September 26, 2017

DealBook: HSBC to Cut 1,150 Additional Jobs in Britain

An HSBC bank in London.Facundo Arrizabalaga/European Pressphoto AgencyAn HSBC bank in London.

LONDON — HSBC said Tuesday that it planned to cut about 1,150 jobs in Britain as the bank adjusts to new regulations for wealth advisers.

HSBC said it would eliminate 3,166 positions but create 2,017 jobs, mainly in its wealth management and advice business, after new rules took effect requiring advisers to hold additional qualifications. The job cuts are separate from a cost-cutting plan that HSBC announced in 2011, when it said it would reduce about 30,000 positions over the next three years.

“The changes reflect the changing nature of customer behavior and regulation,” HSBC said in a statement.

The new rules, which came into place in Britain at the beginning of the year, mean that financial advisers must have to be more transparent about how much their advice costs and how customers would pay for it. Previously, advisers often received commissions from the providers of certain products, such as pension plans or insurance.

HSBC is among a handful of British banks that had to set aside money to compensate some clients because the banks wrongly sold them an insurance product. The so-called payment protection insurance scandal shed additional light on the need to change the rules for financial advisers, who were under pressure to sell products.

Ian Gordon, an analyst at Investec, said other British banks might be considering similar steps because of changing regulation but that the job cuts are also an attempt to reduce costs further. “Ongoing revenue pressures are refocusing efforts on cost reduction,” he said.

Stuart T. Gulliver, who took over as HSBC’s chief executive in 2011, has embarked on a wide-ranging plan that he said would bring down costs by as much as $3.5 billion and improve profitability. The bank closed businesses as it exited some markets, for example retail banking in Russia.

In December, HSBC agreed to sell its stake in China’s Ping An Insurance to a Thai conglomerate for $9.4 billion. It sold its credit card unit in the United States to Capital One Financial for $2.6 billion and its unit in Panama to Bancolombia for $2.1 billion.

Despite the cost-cutting, some analysts are skeptical that HSBC would reach its 12 percent return-on-equity target, a measure of profitability, in the medium term. The company is to update investors on its strategy next month.

Tuesday’s announcement prompted Dominic Hook, national officer of Unite, Britain’s largest workers’ union, to say his organization might ask HSBC staff members whether they want to take part in a strike ballot. “HSBC is making staff suffer in the search for ever greater profits,” Mr. Hook said in a statement on Unite’s Web site. “The bank’s behavior is a disgrace. After making proposals to slash pensions, holidays and sick pay the bank is now slashing even more jobs.”

Bank officials say the changes were necessary to meet new regulatory rules.

“I understand change is always unsettling, particularly for those directly affected,” Brian Robertson, chief executive of HSBC Bank in Britain, said. “However, I also firmly believe what we are proposing is essential in order for us to fulfill our customers’ expectations.”

Article source: http://dealbook.nytimes.com/2013/04/23/hsbc-to-cut-1100-additional-jobs-in-britain/?partner=rss&emc=rss

Bucks Blog: Working Until 70 May Not Solve Savings Shortfall

Research from the nonprofit Employee Benefits Research Institute throws cold water on the notion that working until age 70 will set most Americans up for adequate retirement income.

Jack VanDerhei, research director at E.B.R.I., says some studies have suggested that by working to age 70 — five years past the traditional retirement age of 65 — nearly 80 percent of preretirees, including lower-income Americans, could have adequate retirement income. But such models, he said, don’t fully take into account changes in the retirement system, such as the shift away from pension plans and toward 401(k) accounts, or the potential for a catastrophic health event that would require a stay in a nursing home.

When those factors are accounted for, he said, the outlook is less optimistic, especially for lower-income workers. E.B.R.I.’s analytical model, he said, indicates that for those in the lowest quarter of incomes, workers would have to toil until age 84 before 90 percent of them would have at least a break-even chance for success.

That doesn’t mean, he said, that he is advocating that everyone work until their 80s, or that working that long is feasible. But it does suggest, he said, that it is a risky notion to think that you can work until you’re 65 and then simply work five more years if you don’t haven’t saved enough. If a couple near retirement age has one member who become ill and requires a lengthy nursing home stay, he said, a good chunk of their savings may be exhausted. “How can you ignore that?” he said.

