Archive for the ‘Retirement’ Category
Delaying your annuity can be costly
Delaying buying your annuity with a pension pot could prove costly, warns the Daily Telegraph.
It’s true that annuity rates rise with age, so a 67-year-old in good health gets about 5% more income from an annuity than a 65-year-old. But if at age 65 you defer buying an annuity for two years, you would have to live to the age of 106 before the higher income you get at age 67 would make up for the two years’ worth of income you never had.
Converting your ‘pension pot’ into lifetime income is one of the trickiest decisions people face. It’s vital to get advice – there are many more options than you may think.
At 44 Financial Ltd we specialise in helping those that are at retirement choose the right product and maximise the income they receive. We can ensure that you get the best rate by shopping around on your behalf.
If you need any help please call us on 0116 380 0133.
Steve Clark
Image courtesy of Flickr – Images of Money
Women lose out in new pension reforms
Experts have warned that many married women could lose out under the proposed reforms to the state pension being planned for 2016, says the Financial Times.
At present, married women can qualify for state pension based only on their husbands’ National Insurance contributions – but that will change from 2016. After that, only women who have paid the ‘married women’s stamp’ will qualify for state pension.
If you reach retirement age before 2016, the changes won’t affect you. Married women who will reach pension age later and haven’t paid National Insurance should get advice on their situation.
Steve Clark
Silver inflation is on the up
Rising costs of fuel and food have greater impact on the elderly and the young.
So the imminent rise in inflation – partly the result of the decline in the value of the pound – means pensioners will see their cost of living rise faster than others.
Alliance Trust calculates that the ‘silver’ inflation rate for people over 75 is now 3.2% against the 2.8% rate for under-30s, who benefit more from falling prices for gadgets and clothes.
Age UK do a similar index and the level of inflation is above that recorded by the Retail Price Index or Consumer Price Index. That’s a really important point for those in receipt of an index linked pension to note.
You actual rate of inflation is likely to be higher than any index that your pension is pegged to.
Steve Clark
Changes to auto-enrolment rules?
The Government is consulting on changes to the auto-enrolment regulations.
Fear not, there are no big changes. The Government is just responding to
issues identified in feedback received since some of the largest employers began enrolling employees last year.
The changes include
-
Making it easier for employers to use existing payroll processes to determine whether workers need to be auto-enrolled and for assessing whether existing schemes are qualifying schemes.
-
Turning off the employer duty to auto-enrol where a worker has recently opted out of pension saving before they were automatically enrolled (e.g. where an employer makes joining the pension scheme a condition of the contract of employment).
-
Confirming that opt-out notices need not be identical to the form specified in regulations.
-
Extending the joining window deadline from one month to six weeks.
The Government is looking to make these changes in April 2014. As always…….watch this space.
Steve Clark
Local Govt Pensions–give a little and take a lot?
The recent change to the state pension scheme could be bad news for employees and most employers who participate in the Local Government Pension Scheme,
Here’s the rub. The explanation is going to get a wee bit complicated – but I guess that this being an article on pensions it goes with the territory.
What’s the problem?
Sometime before 2017 contracting out of the State Second Pension will stop. No one is exactly sure when but that is par for the course with some of these changes.
When this happens it means that employees who are members o
f pension schemes like the Local Government Pension Scheme will pay more National Insurance.In today’s money that extra will work out at 1.4% of their earnings between £5,564 and £40,040. In return for paying more the employee will get their service counted towards the new single-tier pension of £144 per week that was announced recently.
Do higher contributions mean higher benefits?
As you might imagine nothing is ever straightforward on planet pensions. In pension terms we are kind of looking at an apple and a pear.
However, fear not; our friends at the Department for Work & Pensions seem to think that employees will benefit. Their white paper claims that around 90% of all contracted-out employees will be better off in value terms.
We can probably safely assume that the 10% that don’t benefit are the higher earners.
The straw and the camel
Clearly, there’s a danger that this could be the last straw for some employees when these higher outgoings come at a time of increased household bills and zero pay rises.
Members have already been asked to pay more towards the Local Government Pension Scheme in recent years. Higher earners will pay more for their benefits from next year. Some members are already considering opting out to boost their take home pay in tough times.
So I’m not entirely convinced that the DWP are right when they say that employees will benefit from these changes. What about those that can no longer afford to be a member and opt out or those who will opt to join the less generous 50/50 Scheme (as and when it appears).
What about Employers?
It’s worse news for Employers I’m afraid. Employers will end up paying 3.4% more in National Insurance.
In the Local Government Pension Scheme the Employers are unlikely to be able to pass this extra cost on to members. So it must be passed down to council tax payers (if the Employer is a Local Authority) or met from further efficiencies .
But what about those Employers that are Admitted Bodies to the Local Government Pension Scheme? Where can they find the extra cost?
Many Admitted Bodies are signed up to long term contracts that were negotiated without an allowance for this extra charge. Traditionally, membership of the Local Government Pension Scheme is high amongst employees of these Admitted Bodies. So this is going to hit them hard.
Could we see some outsourced contracts being in jeopardy? If not, then some form of cost cutting and possible redundancies would seem likely.
Is there some stability on the horizon?
Probably not. Having been in the industry for over 25 years I can’t recall a period where there has been anything other than constant change. One thing is clear though all Employers – and especially those Admitted Bodies in the Local Government Pension Scheme – need to keep an eye on the horizon to make sure they know what’s on the horizon. As I’ve said more than once on this blog over the last two and a half years – watch this space.
Steve Clark