Time finally ran out on Neil Woodford, Britain’s most high-profile fund manager, as he was forced to suspend dealing in his flagship Equity Income fund. The unprecedented move followed months of withdrawals by investors that caused his fund, once worth £10.2bn, to shrink to just a third of that size today. Now pressure is building on the City watchdog to reform its rules governing funds, particularly around the holding of “illiquid” assets.
Investment experts are also predicting that Mr Woodford’s spectacular downfall will push more investors towards “passive” funds run by algorithms rather than humans. Others may have lost faith in managed funds entirely, preferring to go it alone and pick their own stocks or join the millions who leave their money in cash.
So what went wrong?
Mr Woodford’s troubles were caused by his holding of a significant number of small, difficult-to-trade companies, some of which were unquoted. As redemptions increased, he could raise the sums of money demanded by investors only by selling his liquid assets, which made the unlisted ones account for an ever larger percentage of the portfolio.
The fund ended up testing the 10pc regulatory limit on unquoted holdings and in the end suspending dealing was his only option. Peter Sleep of Seven Investment Management, a rival fund house, said: “I think the governance of British funds might be tightened as a consequence, as there were some clear failures here.”
He also was the victim of his own attempt to provide investors with more information. He listed his entire portfolio on his website in an attempt to improve transparency, but this was prayed on by short sellers (those betting that his stocks would fall).
When redemptions picked up, he was forced to sell, causing a vicious cycle he could not escape from. Since then he has reduced the access of his investors to just the top 10 holdings, in line with the rest of his peers.
While property funds have closed their doors in times of stress, as selling properties can take time, never before has a mainstream stock market fund run into such difficulty. Investors are still being charged a management fee, and Telegraph Money has called for it to be waived while the fund remains frozen. This newspaper is also calling for reform of the fund management industry to prevent private investors being pushed towards “open-ended” funds that invest in illiquid assets. Instead, these assets should be held via investment trusts, Telegraph Money says.
What’s next for Mr Woodford? His fund is almost certain to be hit with more heavy selling when it reopens, which is likely to be in a month or more. James Calder of City Asset Management said: “It takes a lifetime to build a reputation and a very short time to lose it.” The broader fund management industry will now come under renewed scrutiny, said Tom Sparke of GDIM Discretionary Fund Managers. He said it was understandable that investors would be “spooked”.
Despite saying "sorry" in a video to investors, it remains to be seen whether Mr Woodford's fund can continue after it reopens. Hargreaves Lansdown, Britain’s biggest investment broker, is another casualty of the debacle. It remained a faithful backer of Mr Woodford until the suspension. Hundreds of thousands of investors use Hargreaves to manage their pensions and Isas. Many place their money with the firm’s recommended funds, rather than choosing from among the thousands of individual shares and lesser-known funds.
Brian Dennehy of FundExpert, another broker, said: “I hope Hargreaves uses this as a catalyst to change the culture to focus on the clients rather than its relationships with asset managers.”
Since then, chief executive Chris Hill has apologised to clients and the firm has agreed to waive its fee for those invested in the fund. It also announced it is reviewing whether or not to remove the fund from its own multi-manager portfolios when it reopens.
Experts say the crisis could accelerate the switching of money to passive funds rather than active stockpickers such as Mr Woodford. Robin Powell of The Evidence-Based Investor, an online educational resource, said over the long term active managers failed 99pc of the time. “Yes, you could pick the right one, but the overwhelming likelihood is that you won’t, and if things go badly wrong as they did with Woodford, it could end up costing you a fortune,” he said.
If an advice company has been responsible for compensation payouts totalling £11m, should the people involved work in the financial services sector again?
This is the question that the Financial Conduct Authority will now have to answer in the case of Dominic Barry.
His financial advice company, BlueInfinitas, gave advice that ultimately led to the Financial Services Compensation Scheme paying out £11m in claims, mostly as a result of advice given on self-invested personal pensions.
Mr Barry, who – we should be clear – has had no action taken against him by the FCA, is now involved in running a claims management company that has been given temporary permission by the regulator.
This is not an uncommon turn of events. Indeed, the FSCS has said it regularly sees advisers phoenix as claims management companies.
