by John Doherty on November 17, 2010
Latest research*shows that a staggering 32% of those over 55 in the UK are depending on pension incomes based mainly on the basic state pension and other payments, and have no personal pension income or pension savings in place.
In the past, this tendency has been variously dubbed ‘pensions inertia’ or, more directly, a failure to plan for retirement. Often, comparisons have been made to the ostrich, his head buried in the sand, in the hope that current problems might simply go away.
The signs are that he will be disappointed.
Current trends reveal a gradual shift in responsibility, away from the government and private sector as the providers of pension income, and towards the individual, who is under increasing pressure to put his or her own pension and retirement planning in place.
With the vast majority of the (generous) final salary company pensions now closing, and a general shift towards defined contribution schemes that offer no guarantee of pension incomes, the onus has never been more strongly on the individual to secure his own pension savings by seeking quality, independent pension advice.
This is crucial at a time when market conditions, following the worst of the recent recession, are still hostile, even for those who are making considerable efforts to put their own retirement planning in place.
Pension incomes fall, even for those who do save
Even for those who have a substantial pension pot built up, pension incomes have fallen by some 70% in the last decade, and a person who would have achieved a pension income of £9,000 if they had retired in 200o would receive just £2,500 from the same pension savings today.
The need for prudent long-term pension planning is clear – and will become more urgent over the coming decades, if the current trends continue.
The time to begin pension savings, and ensure adequate pension incomes, is now!
*Research carried out in UK by MetLife Europe
Have you left it late in setting up your own pension – or are you well provided for? Blog here!
by John Doherty on November 4, 2010
Ethical investments are not an exact science. They operate more on a sliding scale, and range from funds based on a less strict definition of ethical investment, to those based on extremely strict ethical investment criteria.
Many environmentally aware investors look for funds that are at the light green end of the ethical investments spectrum. Companies such as Jupiter, for example, have ethical funds investing in a broader range of industries, but seeking out those companies with best environmental practices in each sector.
The Jupiter Environmental Income Fund, for example, seeks out companies which actively attempt to reduce their environmental impact, but includes large blue chips such as GlaxoSmithKline, the banks Lloyds TSB, HSBC and Barclays, and the gas exploration company BG in their portfolio. The investment fund maintains that all of these are companies making credible efforts to improve environmental practices in their own household and, by example, throughout their sector.
Do you have an opinion on light green investments? Blog here!
by John Doherty on November 3, 2010
The current figures on longevity provide a strong incentive for all of us to think harder about our pension saving.
We have better lifestyle habits, and more nutritious food in our pantries than ever before. We are more aware of the need for exercise, and we are losing some of the most unhealthy habits that afflicted previous generations – for instance, we may go down in history as the generation that banned smoking from our shops and pubs.
But, as we jog in the park or walk the dog, we should also be aware that a healthier lifestyle also means a longer life, and a longer life has got to be funded – funded by building a sensible level of pension savings, to give us the pension income we need in retirement.
The fact is that 75% of all 65 year old men today will live until they are 80, and over 30% of those same 65 year olds will still be going at 90*.
That means we are now realistically looking at a 15 to 25 year ‘unpaid holiday’ at the end of our lives.
Nonetheless, Halifax points out that over half of us are not saving into a personal or company pension. Only 48% of the nation’s adults currently has a pension in place, Halifax says, and of those, around half are not saving enough.
Conclusion: it could be time for some good, independent pension advice.
Do you have an opinion? Blog here!
*Source for figures: Prudential
by roisinmcdaid on November 2, 2010
This week two new reports have shown up important trends in the lending market which underline the need for good financial planning and independent financial advice, for those seeking to refinance.
This is particularly important for those seeking to raise cash through secured loans, especially if you are considering using your home as collateral.
A new mortgage lender, Precise Mortgages, has appeared, offering mortgages to borrowers with imperfect credit records who have been turned down by the mainstream banks. Market watchdog the Centre for Responsible Credit has already responded with concerns about ”predatory pricing” of loans to those who, in the words of Precise Mortgages, have been “overlooked by the High Street”.
A separate report by the Local Data Company shows that, at the other end of the lending market, those seeking more moderate sums are increasingly making use of pawnbrokers, with the number of pawnbroking outlets increasing 44% over the past year.