It’s much less of a gamble, he said, to save more while you’re working, if you can: “It’s much less risky than waiting until you’re 65 or 67 and seeing what happens.”

How long do you plan on working?

Article source: http://bucks.blogs.nytimes.com/2012/09/11/working-until-70-may-not-solve-savings-shortfall/?partner=rss&emc=rss

States Want More in Pension Contributions

So far this year, eight states, including Wisconsin and Florida, have decided to require government employees to contribute more, sometimes far more, to their pensions. Governors and legislators in 10 other states, including California and Illinois, are proposing their own pension changes as they grapple with budget deficits and underfunded pension plans.

Government employees’ unions are not accepting these changes without a fight, complaining that the increased pension contributions often amount to a significant cut in take-home pay.

A burst of labor opposition in New Jersey is threatening a tentative deal between the Republican governor, Chris Christie, and Democratic legislative leaders that would require government employees to contribute at least one percentage point more of their pay toward their pensions. One powerful union warned Democratic lawmakers not to join Mr. Christie’s “war on the middle class.”

But even many of labor’s traditional allies are demanding pension changes. Last week, New York’s governor, Andrew M. Cuomo, a Democrat, proposed that all future state and New York City employees pay 6 percent of their salary toward their pensions, double the current 3 percent. Oregon’s Democratic governor is pushing state and local employees to contribute as much as 6 percent of pay, up from zero at present. Twelve states, including Arizona, Michigan, Minnesota and Virginia, imposed higher employee contributions in 2010. That leaves just a handful of states where employees do not contribute toward their pensions.

“You can call this an exponential increase in activity to have state employees contribute more,” said Ronald Snell, a pension expert with the National Conference of State Legislatures. “Before 2010, this hardly ever happened.”

States are demanding the higher contributions as they reach for new ways to cut budget deficits. The easy savings, like furlough days, have been achieved, and now lawmakers are tackling more complicated cost issues like the long-term shortfalls in their pension funds.

The Pew Center on the States estimates there is a more than $1 trillion funding gap for government workers’ retirement benefits in the 50 states. At the same time, many voters resent that public employee pensions are generally better than their own.

“States have less revenues coming in and higher bills for their pensions, and it’s really focused their attention,” said Susan K. Urahn, managing director of the Pew center, a nonpartisan research group.

Alabama, Arizona, Kansas, Maryland, Mississippi and Oklahoma have all acted this year to require employees to pay more.

In one of the most extreme proposals, a legislative committee in Illinois, daunted by the state’s estimated $80 billion pension shortfall, voted to have state workers either contribute 17 percent of their pay toward their pensions or accept less generous pension benefits.

According to the Pew Center, actuarial reports say the 50 states should have contributed $117 billion in 2009 toward their pension plans to help bring them to full funding, two and a half times more than they contributed a decade ago and well over the $73 billion they actually contributed in 2009.

Requiring employees to divert 3 to 6 percent of their paychecks toward funding their pensions will help, though it will not come close to solving the short-term budget problems in most states, Ms. Urahn said. But every bit helps. In Wisconsin, for example, Gov. Scott Walker said the state government would save $226 million a year from state employees’ paying a 5.8 percent contribution previously paid by the state.

Over time, the budgetary savings can be substantial. Because of New York’s constitutional limits on changing current workers’ pensions for the worse, Mr. Cuomo is proposing increased pension contributions for new employees only. But even so, his office says this change would save New York State and public employers outside New York City $50 billion over 30 years.

“The pension system as we know it is unsustainable,” Mr. Cuomo said last week. He added that his proposal would “bring government benefits more in line with the private sector while still serving our employees and protecting our retirees.”

Article source: http://feeds.nytimes.com/click.phdo?i=e8935f72bb9d18a6f0a14591e6d25805

States Lean on Public Workers for Bigger Pension Contributions

So far this year, eight states, including Wisconsin and Florida, have decided to require government employees to contribute more, sometimes far more, to their pensions. Governors and legislators in 10 other states, including California and Illinois, are proposing their own pension changes as they grapple with budget deficits and underfunded pension plans.

Government employees’ unions are not accepting these changes without a fight, complaining that the increased pension contributions often amount to a significant cut in take-home pay.

