Tag Archives: Quantum Advisory

Economy & Jobs News, Finance News

Quantum Advisory comment on Autumn budget

Today’s budget has made history, with it not only being the first Budget announcement made by a Labour led government in over 14 years, but also the first ever Budget to be announced by a female Chancellor.

In this year’s Autumn Statement, the Chancellor Rachel Reeves, announced the steps the government propose to take in order to restore economic stability and plug the £22 billion reported black hole in the nation’s finances.

Increase in Employer National Insurance contributions and a decrease in the National Insurance threshold

Employers currently pay National Insurance contributions at a rate of 13.8% on employee earnings above the £175 per week threshold.

It has been announced today that the rate of Employer National Insurance contributions from April 2025 has increased by 1.2%, to 15.0%. Separately the £175 per week threshold under which employers start paying tax has been lowered to £96.15 per week. This is expected to raise in excess of £20bn of revenue for the Government.

In order to mitigate the effect of this on small businesses, the Chancellor did also announce that the employment allowance will rise from £5,000 to £10,500.

Sarah Garnish, a Consultant at Quantum Advisory, said:

“Whilst ‘working people’ pay packets will not be directly affected, this change could indirectly affect employees. For instance:

  • Employers reducing future salary increases in order to recuperate the additional costs.
  • A decrease in recruitment drives from companies leading to an increase in unemployment.
  • A potential decrease in business confidence leading to stifled growth.
  • A rework of existing pension contribution structures to recuperate the additional costs. This could either be a reduction in DC pension contributions or more of the NI saving from salary sacrifice schemes going to employers rather than employees.

“However, looking at the change specifically from a salary sacrifice pensions point of view, the increase in the Employer National Insurance rate makes providing a pension provision for employees more attractive for employers where pension contributions are paid via salary sacrifice.”

Inclusion of DC pension pots within Inheritance Tax

From 6 April 2027 unused pension pots and death benefits will be included for inheritance tax purposes. It is thought that this will affect a small percentage of estates each year.

On paper this somewhat restores the principle that pensions should not be a vehicle for the accumulation of capital sums for the purposes of inheritance.

 

Pensions triple lock retained

The triple lock will be applied in full to the State Pension in April 2025. This means that pensioners will receive an increase in line with the growth in national average earnings of 4.1%, ie an increase to the full State Pension of up to £470 pa.

In comparison this compares to a CPI inflation index growth statistic of 1.7% pa.

Sarah Garnish, a Consultant at Quantum Advisory, said:

“This year’s State Pension increase illustrates the value of the triple lock with the pension increasing by £470 pa whereas it would have only increased by £195 if it had been CPI-linked in isolation. This will come as somewhat of a relief to those pensioners in receipt of a state pension, who are struggling with the current cost of living and the recent cut in the winter fuel allowance.

“There remain larger discussions to be held on the State Pension in the future however as the structure is widely expected to be unsustainable in the long term, particularly with future demographic changes.”

What next for pensions?

The 2024 Autumn budget was prefaced with significant speculation on what may happen in the pensions landscape with some speculation reaching the front pages of the UK tabloids as recently as a week ago.

James Bird, a Consultant at Quantum Advisory, said:

“Discussions in the media around potential employer pension contribution taxation and a decrease in the maximum tax-free cash lump sum available ultimately proved more to be a lesson in how uncertainty in the pensions industry can drive consumer behaviour. For example, there is evidence that some individuals accelerated their tax-free cash lump sum plans and will now need to consider how to invest these tax-free cash lump sums to not make a loss.

“Overall, the pensions industry is in a finely balanced position as it is widely accepted that the majority of current pension systems will not provide a sufficient level of income for members in retirement. This has led to the Government initiating a review into pensions adequacy, balancing this with their desire to use pensions investment to boost growth in the UK economy.

“It was well reported before the budget that the Chancellor is an adept chess player and has learnt how to think several steps ahead through the game. At this stage I expect that the Chancellor has elected to make simpler changes elsewhere to recoup the current reported deficit in the nation’s finances at this stage. The wider stage to consider then how the pensions landscape will need to adapt will play out on the chessboard over the next years.

“With that said, the battle may have got significantly harder now that employer costs have increased further as part of this budget”

 

 

Banking, Business, Business Finance, Cardiff, FInance, Finance and Banking

UK drops out of Global Pension Index top 10

The UK has dropped out of the top 10 of the Mercer CFA Institute’s Global Pension Index.

The index compares 48 retirement income systems around the world using more than 50 indicators, with a particular focus on adequacy, integrity and sustainability.