However, a balanced programme of financial planning based on quality, independent financial advice may prove to be a more sensible alternative to a “quick fix” approach based on a high-interest, expensive mortgage or loans deal. An independent financial adviser can take a whole of market approach to the lending market, and his financial advice is based on the full range of investment alternatives.
Have you used high-interest lenders in the past? Tell us your thoughts or experiences with high-interest loans - Blog here!
by Gareth Flanagan on October 28, 2010
It may be appropriate to talk in today’s blog about self-invested personal pensions or SIPPs, in a week when The Royal Institution of Chartered Surveyors (Rics) has noted a strong rise in investing in art at auctions.
A self-invested personal pension or SIPP is an ideal vehicle for art investments, as it is an extremely flexible pension type that not only offers access to an unlimited range of investment funds. A SIPP pension can also contain a wide range of asset types in addition to cash.
SIPP pensions can contain not just cash but also art, stocks and shares, insurances and commercial property.
Do you have a SIPP pension? Tell us about your experience of SIPPs pensions! Blog here!
by John Doherty on October 27, 2010
Here are three reasons, based on recent research, that prove why we need pensions advice.
Halifax has stated that 52% of UK workers have no pension plans.
Scottish Widows says that of those who do, most are not saving enough – only 48% of pension savers will achieve a reasonable basic pension income. Furthermore, of those not saving enough, women are the worst culprits.
Prudential adds that 59% of UK adults now realise they have not saved enough for their pension, and will outlive their pension savings.
As the state moderates its commitment to pension planning, the government and industry experts have joined to urge workers to look after their own retirement planning.
Have you thoughts on this issue? We want to hear them! Blog here
by Gareth Flanagan on October 26, 2010
Scottish Widows has pointed out this month that 20-somethings are more likely than ever to delay their pension planning.
They are bringing £1000s in university debt forward into their working lives, while at the same time facing demands from mortgage lenders for ever higher deposits, as they struggle to get on the property ladder. Setting up a pension plan is the last thing on their minds.
However – and here is a sobering statistic – every 6 months you delay in making that crucial first instalment into your personal pension adds 10% to the pension contributions you must make, to achieve the same pension pot upon retirement.
This is because the principle behind pension saving is that it’s the first pound that works the hardest for you. In fact, Hargreaves Lansdown did some number-crunching and worked out that your first pound, if invested at age 20, could become £28, by the time you reach retirement.
‘Pensionistas’ most at risk
As we have mentioned in the past, the group most vulnerable to inadequate pensions planning are the ‘pensionistas’ – women pension savers. Not only do women tend to save less than men, they are also more likely to break their long-term pension savings campaign, to raise a family.
Scottish Widows estimates that on average, women in the 18 to 29 age group save on average just £4816 per year, compared with men’s pension savings of £7709.
One of our own nuggets of wisdom on this website is ‘Everything you do affects everything else you do’ – and it would certainly appear that going to university will ultimately leave upcoming generations with much lower pension incomes in retirement.
by roisinmcdaid on October 25, 2010
HSBC has found that 1 in 5 UK savers have no savings at all, and 30% have less than £249 set aside in savings accounts, for a rainy day.
These worrying statistics may reflect the aftermath of the recession, and the fact that the average UK household is currently struggling with around £10,000 in unsecured debt, mainly on credit cards.
A recent survey by uSwitch also showed that 11% of us are spending more than we are earning each month, with half of this group using bank overdrafts and half using ‘the plastic’ to make ends meet.
In the longer term, the need for good financial planning and in particular advice on the basic tax-free savings options, such as cash ISAs and stocks and shares ISAs, is clear.
Are you a prudent saver – or are you one of those swamped with debt? Tell us your thinking on saving for the future – blog here!
by John Doherty on October 21, 2010
The subject of writing a will is never the most cheery of subjects, but in terms of financial planning, and inheritance and tax planning, it can eliminate a lot of hassle for your loved ones, at a very difficult time.
Not only does will writing ensure that your wishes are clear, and speed up the process of transferring your wealth to your family, it can also save you thousands of pounds by avoiding Inheritance Tax as well.
Making a will, however, should not mean writing a document that can be hidden in the bottom drawer, and forgotten. Keeping things up to date is just as essential as leaving a will in the first place.
