Tory Shadow Chancellor George Osborne commissioned the review into the tripartite structure, resulting in Sassoon floating the idea that the FSA should go and the Bank of England should take on responsibility for macro-prudential issues.
Sassoon suggested that either the FSA is completely overhauled to focus on micro-prudential and conduct of business issues, or it is replaced entirely by two separate bodies.
If the FSA does survive, Sassoon says it should drop all of its other responsibilities such as tackling financial crime, which many believe it was never very good at anyway.
This could be a good way for the FSA to refocus with a smaller scope of responsibility, rather than spreading itself too thin and ending up with gaping holes in its supervision.
One very interesting tidbit to come out of Sassoon’s review is that in the 10 years before the crisis, the heads of the tripartite bodies met just once to discuss financial matters. Is it any wonder that major problems emerged when the Bank of England, the FSA and the Treasury had no idea what their counterparts were doing?
And since there are very few things to laugh about in the world of financial regulation at present, Verus director Paul Lothian, aka the money doctor, has taken it upon himself to lighten the mood.
He has kindly provided one former banker who has a particularly large pension pot with some helpful hints on how best to make it work for him.
Dear Money Doctor,
I hope you can help me. I have recently (and rather cleverly, I think) managed to negotiate a pension of £703,000 per annum from my former employers and I am keen to find ways in which I can keep as much of it as possible.
F.G., Retired Banker, Edinburgh
Firstly, my congratulations. You must have been an exceptional banker to merit such an annual sum, which many ordinary people won’t earn in their whole lifetime.
There are a number of ways that you can reduce HMRC’s tax take – in the forms of Income tax, Capital Gains Tax and Inheritance tax. I assume this is what you mean?
Have you considered becoming a tax exile? I am sure there are many tax havens where you will be made very welcome and should fit in nicely. Remember, if you remain tax resident in the UK, you will suffer 40 per cent income tax on most of your pension, with the rate set to increase to 45 per cent after the next election. I understand that Monaco is lovely at this time of year.
You don’t mention how old you are and whether you have children and/or grandchildren. If you do, you could consider funding stakeholder pensions for them. The basic rate of tax would be clawed back from HMRC on gross contributions to personal pensions for each of them of up to £3,600 pa, making the net cost of each such contribution just £2,880.
You also don’t mention whether you will have any other earned income, for example income from employment or self-employment. It may be that you will seek a wee job stacking shelves at Sainsbury’s to occupy your time in retirement. Unfortunately, it won’t be prudent to seek to gain income tax relief by paying any part of such income into further pension arrangements, as you are already in receipt of pension benefits above the Lifetime Allowance, meaning that surplus pension benefits will incur punitive tax charges amounting to 55 per cent.
I’m not aware whether or not you are a risk-taker in financial matters. If you have an appetite for risk (using your own money) you could consider investing in a Venture Capital Trust. If you buy a VCT at launch you receive a 30 per cent income tax rebate – if held for five years – tax free distributions and dividends and no capital gains tax on any profit made on sale. Up to £200,000 per tax year can be invested into VCT’s by an individual.
Obviously, you should also utilise your full ISA allowances each year of £7,200. You should also consider making significant gifts out of your income into trust for IHT mitigation purposes as well as making IHT-efficient investments such as certain AIM listed shares and Enterprise Investment Schemes.
I could go on and on, but I won’t. I hope the information I have provided is useful. Good luck!
The Money Doctor.