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Pension pots take a further hit as markets freefall

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24/07/2012
Millions of British pension pots were dealt another crushing blow yesterday as the uncertainty over the Eurozone triggered further turmoil in the markets.

An estimated £29bn was wiped off the value of shares on London’s FTSE 100, after Spanish government borrowing costs soared to a new Euro-era high of 7.5%, fuelling speculation that the Spanish economy will need a full sovereign bailout.

Nigel Green, chief executive of financial advisory firm deVere Group, said: “The FTSE 100 plummeting by 117.9 points is disastrous for pension pots as the vast majority of all pensions and savings are linked, at least in part, to shares.

“The crisis in Europe is driving many investors into the gilts of ‘safe haven’ Britain, which is having the effect of pushing up their price, reducing their yield, and forcing annuity providers to cut rates to historic lows.

“This means those on the cusp of retirement are destined to have a permanently lower level of retirement income.”

According to deVere Group, the ongoing Eurozone saga is prompting an increasing number of pension holders to consider transferring their pension pots out of the UK.

Green continued: “Retirees are becoming poorer due to low annuity rates and therefore, to get the most from their retirement income, a growing number of those who can, namely expatriates, are moving their pensions into an HM Revenue & Customs-recognised QROPS, because buying an annuity with a QROPS is not mandatory.”

QROPS, Qualifying Recognised Overseas Pension Scheme, is a form of pension based outside the UK which is recognised by the British authorities as being eligible to receive transfers from registered UK pension funds, providing no annuity have been purchased.

deVere advises that people who are interested in the scheme should only transfer to countries which provide consumer protection equivalent or greater than the safeguards here in the UK.

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