(Newswire.net — April 19, 2013) West Midlands, UK — The downturn in economic conditions worldwide has given rise to a new demand for more leniency in accessing retirement and pension funding pools. Often, these are the last remaining bastions of savings for the average investor, intended to serve as a lifetime tax-free savings vehicle to protect them in their retirement years.
To protect their value, governmental bodies have created rigorous regulations around them so they are not accessed before retirement age is achieved. In the UK, new financial instruments have taken shape to offer improved early access options to pension funds and they have garnered much attention, with proponents and detractors alike. We look at some of the issues surrounding one of these approaches, the Umbrella Pension Trust.
The Umbrella Pension Trust (UPT) is structured to allow the client to transfer their retirement pension out of its existing management program and place it under the control of the trustees for the Trust. Once housed in the new Trust, a broad array of vehicles are available to the client for tax-free management of the assets. These options are represented as going well beyond the normal investment options used by a more traditional pension investment company, thus offering the possibility that a client can generate greater wealth for themself and their heirs.
This pension scheme suggests that Trust assets can be invested in any asset class available around the world, and are no longer subject to UK tax penalties or inheritance taxes. Of particular appeal to many interested in this sort of vehicle, the Trust managers (trustees) can transfer their own fiduciary authority to the investor themself, allowing the individual investor to manage the tax-free assets in any way they see fit.
Opponents to this new breed of pension management program are very concerned about costs on two fronts:
1) very significant upfront costs incurred by the individual who transfers into the Trust
2) serious potential costs to society at large.
First, there are very significant costs incurred by the investor to have the Umbrella Pension Trust restructure their pension so it can be brought under its wings. These fees cover the costs of administrative, trustee and legal specialists needed to set up the new accounts. These costs can be upwards of 20% or more in fees and can seriously dilute the value of the original asset right at the start.
Second, many concerns exist over the potential that unwise investors will make poor investment decisions and deplete their account long before retirement. By absorbing the fiduciary role themselves, they have little recourse to hold the Trust responsible for bad decisions that are made. A pension, by its nature, is set up to provide a guaranteed income and considerable benefits for the investor in their later years. If these assets erode through poor investment practices, the investor can be left with an empty account and no support to fall back on. This result has huge repercussions for the individual, but also for society at large who will have to step in to provide support. More information
Financial vehicles like the Umbrella Pension Trust have evolved to fill a perceived need. Whether they are right for any individual is a decision to be made only after significant research and close counsel with legal, financial and tax advisors. Interested parties should proceed slowly to ensure their expectations are realistic and they have a full understanding of potential risks.
Visit the website www.stuartsgreen.co.uk or call to find out more.
Contact Information:
Stuarts Green Consulting Ltd
Phone: 01562 887590
Website: www.stuartsgreen.co.uk
Graham Winmill Google+ has written numerous articles on Pensions and Wealth protection
Umbrella Pension Trust Video http://www.youtube.com/watch?v=lJ8h9yRnbqQ