This will stick on the throat of the many financial advisers who feel they give good advice, particularly when one of their clients could seek out help in getting compensation from one of these phoenixed advisers.
The FCA will now decide whether it feels Mr Barry – and the other 900-odd CMCs it took responsibility for regulating this month – are appropriate people to continue operating their businesses.
CMCs can be an important part of the financial ecosystem, indeed some advisers operate as a CMC on the side.
The onus is now on the regulator to make sure the right people end up running a CMC and clear out those who should not be there.
Saving Inheritance Tax (IHT) IHT is chargeable at 40% above your nil rate band, many people’s estates will still attract large IHT bills. IHT is known as a voluntary tax, as it can easily be planned for. We will discuss some ideas, which can give 100% IHT relief in just two years.
How to make your pension last in retirement Since the pensions freedom legislation in 2015 many more people are shunning annuities and their poor rates and drawing from their pensions in retirement. This comes with significant risk, as your income is not guaranteed and your funds are still invested.
We discussed the difference between investing for growth and income and the potential pitfalls of not having a suitable strategy in place.
The Ride London 100 was a grim affair with rain pouring down for a good 3/4 hours as well as drizzle. At the 40 mile point I had to stop for not only a comfort break but also because I was cold. Having prepared myself for a 35c temp on the day things turned cold. My muscles tightened up and I have to put arm warmers on at the 40 mile point. The visibility was also very poor as my glasses were wet and steamed up from time to time. So no records broken this year. But I did complete it in an official time of 5 hours 52 mins (5 hrs 46mins riding) and raised approx £1,700.
Those who receive financial advice are on average £40,000 better off than those who don’t, a new report has found.
Research, published by the International Longevity Centre and Royal London, found those who received financial advice between 2001 and 2007 accumulated significantly more liquid financial assets and pension wealth than those who didn’t by 2012 to 2014.
The report, called The Value of Financial Advice, examined the impact of advice on two groups: the 'affluent', who are wealthier and more likely to have degrees and be homeowners, and the 'just getting by', who are less wealthy and more likely to be single, rent and have lower education levels.
It found that the 'affluent but advised' accumulated on average £12,363 (or 17 per cent) more in liquid financial assets than the affluent and non-advised group, and £30,882 (or 16 per cent) more in pension wealth, making a total of £43,245.
Meanwhile the 'just getting by but advised' accumulated on average £14,036 (or 39 per cent) more in liquid financial assets than the just getting by but non-advised group, and £25,859 (or 21 per cent) more in pension wealth, bringing a total of £39,895.
Since advice has clear benefits for customers, it is a shame that more people do not use it.
Ben Franklin, head of economics of ageing at ILC-UK, said: “The advice market is not working for everyone.
“A high proportion of people who take out investments and pensions do not use financial advice, while only a minority of the population has seen a financial adviser."
“Since advice has clear benefits for customers, it is a shame that more people do not use it."
“The clear challenge facing the industry, regulator and government is therefore to get more people through the ‘front door’ in the first place.”
The report also finds that financial advice led to greater levels of saving and investment in the equity market.
The 'affluent but advised' group were 6.7 per cent more likely to save and 9.7 per cent more likely to invest in the equity market than the equivalent non-advised group.
Of the ‘just getting by but advised’ group 9.7 per cent were more likely to save and 10.8 per cent more likely to invest in the equity market than the equivalent non-advised group.
Those who had received advice in the 2001 to 2007 period also had more pension income than their peers by 2012 to 2014.
The 'affluent but advised' group earned £880 (or 16 per cent) more per year than the equivalent non-advised group while the 'just getting by but advised' group earned £713 (or 19 per cent) more a year.
This powerful research shows for the first time the very real return to obtaining expert financial advice.
Sir Steve Webb, director of policy at Royal London and former pensions minister, said: “This powerful research shows for the first time the very real return to obtaining expert financial advice.
“What is most striking is that the proportionate impact is largest for those on more modest incomes."
“Financial advice need not be the preserve of the better off but can make a real difference to the quality of life in retirement of people on lower incomes as well.”