Did you know, for instance, that a will written when you are single becomes invalid if you marry?
Or that if you divorce and later remarry, but forget to change your will, you could unintentionally leave wealth or property to your former spouse, and leave your new spouse with nothing?
For unmarried couples, only a will can ensure a smooth transition of wealth in accordance with your wishes. Contrary to popular belief, an unmarried person has no automatic claim on the house or property of their deceased partner.
In inheritance terms, the notion of a ‘common law’ partner does not exist!
by Gareth Flanagan on October 21, 2010
The Government has announced plans to raise the state pension age, i.e. the age for taking the basic state pension, from 65 to 66 in 2020, six years earlier than planned.
This is designed to increase by 1 year the time we work and make National Insurance contributions, while at the same time cutting by a year the time we take those contributions by in the form of the state pension and other state benefits. The Work and Pensions Secretary stated recently that deferring state pensions by one year would add 1% to GDP.
However, projections for increasing longevity – which is already 88 years for a male aged 55 today – will mean that we are expected to draw back our state pension benefits for a year longer in any case – thus largely nullifying any savings in this calculation.
Furthermore, Aviva calculated recently that 2 years of work may be required to fund each year of state pensions income, which will reduce the benefit to the state of the additional NI contributions as well.
Are you happy to work an extra year before taking your basic state pension? Why not let us know – write you opinion here!
by John Doherty on October 20, 2010
Are you coming to retirement, and thinking about buying a pensions annuities? Have you considered how inflation might affect your pension income, moving forward?
Nine out of 10 annuities purchased today are level annuities, providing pension income that does not rise or change over time.
However, inflation will reduce the buying power of your pension, especially when you consider that you may be drawing your pension for 20 years or more.
As an example of how inflation can work: in 1978 a loaf of bread cost 21p, today a loaf of bread costs £1 or more.
However, there are annuities available which rise each year, to offset inflation and protect your pension income.
These are known as fixed rate annuities, and are well worthy of consideration, as an alternative to the level annuity.
by John Doherty on October 18, 2010
One of the nation’s largest ethical investments funds has been found to have 13.5% of its holdings in BP and Shell, and another 4.3% in the mining giant Rio Tinto, leaving several red faces among fund managers, who have struggled to explain how such holdings could be described as ethical.
The Zurich ethical fund promised to invest in “companies and institutions which actively enhance the global environment and community”, but reality seems to have fallen far short of their lofty intentions.
The Marks & Spencer ethical fund was also spotted recently with nearly 9% of its cash invested in BP and Shell, and quickly retrenched to remove both from its portfolio.
Both instances highlight again the difficulty of identifying the truly green, in a market where some seem to be cashing in by draping a few bits of foliage over pretty standard investment funds.
Only an ethical funds expert offering independent financial advice has the know-how to drill down into an ethical fund, take a good close look at its holdings, and reveal if a fund is non-ethical, merely one of the light green funds, or at the ‘dark green’ end of the ethical investments spectrum.
Only dark green funds, which apply the strictest of ethical investment criteria, are likely to satisfy the hardcore ethical investor.
Only dark green funds echo what my wife tells me, when I’m daydreaming at the traffic lights:
“It’s not getting any greener.”
by Gareth Flanagan on October 18, 2010
Women are much more likely to ignore, delay, or underfund their pensions, compared to men.
The likelihood of a long mid-career break to bring up a family, salary inequality, and lack of access to executive company pension schemes all add up to one basic fact: that women are much more likely to have an indequate pensions income, compared to men.
Scottish Widows revealed recently that only 47% of women had adequate pension planning, compared to 59% of men.
This makes good pension advice more crucial to female savers.
by John Doherty on October 14, 2010
Telling the truth is always a virtue, but in an application for critical illness cover it is … critical.
Failing to reveal a minor detail about your lifestyle or health can block or complicate an eventual insurance claim. A general non-smoker who does smoke a cigar twice a year,a person giving an out-of-date estimate of their weight, or a person failing to reveal they carry an asthma inhaler even if they never need it – all these are details that can jeopardise a claim.
