Companies with pension sch-emes in deficit should borrow cash to pay off the shortfall now rather than pay the MFR minimum contribution, according to actuarial firm First Actuarial.The firm says merely paying the minimum required each month will be more expensive, allowing the debt to accrue in much the same way as a credit card debt. Director Alan Smith says that a pension scheme with a £500,000 deficit would take 15 years to pay it off at the minimum £36,000 a year after tax relief. But taking out a loan of £350,000 and investing this in the pension scheme would clear the deficit after 30 per cent tax relief is added. Assuming an interest rate of base rate plus 2 per cent – currently making 6.75 per cent – would result in loan repayments of £33,000 a year, saving £45,000 over the term. Smith says: “Finance directors are likely to be among those who act rationally when dealing with their personal finances so why on earth do they throw these principles away when funding their company pension schemes””There is a viable alter-native to just paying the minimum and watching the deficit magnify and this is to borrow money to make good the deficit.”
Professional Solutions IFA director Mark Ryan has won a battle with GE Life after confusion over placing an impaired life annuity. Ryan was quoted a rate of 6.5 per cent on a £22,000 impaired life annuity but subsequent quotes were reduced by the company to 5.5 per cent. This left Ryan being forced to revisit […]
Ingenious Asset Management
Directional Bond Fund
cchm:ping chairman Lucian Camp says financial services companies should only consider specialist agencies.
The FSA has warned homeowners about the dangers of overestimating the income they could receive from their property.
The Pensions Regulator (TPR) has issued its first fines to employers for failing to meet their auto-enrolment duties, along with 163 compliance notices giving employers a deadline to take action.
News and expert analysis straight to your inboxSign up
Latest from Money Marketing
As someone training to be a cricket umpire, fair play matters to Fortitude Financial Planning director Chris Bowmer. Doing the right thing for clients is something he has adhered to from the start of his career, even in a 1980s sales environment with nothing to gain by delving beyond a client’s surface requirements. While he acknowledges […]
Fund managers who have helped pay compensation over the collapse of life settlement bond provider Keydata will receive a £12m refund, the Financial Services Compensation Scheme has announced. Keydata’s management has been embroiled in a multi-million-pound legal battle with the FCA since it collapsed in 2009. The total bill for compensation stands at more than […]
With no employer to fall back on, the self-employed are on their own when it comes to retirement saving. Irregular income patterns can make it harder to save regularly into a pension and commit to locking money away until age 55. Those who are building a business may see that as their biggest asset and […]