Learn about the relationship between risk and retirement and how that has changed with pension freedoms.
Understand why retirees tend to be risk averse and how this can be overcome.
Grasp what the FCA concluded about risk and how advisers can incorporate this into the advice process.
The Financial Conduct Authority's (FCA’s) recent Retirement Outcomes Review Final Report mentions the word ‘risk’ 63 times.
The report talks about longevity risk, the risk of scams and the risk of overspending, but the dominant theme is arguably the risk of over-cautious investors (mainly those without the benefit of advice) losing out by holding too much cash.
The paper sends a strong signal about the need to challenge clients’ inherent caution in later life.
It arguably also sounds another death knell for lifestyling funds that automatically take risk off the table as the investor approaches their retirement date.
Breaking with tradition
In the days when nearly everyone bought an annuity, retirement represented the point at which you converted your pension savings into a guaranteed income for the rest of your life.
In that scenario, and with gilts also offering inflation-beating returns, there was some logic to the long-held tradition of gradually moving out of risk assets as you neared this important cut-off date.
But times have changed. Quantitative easing has made bonds look decidedly risky. Pension freedoms and longevity have forced a rethink of old traditions.
Back in 1980, when a man retiring at 65 could expect 13 years of retirement, a 15 per cent annuity was possible.
Research shows that in most circumstances, investors are better off leaving more of their portfolios in equities at and into retirement than they might have done traditionally.
Today, when that life expectancy has stretched 40 per cent to more than 18 years, the same annuity packages now generate less than 5 per cent a year.
Little wonder so many people are opting for drawdown – the FCA paper says twice as many pots are being used for drawdown than to buy an annuity since the pension freedoms.
But the longevity challenge that has contributed to the collapse of annuity rates remains for those in drawdown too.
There is now substantial evidence to suggest that the only way for many investors to make their money stretch throughout the whole of their retirement is to embrace a degree of investment risk.
Research shows that in most circumstances, investors are better off leaving more of their portfolios in equities at and into retirement than they might have done traditionally.
The reason is simple: people tend to be at their wealthiest as they near retirement age. This is the point at which their portfolios are at their biggest and the power of compounding has the most benefit.
For most people, this is not the time to be taking a foot off the risk pedal.
One of the most important pieces of research in this area was conducted by Robert Arnott, chief executive of Research Affiliates in California.
In his landmark 2012 paper, The Glidepath Illusion, Mr Arnott simulated the performance of three distinct retirement strategies on the basis of more than 140 years of historical returns.
He offered three characters on the ‘glidepath’ to retirement – Prudent Poly, whose stock- bond allocation progressively moves from 80-20 to 20-80; Balanced Burt, whose stock-bond allocation is rebalanced annually to a static 50-50; and Contrary Connie, whose stock-bond allocation progressively moves from 20-80 to 80-20.
According to Mr Arnott, assuming an annual investment of $1,000 (£784.70) over 40 years, on average, Polly could expect to enter retirement with around $124,000, Burt with $138,000 and Connie with $152,000.
Crucially, the worst case scenarios showed a similar pattern. In the worst outcomes experienced over 140 years of historic returns Polly would end her working life with just $50,000, Burt with $52,000 and Connie with $53,000.
Many others have corroborated this research. In 2017, I carried out a similar study to explore how far retirement savings might last in a range of scenarios.
In this study, two investors (and admittedly this is not a hard luck tale – these would be high-net-worth individuals) save an average of £20,000 a year from the age of 30 to 60, retire and then set about withdrawing an annual pension of £60,000 a year.
But having also modelled much more modest scenarios, the conclusions drawn below in terms of the risk reward trade-off are consistent whether you save £20,000 or £2,000, and draw £60,000 or £6,000.
One invests throughout in a moderately cautious portfolio generating 4 per cent per annum on average (after advisory fees and miscellaneous costs), the second targets 5 per cent per annum through a balanced portfolio.
The cautious investor runs out of money at nearly 86, by which point the balanced investor still has £800,000 in savings.
The comforting conclusion is that it only takes a modest increase in risk to generate significantly better returns.
This was a simple model – it assumed the portfolios were kicking out exactly 4 per cent and 5 per cent a year.
