarchy.

This principle has not been applied in respect of Levels 12A (Lt. Col. And equivalent), 13 (Colonel and equivalent) and 13A (Brigadier and equivalent) of Defence Pay Matrix and Level 13 (Director and equivalent) of the Civil Pay Matrix on the ground that there was a disproportionate increase in entry pay at the level pertaining to GP 8700 in the 6ht pay commission regime. The IOR for Level 13A (Brigadier and equivalent) in the Defence Pay Matrix has already been revised upwards with the approval of the Cabinet earlier. In view of the request from Ministry of Defence for raising the IOR for Levels 12 A and 13 of the Defence Pay Matrix and requests from others, the IOR for these levels has been revised upwards to ensure uniformity of approach in determining the IOR.

To ensure against reduction in pay, benefit of pay protection in the form of Personal Pay was earlier extended to officers when posted on deputation under Central Staffing Scheme (CSS) with the approval of Cabinet. The benefit will also be available to officers coming on Central Deputation on posts not covered under the CSS.

 

 

[“source-ndtv”]

Older Regime To Continue For Armed Forces Disability Pension

The armed forces have been pressing for reverting to the percentage-based regime for disability pension

New Delhi: Heeding to a major demand of armed forces personnel, the government on Wednesday decided to continue with an earlier system of disbursing disability pension and not to go ahead with a new regime recommended by the seventh pay commission. The armed forces have been pressing for reverting to the percentage-based regime for disability pension and were strongly opposed to the slab-based system conceived by the seventh central pay commission (CPC).

The decisions was taken at a meeting of the Union Cabinet presided over by Prime Minister Narendra Modi.

The government has also agreed in-principle to address three major grievances of the armed forces relating to their salary structure including providing pay protection to those getting promotion from the rank of brigadiers.
The current system has certain anomalies and some of those promoted to higher ranks lose on the military service pay.

After a meeting of the Union Cabinet, Defence Minister Arun Jaitley also assured that the government was addressing the demand of extending pay matrix from 24 years to 40 years and carrying out rationalisation of pay Lt Colonels and Colonels.

The government also approved modification in recommendations of the seventh CPC relating to the method of revision of pension of pre-2016 pensioners and family pensioners based on recommendations of a high-level panel.

The decision will benefit over 55 lakh pre-2016 civil and defence pensioners and family pensioners. The modified formulation will entail an additional benefit to the pensioners and an additional expenditure of approximately Rs. 5,031 crore for 2016-17.

The benefit of the proposed modifications will be available with effect from January 1, 2016, the date of implementation of 7th CPC recommendations.

With the increase approved by the Cabinet, the annual pension bill alone of the central government is likely to be Rs. 1,76,071 crore, the government said.

“The Cabinet also approved the retention of percentage-based regime of disability pension implemented post sixth CPC which the seventh CPC had recommended to be replaced by a slab-based system,” the government said in a statement.

It said the decision will benefit existing and future pensioners of the armed forces and would entail an additional expenditure of approximately Rs. 130 crore per annum.

The government was under attack from the opposition parties as well as the military establishment over slab-based system following which the matter was referred to the National Anomaly Committee by the Ministry of Defence.

The armed forces felt the new system would result in reduction in the amount of disability pension for existing as well as future retirees compared to percentage-based disability pension.

The military personnel were upset as civilian pensioners were to be paid pension according to the earlier percentage system.

Referring to revision of pension of pre-2016 pensioners, the government said the modifications were brought in to provide the more beneficial option to the pensioners.

The Cabinet has accepted the recommendations of the Committee, which has suggested revision of pension based on information contained in the Pension Payment Order (PPO) issued to every pensioner, it said.

The revised procedure of fixation of notional pay is more scientific, rational and implementable in all the cases, it said

 

[“source-ndtv”]

 

Snapdeal raises $200 million from Canadian pension fund, Iron Pillar

In August, Snapdeal raised $500 million mainly from Chinese e-commerce firm Alibaba Group, Foxconn Technology Group and existing investor Softbank Group, which valued the Delhi-based firm at about $4.8 billion post moneyIn August, Snapdeal raised $500 million mainly from Chinese e-commerce firm Alibaba Group, Foxconn Technology Group and existing investor Softbank Group, which valued the Delhi-based firm at about $4.8 billion post money

India’s second largest e-commerce firm Snapdeal on Sunday said it has raised $200 million in fresh funds from investors led by Canada’s Ontario Teachers’ Pension Plan.

Venture capital fund Iron Pillar and other investors also participated in the round.

In August, Snapdeal raised $500 million mainly from Chinese e-commerce firm Alibaba Group, Foxconn Technology Group and existing investor Softbank Group, which valued the Delhi-based firm at about $4.8 billion post money.

The company didn’t disclose the current valuation.

“We continue to make targeted investments in building internal and external capabilities that will enable us to consistently deliver optimal experience for the millions of buyers and sellers who transact daily on Snapdeal,” said Anup Vikal, chief financial officer, Snapdeal.

Founded in 2010 by Kunal Bahl and Rohit Bansal as a deals site, Snapdeal, promoted by Delhi-based Jasper Infotech Pvt. Ltd, has become the biggest local rival to Flipkart. The company has more than 275,000 sellers and over 30 million products.

It currently delivers goods to over 6000 cities and towns in India. Ontario Teachers’ is Canada’s largest single-profession pension plan with $154.5 billion in net assets. Iron Pillar is a venture capital fund focused on mid-stage technology investments in India.

Jasper Infotech Pvt. Ltd, the parent firm of Snapdeal, reported losses widening to Rs.1,328.01 crore for the year ended 31 March from Rs.264.6 crore in the previous year as it spent heavily to maintain its market share amid growing competition from Amazon and Flipkart.

Other investors that have invested in Snapdeal include Premji Invest, Intel Capital, Bessemer Venture Partners and Ratan Tata, among others.

[“source-Livemint”]