A burst of labor opposition in New Jersey is threatening a tentative deal between the Republican governor, Chris Christie, and Democratic legislative leaders that would require government employees to contribute at least one percentage point more of their pay toward their pensions. One powerful union warned Democratic lawmakers not to join Mr. Christie’s “war on the middle class.”

But even many of labor’s traditional allies are demanding pension changes. Last week, New York’s governor, Andrew M. Cuomo, a Democrat, proposed that all future state and New York City employees pay 6 percent of their salary toward their pensions, double the current 3 percent. Oregon’s Democratic governor is pushing state and local employees to contribute as much as 6 percent of pay, up from zero at present. Twelve states, including Arizona, Michigan, Minnesota and Virginia, imposed higher employee contributions in 2010. That leaves just a handful of states where employees do not contribute toward their pensions.

“You can call this an exponential increase in activity to have state employees contribute more,” said Ronald Snell, a pension expert with the National Conference of State Legislatures. “Before 2010, this hardly ever happened.”

States are demanding the higher contributions as they reach for new ways to cut budget deficits. The easy savings, like furlough days, have been achieved, and now lawmakers are tackling more complicated cost issues like the long-term shortfalls in their pension funds.

The Pew Center on the States estimates there is a more than $1 trillion funding gap for government employees’ retirement benefits in the 50 states. At the same time, many voters resent that public employee pensions are generally better than their own.

“States have less revenues coming in and higher bills for their pensions, and it’s really focused their attention,” said Susan K. Urahn, managing director of the Pew center, a nonpartisan research group that analyzes state policies.

Alabama, Arizona, Kansas, Maryland, Mississippi and Oklahoma have all acted this year to require employees to pay more.

In one of the most extreme proposals, a legislative committee in Illinois, daunted by the state’s estimated $80 billion pension shortfall, voted to have state workers either contribute 17 percent of their pay toward their pensions or accept less generous pension benefits.

According to the Pew Center, actuarial reports say the 50 states should have contributed $117 billion in 2009 toward their pension plans to help bring them to full funding, two and a half times more than they contributed a decade ago and well over the $73 billion they actually contributed in 2009.

Requiring employees to divert 3 to 6 percent of their paychecks toward funding their pensions will help, though it will not come close to solving the short-term budget problems in most states, Ms. Urahn said. But every bit helps. In Wisconsin, for example, Gov. Scott Walker said the state government would save $226 million a year from state employees’ paying a 5.8 percent contribution previously paid by the state.

Over time, the budgetary savings can be substantial. Because of New York’s constitutional restrictions against changing current workers’ pensions for the worse, Mr. Cuomo is proposing increased pension contributions for new employees only. But even so, his office says this change would save New York State and public employers outside New York City $50 billion over 30 years.

“The pension system as we know it is unsustainable,” Mr. Cuomo said last week. He added that his proposal would “bring government benefits more in line with the private sector while still serving our employees and protecting our retirees.”

Article source: http://feeds.nytimes.com/click.phdo?i=e8935f72bb9d18a6f0a14591e6d25805

401(k)’s: What You Need to Know

The 401(k) — named for a section of the tax code — is a type of defined-contribution plan, where you make regular contributions into a retirement account that you own. You make all of the investment decisions, unless you hire a professional to help you out. This differs from a defined-benefit pension plan, which provides workers with a guaranteed paycheck (or lump sum) in retirement — and the onus is on the employer to finance it. Many companies have phased out pension plans in recent years given their high costs, which means that most people need to worry about financing their own retirement.

While retirement plans differ — and go by an alphanumeric soup of names — most medium-sized and large companies offer 401(k)’s. There are two similar varieties — 403(b) and 457 plans — with the former offered to certain employees of public schools, hospitals and certain tax-exempt organizations, while the latter is provided to governmental employees. If you work for a small business, you might be offered a different type of plan, but the inner workings and concept will most likely be similar to those of a 401(k).

Employer-sponsored plans are usually the place you want to start saving for retirement because many employers match a piece of your contribution — and that serves as a guaranteed return on your money. They also provide certain tax benefits. Traditional 401(k)’s and similar plans allow employees to make their contributions on money that has not yet been taxed. So you’re effectively reducing your taxable income by the amount you contribute.