Not very realistic, you might argue.
Subjecting them to the vicissitudes of normal markets using real-life market data that included the market crash of 2008 to 2009 aimed to address that issue.
Taking a ‘bad’ scenario (on a scale of one to 100 of outcomes, where one was the best and 100 was the worst, this was number 80 on the scale), the cautious investor ran out of cash at around 80; the balanced investor ran out of money at 84.
Caution still did not pay.
We dialled up the gloom even further, this time assuming both investors had been taking the same levels of risk all their lives, so they started out with the same pot of money at 60.
Then we plugged in the 90th centile – ‘really bad’ – market data. Both investors ran out of money at roughly the same time – when they were 80.
No need to be reckless
The comforting conclusion is that it only takes a modest increase in risk to generate significantly better returns – in our research it was one step up the risk ladder, from moderately cautious to balanced.
This is helpful because an adviser may have to nurse a client to an uncomfortable conclusion – they may be inclined towards caution, but cannot afford it.
There are several drivers of this caution. The obvious one is that it is not as easy in retirement to go back to work to make up investment losses.
But we must also contend with what you might call ill-informed optimism and misguided pessimism.
Firstly, the optimism. Seven Investment Management's annual survey research consistently shows that investors looking at the size of their pension pot overestimate by about 100 per cent how much income it will generate, or how long it will last.
As for the pessimism, that is human instinct according to Nobel Prize winners Daniel Kahneman and Amos Tversky, who developed the concept of ‘prospect theory’.
Supported by an array of studies in the fields of psychology and experimental economics, the concept posits that we place more emphasis on avoiding losses than on acquiring gains – losses hurt roughly twice as much as gains feel good.
This leads to another dangerous tendency.
Rather than evaluate the expected range of returns for a lower risk portfolio alongside those of a higher risk portfolio, our natural loss aversion leads us to instinctively contemplate what the likely return from a lower risk portfolio might be and then contrast it to what we could face if something utterly terrible were to happen with a higher risk portfolio.
This perhaps explains why the FCA found so many consumers ending up with investments that were not right for them, including in cash – and why those who struggled most with this were those without the benefit of professional advisers.
Overall, 33 per cent of non-advised drawdown consumers are wholly holding cash, according to the FCA Retirement Outcome Review Final Report, which took the view that “holding funds in cash may be suited to consumers planning to draw down their entire pot over a short period".
The FCA continued: "But it is highly unlikely to be suited for someone planning to draw down their pot over a longer period. We estimate that over half of these consumers are likely to be losing out on income in retirement by holding cash.”
The FCA report draws the conclusion that someone who wants to draw down their pot over a 20-year period could increase their expected annual income by 37 per cent by investing in a mix of assets rather than just cash.
Arguably, this is the clearest signal yet from the FCA that it does not assume investors should necessarily reduce risk at retirement.
That, coupled with the growing body of research on investment outcomes, should give advisers further discussion points with inherently very cautious clients on the risk/reward trade-off.
Risk and the advice process
So how does an adviser deal with the client who is too cautious for their own good?
A simple step might be to ensure your advice process is not primarily focused on investment risk.
If the process begins by you asking about the client’s tolerance to investment risk, this is likely to drive the shape and tone of the conversation, potentially closing down opportunities to explore beneficial alternatives.
Here the primary focus is on the client’s goals – what they want to achieve and when. This determines the investment return they need, which in turn determines how much investment risk they need to take to achieve that.
Only at this point does the adviser consider the client’s investment risk tolerance versus how much risk they need to take to achieve their financial goals.
If the client is not comfortable with the required level of risk then the adviser can take them through the options – for instance, save harder, work longer or reduce aspirations.
Alternatively, they may opt to take up risk just a notch, supported by a combination of these other options.
It might not be natural instinct to many investors, but in the vast majority of circumstances investors would be better off leaving more of their portfolios in equities at and into retirement than they have done traditionally.
That doesn’t mean investors should necessarily take more investment risk than they are comfortable with, but they need to understand that by choosing lower-risk investment options they may be increasing the danger of running out of money in retirement.
