UK - Pensioners are being robbed of some £8000 off their final pension pot because of stamp duty on equity investment.
The claims were made by the National Association of Pension Funds (NAPF) who said that the abolition of stamp duty would go a long way towards easing the burden of pension provision among UK employers, and boosting the retirement income of millions of tomorrow’s pensioners.
“As such it is an unwelcome – and we think unnecessary – additional cost borne in the end by UK consumers whose pensions savings are invested in the stock market,” said NAPF chief executive Christine Farnish,
Stamp duty is applicable to the purchase of shares in UK listed companies. The NAPF represents around £700bn funds under management, or a quarter of all investment in UK equities. Of UK pension fund assets, about half are invested in UK equities. But although the proportion of UK pension fund assets invested in UK stocks fell from 55% to 46% between 1991-2001 , the share invested in overseas equities rose from 20% to 25% over the same period.
“With the need for pension funds to focus on transaction costs and efficient investment strategies as a result of the Myners report, fund managers are likely to think twice in future about investing such high proportions of their assets in UK equities, if stamp duty makes such investment more expensive than European or American stocks,“ added Farnish.
Farnish also highlighted how stamp duty was hastening the shift away from final salary schemes. The duty raises transaction costs, which in turn means higher costs for employers in the case of defined benefit schemes. For defined contribution schemes the cost and risk is borne directly by the consumer, ultimately buying them a smaller annuity.
“If the Government is serious about wanting to shift the balance of state:private funding of pensions from 60:40 to 40:60 over the coming decades, it needs to act to sweep away the disincentives and the barriers to private pension savings, whether through company schemes or personal pensions. Stamp duty on equities is just such a barrier,” said Farnish.
The Pensions Regulator (TPR) has granted 11 master trusts extensions to apply for authorisation, as it confirms it has received 22 applications ahead of the 31 March deadline.
Aegon Master Trust, Fidelity Master Trust and Ensign have sent off their authorisation applications to The Pensions Regulator (TPR).
Self-administered pension funds spent £15bn on payments to pensioners in Q4 2018, but received just £12bn in contributions (net of refunds), Office for National Statistics (ONS) data reveals.
Aberdeen Standard Investments (ASI) and Gresham House are to team up to form a joint venture.