The research’s primary aim is to benchmark each retirement income system, but it also highlights areas of reform which could provide greater trust in the pension system of each country as well as increased sustainability and improved benefits.

The UK’s pension system has been ranked as the 11th best system in the world with a value of 71.6, dropping one place since 2023 and out of the top 10. The Netherlands, Iceland and Denmark retained their top three spots for another year.

The index reports that the value for the UK system could be increased by further increasing the coverage of employees and self-employed in private pension schemes, restoring the requirement to take part of the benefit as an income stream (ie not allowing individuals to take all of their retirement savings as a lump sum) and increasing the scope and contribution levels required under auto-enrolment.

Stuart Price, Partner and Actuary at Quantum Advisory, said: “It is disappointing to see the UK’s pension system slip out of the top 10 of the Global Pension Index this year. Its ranking places it as a ‘B’ grade system within the index, suggesting that the system has a sound structure and many good features but that there are clear areas for improvement and reform.

“The state pension only provides 22% of an individual’s average earnings, so private pension saving, whether in defined benefit, defined contribution or collective defined contribution schemes, is crucial to allow people to retire with a decent level of income and at a reasonable age.

“All employers must provide a workplace pension scheme or arrangement and automatically enrol employees into it. Auto-enrolment has worked to a degree but would benefit from further reform which could improve the UK’s index ranking. The number of individuals saving for their retirement has increased substantially since auto-enrolment was introduced in 2012, with 76% of the working population contributing to their pension schemes.

“However, auto-enrolment could be extended to include younger workers from age 18, lower earners and the self-employed, in addition to increasing the total contribution rates from 8% to at least 12%. Following a review in 2017 which received royal assent in September 2023, plans are in place to lower the age of eligibility for auto-enrolment but frustratingly no date has been set to introduce this legislation.”

Accountancy, Business, Business News, Cardiff, Charity, Hospice News

Quantum Advisory scores big for Tŷ Hafan in football fundraising tournament

ONE of the UK’s leading actuarial and pension consulting firms, Quantum Advisory, took part in Tŷ Hafan’s Football Fives tournament and raised £3000 for the children’s hospice charity.

The firm rallied together to enter two teams into the round robin league which featured Champions League, Europa League and ECL stages, including knock-out phases, semi-finals and the final.

After standout performances amid tough competition, Quantum Advisory’s teams celebrated success in the top event: the Champions League. One of the firm’s teams won the league, while the other reached the quarter finals of the same competition.

The Football Fives tournament is held annually by Tŷ Hafan at Gôl Centres in Cardiff and was this year sponsored by V12 Retail Finance.

Tŷ Hafan, one of the UK’s leading paediatric palliative care charities, provides comfort and care to children and young people with life shortening conditions throughout Wales. The charity also provide support to parents and siblings, helping to create special memories and offering respite not only at the hospice but in the homes of the families or in hospital, completely free of charge.

Joining the fundraisers at the tournament was former Wales and Cardiff City player Danny Gabbidon who held a live Q&A session and presented a series of awards. Quantum received the top fundraisers award for a second year running, sharing the award this time with V12 Retail Finance. John Plenderleith, an Investment Consultant at Quantum Advisory, was also named ‘player of the match’ for his performance in the final.

Quantum Advisory is a longstanding supporter of Tŷ Hafan, with one of its first projects in 2016 winning them an engraved bronze apple to place on the hospice’s Gift Tree in recognition of reaching their ‘pay for a day goal’ of £11,000.

Since 2016, they have raised over £31,000 for the charity. Past events have included the Race to the Stones challenge, a fundraising ball and participation in Tŷ Hafan’s Christmas pantomime. In 2023, Team Quantum took part in Tŷ Hafan’s Football Fives tournament and received the ‘Best Tŷ Hafan Fundraisers’ trophy by former Cardiff City, Celtic, Crystal Palace and Welsh International midfielder, Joe Ledley, in recognition of their continued support.

Stuart Price, Actuary and Partner at Quantum Advisory, said: “We had a fantastic time at Tŷ Hafan’s Football Fives tournament this year. It was wonderful to see so many businesses coming together to raise funds for this incredible cause and thank you very much to those individuals that sponsored us, all the support is warmly received.

“Tŷ Hafan’s work is life changing and we are proud to have been supporting them for almost a decade. I would encourage anyone to find out more about Tŷ Hafan if you have not already and get involved with their next fundraising event.”