And they certainly shouldn’t do it automatically without thinking the issue through. This is something the FCA paper makes loud and clear, and it is very encouraging to see this creeping up the national agenda.
Ultimately, however, investment risk is not the only lever to pull when making investment decisions.
Investors should frame their plans in the context of balancing all the risks they face, not just investment risk.
This includes the risk they can’t save as much as they plan to, that they live longer than expected and that other events happen which knock their plan off course. This is something the FCA paper alludes to.
Advisers have a really important role to play in informing this debate, given this is one of the most important issues for the profession.
It will provide a great opportunity for clients to recognise the real value of planning and, above all, their adviser.
Matthew Yeates is an investment manager at Seven Investment Management
Ask an expert: We look at how HMRC will tax pension income that is over the £1.25m lifetime allowance.
If my pension is worth more than the lifetime allowance and I pay the 55pc tax charge on the excess, is the remaining money over the limit subject to income tax?
The lifetime allowance is the maximum amount that you are able to build up in your pensions before a punitive tax charge is incurred. The limit started at £1.5m in 2006, rose to £1.8m in 2010 and has since been reduced. The LTA is £1.25m for the 2015/16 tax year and is due to drop to £1m from 2016/17.
In essence if you take money above the LTA as a lump sum you pay just the 55pc tax charge and no additional tax. If you take it steadily, as income, you pay a 25pc tax charge and then you also pay your usual rate of income tax.
Jason Witcombe, of Evolve Financial Planning, said you are tested against the lifetime allowance at various points. The most common is when you first draw pension benefits from a scheme.
“Taking a simple example, if you retire with a pension fund of £1.5m and draw it all in one go, you will exceed your lifetime allowance by £250,000,” he said. “This excess suffers a tax charge. In reality, it’s not usually this simple because many people have a combination of defined contribution and defined benefit pensions, which they draw at different stages. Also some people will have protected a higher lifetime allowance.
'Can I use my pension to buy land for a new house?'
'Will my £920,000 military pension take me over the lifetime allowance?'
“But in this example, the surplus can be looked at in two ways. If you take the whole amount as a lump sum, an immediate 55pc tax is charged on the surplus [the £250,000 above £1.25m]. There is no income tax on top of this.
“Alternatively, if you take the surplus as an income, a 25pc tax charge is deducted. You are then liable for income tax on said income when you receive it.
“One way of looking at this is that if we assume that the recipient is a 40pc taxpayer, a 25pc lifetime allowance charge followed by a 40pc income tax charge on the balance works out as 55pc tax. This is because for every £1,000 of excess, a £250 lifetime allowance charge is deducted, leaving £750. After 40pc income tax that leaves £450, resulting in the same figure as the 55pc charge.”
British and EU negotiators have reached a deal over the so-called Brexit bill, opening the door to a potential breakthrough in the talks this December, the Telegraph has learned.
Sources on both sides confirmed that an agreement-in-principle has now been reached over the EU’s demand for a €60bn financial settlement ahead of a crucial lunch meeting next Monday between Theresa May and Jean-Claude Juncker, the European Commission president.
Two sources confirmed that the terms were agreed at a meeting in Brussels late last week after intense back-channel discussions led by Oliver Robbins, the UK’s chief Brexit negotiator.
The Telegraph understands that the final figure, which is deliberately being left open to interpretation, will be between €45bn and €55bn, depending on how each side calculates the output from an agreed methodology.
It means the final amount will be far higher than the opening €20bn offer to win "sufficient progress" made by Mrs May in her Florence speech. The gross UK settlement, before deductions, is understood to be €100bn.
After being dragged down earlier in the day by Bank of England governor Mark Carney’s gloomy warning of potential Brexit “pain”, sterling spiked above €1.12 against the euro as traders piled into the currency on news of a breakthrough in negotiations.
Although it remains true that "nothing is agreed until everything is agreed", sources said that the breakthrough on money effectively now leaves only two major obstacles to overcome in order to make progress when the European Council meets on December 14-15.
These are defining the role of the European Court of Justice in governing the agreement on the rights of 3.2million EU expats in the UK after Brexit, and the continued row between London and Dublin over avoiding a return of a hard border in Northern Ireland.