The mechanics of a 401(k) plan are relatively simple: An employee must first decide the amount to contribute, typically measured as a percentage of salary. The contributions are automatically deducted from your paycheck, but they’re subtracted from your gross income (before you’ve paid any income tax). By deferring, say, 10 percent of your salary, you’re also reducing your taxable income by 10 percent. So if you earn $60,000 annually and make a 10 percent contribution, you will be taxed on only $54,000. Contributions are held in your account and are invested in any of the mutual funds on a menu selected by your employer. (If new employees do not sign up for the company plan, some employers will sign them up automatically.)

Most 401(k) plans provide matching contributions. So if you set aside 10 percent of your salary, your company should make a matching contribution each time you do. Most companies that provide matching contributions match up to 3 percent of pay, but they use different formulas to get there. For instance, some companies will match you dollar for dollar up to 3 percent of pay, but more companies tend to pay 50 cents for every dollar you contribute, up to 6 percent of your pay.

All of the money inside the account grows tax-deferred, but ordinary income taxes will be owed on all withdrawals. If you want to avoid paying any penalties, you must wait until you are 59 1/2 to start tapping your 401(k). Individuals who leave their employer during the year of their 55th birthday or later may also begin to withdraw funds penalty-free.Before then, you’ll pay a 10 percent penalty fee on top of ordinary income taxes.

ROTH 401(K)

An increasing number of employers are adopting what are known as Roth 401(k)’s. These operate the same way traditional 401(k)’s do, but employees make their contributions with dollars that have already been taxed, and everything inside grows tax-free. No taxes are owed on withdrawals — but you must be at least 59 1/2 and have held the account for five years or more.

If your employer makes matching contributions, those will be put into a separate account, similar to a traditional 401(k), because that money has not been taxed and can not be commingled with your after-tax contributions. When you withdraw your match money, you’ll pay ordinary income taxes just as you would with a regular 401(k).

There are calculators that will help you figure out which 401(k) makes the most financial sense, but it really comes down to whether or you think you will be in a higher tax bracket in retirement than you are now. A better question might be whether you think federal deficits will push tax rates higher over all. Either way, if you expect to pay more in taxes in retirement, a Roth 401(k) probably makes more sense. Or, you can simply diversify — from a tax perspective — and contribute to both plan types.

MAXIMUM CONTRIBUTIONS

The maximum you can contribute to your 401(k) in 2009 is $16,500. For those 50 and older, you can contribute another $5,500, known as a “catch-up contribution,” as long as your plan allows them. In 2009, the total amount that can be contributed by both you and your employer cannot exceed the lesser of 100 percent of your salary or $49,000.

BORROWING AND HARDSHIP WITHDRAWALS

Most plan sponsors provide programs that can lend you money from your accumulated funds, but your employer can limit the reasons for borrowing to, say, buying a home, medical bills or higher education. You are usually allowed to borrow up to half of your vested account balance, up to $50,000. (Vesting is the amount of time you need to be employed with your company before you have access to their matching contributions; these contributions usually vest over several years).

Loans generally need to be paid back within five years, though you should contact your employer because rules will vary by company. Interest rates are usually priced at the prime rate plus one percentage point, but the interest is paid back to yourself. Keep in mind that if you leave your company before you’ve repaid your loan, you’ll need to repay it within 60 days or so. If you fail to do so, it will be treated like a withdrawal and you will owe income taxes and any penalty fees.

In some cases, you might qualify for a hardship withdrawal, which means you can take money out if you encounter certain situations that qualify. But you will still owe the 10 percent penalty fee (if you are under age) and income taxes on all withdrawals. Qualifying hardships usually include: medical bills that will not be reimbursed by insurance for yourself, your spouse or dependents; foreclosure and eviction costs; buying a primary home; costs to repair your primary home; college costs; funeral and burial expenses. There are some cases where you might be able to avoid the penalty fee, for instance, if your medical bills not covered by insurance exceed 7.5 percent of your income. But check with your employer first.

If your employer happens to go kaput, your 401(k) plan would most likely be terminated. But your money is protected — and cannot be touched by your bankrupt employer.

If you leave your job, it might make sense to roll your 401(k) funds over into an individual retirement account. If your balance is less than $5,000, your former employer may require that you do so anyway.

Article source: http://www.nytimes.com/2008/12/17/your-money/401ks-and-similar-plans/primer401k.html?partner=rss&emc=rss