Even a minor discrepancy between your insurance application and your lifestyle can lead to your insurer claiming you would have been denied cover, or cover at that price, had they known. In critical illness – honesty really is the best …. policy!
by Gareth Flanagan on October 13, 2010
Press revelations this week that the pension income of public sector workers stems partly from £50m invested in global tobacco companies will be no surprise to pension savers who understand a little of the pension saving industry.
Pension funds invest for high returns, not for high ideals, and have generated the pensions income of several post-war generations from investments in the great growth drivers of all non-ethical or non-screened pension funds – namely the tobacco, banking and oil & gas sectors.
Those following news coverage on this website will know that, in June, we noted that pension funds in the UK lost billions, when the value of their BP shares tumbled following the oil spill in the Gulf of Mexico*. It was estimated that pension incomes of £15,000 a year would have lost £400 from BP’s share slump alone, showing the importance of oil and gas in a typical pension saving portfolio.
Certain international investment funds do strive to provide pension income with an ethical slant – the Norwegian national pension fund pulled Euro 1.8bn out of tobacco shares in January, while the Swedes pulled their investment in an Israeli defence tech stock in March.
The Nordic countries currently lead the way in the drive towards ‘cash with conscience’ for their pensioners, however, and the UK has a long way to go, if it hopes to follow suit.
*Read full article on BP share slump here
by John Doherty on October 13, 2010
Ethical investments and ethical funds are categorised as dark green or light green, depending on how strictly they apply their ethical investment criteria. While all are likely to exclude the tobacco, military and pornography industries, light green ethical investments may well include companies related to oil & gas, animal testing for drugs products, and the global banks in their portfolios.
With independent financial advice you can gauge your personal ethical criteria, and find an ethical fund that is a perfect match for you.
by John Doherty on October 12, 2010
Like the sound of an ethical investment with greater stability and less volatility than stock markets? Ethical investors can now invest directly in raw materials and forestry through the Quadris Environmental Fund, an ethical fund which invests in teak and timber plantations in Brazil.
Research indicates that ethical investments in teak, which enjoys consistent demand as a building resource and a furniture-making material, would have returned 13.1% annually over the past 40 years*, compared with 9.96% for the Standard & Poor’s 500.
*Source: Hancock Timber Research Group
by John Doherty on October 11, 2010
The publication this month of the Hutton report on public sector pension schemes represents the loudest-yet death knell for the final salary pension.
It also highlights the huge discrepancy in pension contributions within the public sector, where most civil servants are still paying just 1.5% of salary, while NHS workers pay up to 8.5% and teachers pay 6.5%.
Lord Hutton used his report to state there was a “compelling reason” for public sector workers to pay more in pension contributions, as the deficit between contributions to and payouts from public sector schemes now stands at £4bn, and is expected to rise to £10bn.
The bottom line could well be higher contributions, a longer working life for civil servants, and less generous income from public sector pension schemes in future.
by John Doherty on October 7, 2010
In a rare moment of humour, pensions minister Steve Webb has claimed that birthday card manufacturers will be the real winners, as some 1.45m people turn 65 and become entitled to the state pension in 2011 and 2012.
The humour ends there, however, because this will further strain the state pensions budget, which has soared by £14bn since 2006 and is predicted to rise another £4bn, or 28.5%, as a result. This will certainly be no Hallmark holiday for the government, and a glance at some new longevity statistics make even gloomier reading for those managing the basic state pension and other state pension benefits.
New data from the Department of Work and Pensions (DWP) show that in 1946, the life expectancy of a 65-year-old was 78. That has risen to 88 today.
And the burden on the state pensions system is going to get much, much worse. The DWP predicts that, by 2030, there will be 5.2m more people over the age of 65 than there are today.
Something has got to give. There is no law that says state pension benefits are set in stone, and will be part of our way of life forever. Can we rely on having a state pension, when we retire in 20 or 30 years from now?
Perhaps it’s time to take a close look at some private pension provision….
by roisinmcdaid on October 7, 2010
Even kids’ pocket money is not recession-proof, falling to a 7-year-low of £5.89 this year, says Halifax. A third of children have no savings and spend their weekly allowance, resorting to ‘pester power’ in order to acquire a new item, the Halifax survey said.
However, over 75% of children aspire to be savers, and have expressed an interest in learning more about saving, Halifax said.