“The deal on the money is there; it’s now the ECJ question and Northern Ireland that are the outstanding issues ahead of the Council,” said a senior source involved in the negotiations.
The British offer on all three areas - money, citizens’ rights and Northern Ireland - is now expected to be delivered by Mrs May on December 4 in order to enable Michel Barnier, the EU’s chief negotiator, to make his recommendation on “sufficient progress”.
If Mr Barnier gives the green light, a meeting of EU ambassadors scheduled for December 6 will be used to draft guidelines for the December 14-15 European Council summit, with the European Parliament likely to vote on its own “sufficient progress” resolution on December 13.
The precise size of the UK’s payment will not be calculated until the point of UK exit, and the Telegraph understands the EU side is discussing how to obscure the final bill in order to help Mrs May overcome political opposition from Brexiteers.
The UK had already signalled a willingness to pay €40bn, but the Telegraph understands that Mrs May was forced to increase that offer during the course of the last week and has acceded to majority of the EU's demands.
A third EU source with knowledge of the talks said the text of the deal would allow a “low figure” to be generated for the UK public, but that the final text of the deal would give the EU certainty it was looking for, which is in excess of €50bn.
A spokesman for the Department for Exiting the European Union said that “intensive talks” were continuing in Brussels ahead of next week’s meeting.
“We are exploring how we can continue to build on recent momentum in the talks so that together we can move the negotiations on to the next phase and discuss our future partnership,” he said.
Prior to the deal, senior EU negotiators told the Telegraph the UK would need to formally commit to honouring its share of EU pensions, outstanding loan liabilities and €250bn in outstanding spending commitments from the current 7-year budget cycle, due to be disbursed after 2020.
Although the EU has not demanded a final number, the Telegraph understands that it has pinned down the UK over its share of those commitments, leaving only limited room for manoeuvre.
The UK side will seek to massage down its total bill by off-setting the UK's share of European Investment Bank (EIB) capital and discounting payments that are not immediately due, such as Eurocrats’ pensions and potential EU loan defaults to Ukraine, Ireland and others.
EU sources have also argued that Mrs May’s original commitment in Florence to pay €20bn to cover UK contributions during a transition period in 2019 and 2020 would need to be increased. “Net contributions in these two years taken together are clearly above €20 billion,” the source added.
Despite the progress on the bill, the twin problems of the ECJ’s role and the Northern Irish border remain significant obstacles to progress.
A fourth EU source said the deal on EU citizens’ rights was “85 per cent there”, but questions remained over whether the children of EU expats would retain family rights for life; the export of winter fuel allowance and streamlining the UK cost and bureaucracy for EU nationals applying for “settled status”.
On the ECJ question, the discussion is over the extent to which the UK’s Supreme Court should - or must - “pay due regard to” the rulings of Europe’s top court in so far as they impact the rights of EU citizens living in Britain.
Negotiators are still searching for a satisfactory formula that will preserve the ECJ as the final arbiter of EU law, while maintaining the sovereignty of UK courts which David Davis, the Brexit Secretary, has repeatedly promised will be preserved.
By far the most difficult issue, however, remains the Northern Ireland border question with negotiators currently in near-continuous talks to try to draft written commitments on the future of the border that will satisfy the Irish government.
Dublin has demanded “written guarantees” that Northern Ireland will not diverge from EU rules and regulations - a demand that is difficult to reconcile with Mrs May's determination to adopt an independent trade policy.
Negotiators now have less than a week to find a form of words that reassures Dublin of London’s commitment to the Good Friday Agreement, while preserving room to create “granular”, tailor-made solution protects both sides interests.
Brexiteer Lord Bamford has waded back into the political debate, accusing the Government and lobby groups of ignoring the millions of small businesses that form the “backbone” of Britain.
In a rare interview, the boss of manufacturing giant JCB told The Sunday Telegraph that senior politicians could have anticipated the UK’s vote to quit the European Union if they had listened to views of the country’s 5.4m private and family-owned firms. He also launched a fresh attack on the CBI, calling the lobby group a “waste of time”.