Sorrel Mayo, Corporate Senior Fundraiser at Tŷ Hafan, said: “When a child’s life will be short, Tŷ Hafan will walk alongside their family every step of the way – through life, death and beyond. We were delighted to see so many teams at our Football Fives fundraising tournament to help us to be able to do this.

“Quantum Advisory’s fantastic fundraising has contributed to this year’s event raising almost £15,000 which is truly incredible, and we are also extremely grateful to them for their ongoing support and enthusiasm.

“No parent ever imagines that their child’s life will be short. Sadly, this is the reality facing thousands of families in Wales. We can’t stop this happening, but together we can make sure that no one in Wales lives their child’s short life alone.”

For further information on Tŷ Hafan, visit www.tyhafan.org/. Donations can also be made at https://www.justgiving.com/page/tyhafanfiveaside.

Quantum Advisory provides pension and employee benefits services to employers, scheme trustees and members, and has offices in Cardiff, Amersham, Birmingham and London. For more information, visit www.quantumadvisory.co.uk.

Awards, Business, Pensions, South Wales, Wales

Swansea graduate awarded Quantum Advisory Prize for mathematics excellence

The Quantum Advisory Prize for 2024 has been awarded to a Swansea University graduate, recognising their contribution to mathematics.

 

Hal Peckett, from Exeter, graduated from Swansea University this year with a first class honours degree in Applied Mathematics. Hal was chosen as the recipient of the prize for his dissertation titled ‘The Tragedy of the Commons: Dynamical Systems of Competing Fisheries and Game Theory’.

 

The Quantum Advisory Prize is an annual award presented by corporate pension and employee benefit experts Quantum Advisory that celebrates mathematics students who have transcended throughout their degree. The award recognises the quality and ambition of their work and, as well as acknowledgement of their effort, recipients benefit from a financial grant to support them as they initiate their career.

 

In applied mathematics, researchers can apply mathematical methods and specialised subject knowledge to a range of different scientific, economic and industrial fields. In his winning dissertation, Hal applied two mathematical approaches, dynamical systems and game theory, to the field of biology to analyse access and competition surrounding finite resources in fishery settings.

 

Hal said: “I am incredibly grateful to receive this prize for my final year dissertation. I put a lot of hard work into it, and it was a very challenging undertaking. I thank Quantum Advisory for this award and must also thank my supervisor Dr Noemi Picco for her guidance throughout my project.

 

“I am going to further specialise in mathematical biology, the area of mathematics on which my dissertation was based, by continuing onto a master’s degree in Biomathematics at Exeter University. It is an area of maths that I had never heard about before coming to Swansea, and it is a topic I am excited to pursue further and develop a career out of. The prize money is a massive help for the transition into my master’s and will help support me while I take on this new challenge.”

 

Dr Noemi Picco, Senior Lecturer in Mathematics at Swansea University, said: “Hal has done a fantastic job developing an excellent piece of work centred around the problem of sharing common finite resources: the ‘tragedy of the commons’. Hal was inquisitive and motivated into exploring how this seemingly simple scenario could be described and analysed mathematically. The end result was an outstanding dissertation which brings together two distinct mathematical approaches: game theory and dynamical systems.

 

“Hal has successfully navigated his first experience of independent research work, growing in confidence and critical thinking while overcoming obstacles along the way. It has been a pleasure to witness his journey through this project, and the potential for a future as a brilliant researcher.”

 

Stuart Price, Partner and Actuary at Quantum Advisory, said: “We are proud to support Swansea University graduates as they begin their careers in mathematics and the calibre and talent of their students always greatly impresses us year on year.

 

“Hal’s project and his approach really stood out this year and we are delighted to award him the Quantum Advisory Prize for his outstanding dissertation. We are delighted to hear that he is progressing his interests in this field further and wish him the very best for his master’s degree.”

 

Quantum Advisory provides pension and employee benefits services to employers, scheme trustees and members and has offices in Cardiff, Amersham, Birmingham and London. For more information about Quantum Advisory, please visit https://quantumadvisory.co.uk.

Economy & Jobs News, Tax

The Spring Budget 2024 sees tax cuts and a continued push to unlock pension investment potential

In this year’s Spring Budget, the Chancellor Jeremy Hunt focused on tax cuts made possible through reported progress in the UK economy and to encourage growth in the next few years.

Where pensions are concerned, the Chancellor reiterated messaging over the last few months from the Mansion House reforms and Autumn Statement on targeting value for money for pension scheme members and encouraging pension funds to drive further growth in the UK economy.