“The CBI is a waste of time, it didn’t represent my business or private companies,” he said. “I didn’t agree with its view on Europe.” He claimed the lobby group – and others like it – failed to promote the interests of private and smaller businesses.
“The CBI really only represents 20 companies in my view and they are multinational and not British – something like Unilever, Royal Dutch Shell,” he said.
In his support of Brexit, the peer said he represented the opinions of a huge silent majority. He admitted his stance had made him unpopular with many leading figures in commerce and the Government but addded he was “not the tiniest bit surprised” by the 51.9pc vote to quit the EU.
“Politicians and civil servants glass over when you talk about SMEs and yet they are the backbone of the country,” Lord Bamford said. The CBI hit back, saying it “speaks on behalf of 190,000 businesses of all sizes, which together employ nearly 7m people, a third of the private sector”.
“Any suggestion that the CBI doesn’t represent the diversity of British businesses is patently false,” a spokesman said, adding its president, Paul Dreschler, “chairs one of the UK’s leading family businesses”, the shipping to finances group Bibby Line.
But Lord Bamford’s views were backed by John Longworth, the former director-general of the British Chambers of Commerce, who quit the body in March after saying UK businesses had a “brighter” future outside the EU. “Membership of organisations like the CBI is mostly federations rather than individual businesses,” said Mr Longworth, who is now co-chairman of campaign group Leaves Means Leave.
“They are bureaucracies or big corporations with no particular loyalty to the UK or British people.” The Federation of Small Businesses, which has successfully campaigned on several issues in the past year, including reducing business rates and National Insurance costs for members, said: “Our membership was split down the middle on the Brexit question.”
There are two restrictions on how much you can save into a pension and still receive tax relief on your contributions - the annual and lifetime allowances. If you go over these limits you will face a tax charge.
The annual allowance is currently £40,000 a year - but it could be far less if you are a high earner because of the new "taper".
This has applied since April 2016 and sees the amount you can in a year cut the more you earn.
Jessica List, a technical specialist at Sipp firm Suffolk Life, said this was “one of the most complicated things ever introduced around the annual allowance”.
To work out whether you will be affected you need to calculate a “threshold” and “adjusted” income.
If your threshold income is more than £110,000 and adjusted income is more than £150,000 a year you will be caught and start to see your annual allowance drop from £40,000 to a minimum of £10,000.
Threshold income includes income from all sources, not just your salary. Income produced by investments and buy-to-let properties fall within the scope.
The taper is one of the most complicated things ever introduced around the annual allowance
You also have to add any income given up in a salary sacrifice arrangement, used by many employers to lower National Insurance bills, if it was set up after July 8 2015. From this deduct pension contributions you made to personal pensions, such as Sipps, and to workplace pensions.
If you have received a lump sum from someone else’s unused pension on their death, this is not included.
If the figure produced is less than £110,000 there is nothing to worry about – your annual allowance will be £40,000. If it is above, however, you need to calculate adjusted income.
The Government estimates that 300,000 people who save into pensions will be in this situation.
Adjusted income is calculated in much the same way as threshold income but includes the pension contributions that you and your employer make both from gross pay and via salary sacrifice.
If adjusted income totals more than £150,000 the taper applies and your annual allowance will fall by £1 for every £2 of adjusted income between £150,000 and £210,000. For adjusted incomes of £210,000 or more, the allowance will be £10,000.
However, using what is known as “carry forward”, you will be able to claw back some extra allowance if you have some left over from the previous three tax years. HMRC automatically tops any contributions up by 20pc, but higher and top-rate taxpayers need to claim the extra tax relief through their tax return.
If you have accessed your pension pot using the pension freedom rules introduced in April 2015 your annual allowance is automatically cut to £10,000 and carry forward cannot be used.
However, if you make your withdrawals using a “capped drawdown” plan set up before the freedoms took effect, your limit remains at £40,000.
If you do exceed the limits, HMRC will impose a charge at your marginal rate of income tax.
If you wish to register a complaint, please write to Mr Paolo Standerwick, Complaints Handling Officer at 17 Station Road, Belmont, Sutton SM2 6BX, email email@example.com or telephone 020 8296 1799.