Reduction in National Insurance contributions

The government announced plans today to reduce the basic employee rate of National Insurance contributions (affecting approximately 27 million people) from 10% to 8% with effect from 6 April 2024; a further decrease from the recent shift on 1 January 2024 from 12% to 10% and the lowest the rate has been set since the early 1980s.

From an employee benefits angle, this will make salary sacrifice arrangements (where employees can make National Insurance savings on certain benefits) a little less attractive for employees.

Simon Hubbard, a Principal Consultant at Quantum Advisory, said:

“Further reductions in National Insurance contribution rates will be welcomed by many. The change, at face value, indirectly makes saving into a pension less attractive for employees where contributions are paid before the deduction of tax and National Insurance through an arrangement known as salary sacrifice. This change reduces the National Insurance that employees save by using such an approach. 

“These tax cuts must be viewed alongside the freeze on income tax thresholds until 2027. Given this, we expect that salary sacrifice arrangements will remain the most efficient way for employees to pay their pension contributions and there is no impact on the National Insurance savings made by the employer.

“Cuts in National Insurance will only benefit income earned through work, so pensioners will not benefit in the same way that employees do.”

Disclosure and value for money for DC Schemes and LGPS arrangements

The government reiterated planned changes in disclosure requirements for defined contribution (DC) pension funds, such that funds will need to publicly state their level of UK investment and compare their performance level against other schemes (at least £10bn in size).

Where it is determined that schemes are providing relatively poor returns for members compared to that provided elsewhere, schemes may not be allowed to take on new members.

There will separately be revised reporting guidance for Local Government Pension Scheme (LGPS) Funds from April 2024, such that a summary of asset allocation, including UK equity investment, as well as providing greater clarity on pooling will need to be disclosed.

Simon Hubbard, a Principal Consultant at Quantum Advisory, said:

“The announcement from the government will help concentrate DC pension funds on delivering the best returns for members whilst encouraging further investment in the UK economy. We welcome the aim to target good investment returns for every member. Careful consideration will need to be given in the coming months on how to encourage this for DC schemes whilst allowing funds to invest in long-term growth assets that may be volatile in the short-term.”  

Abolition of the Lifetime Allowance

The Lifetime allowance (LTA) is being removed from 6 April 2024 following the Spring Budget announcement last year; a move that is hoped to alleviate pressure on the NHS as well as other industries to prevent early retirements from experienced individuals.

HMRC have since referenced that there will continue to be a fixed cap on tax-free cash sums of £268,275 (25% of the current LTA) and a fixed cap of £1,073,100 (the current LTA) on the total tax-free cash sums that can be paid to an individual.

Simon Hubbard, a Principal Consultant at Quantum Advisory, said:

“The abolition of the LTA will, as a whole, simplify the pensions industry and encourage more to save for retirement and work for longer. It remains to be seen whether this policy will change if there was a new government following the imminent General Election given the Labour party’s opposition to the abolition of the LTA.”

State Pension

The government has committed to applying the triple lock to the State Pension for 2024-2025, such that it will increase from £10,600.20 pa to £11,502.40 pa.

Simon Hubbard, a Principal Consultant at Quantum Advisory, said:

“The triple lock guarantee for 2024/25 (which the Labour Party has also committed to retaining) will ease pensioner fears, particularly given the recent years of high inflation. Whilst this news will be welcomed, wider issues remain with the functionality of the State Pension, which is becoming increasingly more expensive in real terms due to current birth / death rates. We expect there will be further discussions around the State Pension following the election.”

Pension ‘Pot for Life’

The government is continuing to consult on plans to allow individuals to choose one provider to hold their pension pot throughout their life; aiming to improve outcomes for savers as well as convenience of access.

Simon Hubbard, a Principal Consultant at Quantum Advisory, said:

“We look forward to the government providing further detail on the lifetime provider model they have set out, noting that challenges with economies of scale will need to be carefully managed.  This will help people who change jobs frequently or who have multiple jobs at any one time, because under the current system some workers can end up with a large number of small pensions which can be difficult to manage and to keep track of.”

ISAs

The government announced the launch of a new British ISA which will allow individuals to invest £5,000 tax-free cash per year in UK assets in addition to the current ISA allowance of £20,000. The government intends this to help the UK economy grow.

About Quantum Advisory

Established in 2000, we are an independent, owner-managed actuarial and employee benefits consultancy that provides straight-talking, no-nonsense advice to employers and pension scheme trustees.  We design, maintain and review pension schemes and related employee benefits so that they operate efficiently and effectively.  We also help communicate these benefits in a straightforward way so that employees understand their real value.

 

Simon Hubbard

Principal Consultant

Quantum Advisory