Archive for the ‘State Pension’ Category
My Pension Roadmap – Sat Nav for your Retirement!
We’ve recently launched a subscription based advice service called My Pension Roadmap. It’s aimed at the members of our group pension plans who want to know what it’s all worth and when they’ll be able to retire. We’ve extended it to all of our clients recently. You can read more about it here.
There are some really scary statistics being banded around in the media about exactly when we’ll all be able to stop 
working. Of course that’s if we even want to! We mentioned the Oddfellows survey in our earlier blog article here. Not only do people have very little idea of what kind of savings they need – they are doing nothing about it.
That’s where My Pension Roadmap comes in. We call it Sat Nav for your retirement.
But don’t take our word for it. Let us give you a real live example of My Pension Roadmap in practice. We’ve changed some of the personal details to protect the clients’ privacy.
Jim and Donna are both in their 50’s. They own their own home and the kids have all grown up and left home. Jim works in a factory and Donna is a nurse in the NHS. Apart from a short break to bring up kids Donna has always worked full-time. Jim has worked for several companies but has always been in the pension scheme. The couple have a modest standard of living and have always saved what they can.
The first stage of My Pension Roadmap is to sit down with Jim and Donna at the Discovery Meeting. This is when we really get to grips with what Jim and Donna’s ambitions are for their later years. For example we really drill down into issues like where they want to live, what they want to do with their time and what legacy they’d like to leave. We look at how they feel about taking risks with the money they’ve worked so hard to build up. We’ll also try to help Jim and Donna understand he risk v reward conundrum. The Discovery Meeting is part explanation, part education and mostly listening.
At our Discovery Meeting it became clear that Jim was becoming weary after a lifetime of work and Donna was really looking forward to reaching her retirement date soon. They both wanted to spend more time with their grandchildren. As avid caravanners they wanted to set off on a great adventure around Europe for a few months and wanted a new super duper caravan for this road trip.
We looked at the state pensions that Jim and Donna had built up and Donna’s NHS Pension. We also had details of Jim’s personal pension plans. The couple also have some savings.
Jim doesn’t think he’ll be able to retire until his state pensions kicks in when he’s 65. He doesn’t have a clear idea of how much his pensions are worth. The pensions that him and Donna have all be one payable at different dates and Jim admits he’s confused. Ideally he’d like to retire when Donna gets to 60 in a couple of years.
After the meeting we went away to start collecting all the info we needed to be able to report back to Jim and Donna. My Pension Roadmap is designed to distill all the technical stuff down into something really simple and easy to understand. At the heart of My Pension Roadmap is your Retirement Cashflow. It shows you the estimated money in and money out and help you see whether you will achieve your goals.
Jim and Donna are over the moon when we tell them at our next meeting that they can both afford to stop working and do the things they want to in a little less than 18 months. Jim said it was like a weight lifted off his shoulders and 
that he felt invigorated.
We are now in the process of implementing the changes that we recommended that’ll help Jim and Donna stand the best chance of meeting their goals. We’re moving Jim’s pensions into less volatile funds. We’re looking at getting updated State Pension Forecasts. Finally we’re moving into the discussion stage and looking at all the ways that we can turn Jim’s pension savings into an income for him.
Finally, we’ve transferred Jim’s pension plans into one pot. This means that not only will he pay less in charges but he can also pay his My Pension Roadmap subscription from his pension in product charges. And he’s still better off.
We’re really excited about My Pension Roadmap and we hope that people like Jim and Donna become it’s biggest ambassadors.
If you’d like to arrange a free initial discussion about My Pension Roadmap please contact us here.
We’re all doomed Captain Mainwaring!
We’ve been catching up on some reading recently after all the efforts to get the web site up and running. A few weeks ago the Department for Work & Pensions issued a short overview of what employers have to do to comply with the new auto-enrolment monster that’s about to hit us all. If you want to catch up on auto-enrolment here’s a link to one of our previous blog articles on the subject.
No, the thing that caught our eye in the DWP report – which you can read here – is the shaky basis upon which our state pension scheme finances are based. In the overview there’s an interesting diagram about how many workers are needed to support every pensioner that gets a state pension. We’ve included it below:
Source: DWP – Automatic Enrolment and Workplace Pension Reform – the facts. May 2011
By the looks of it by 2050 we’ll each have to adopt a pensioner and pop round every month with their pension money! Clearly, this can’t go on. That’s why successive governments have ducked the issue of state pension reform as it’s such a long term 
issue. The Coalition are looking at ways of reforming the state pension by increasing the age that you can draw benefits and moving towards a flat rate £140 per week benefit. But the pay-as-you-go system that we have – where money we pay today is paid straight out in pensions – will still reach crisis point at some point in the future. Our kids and grandkids will no doubt be responsible for sorting out the mess then.
Compulsion – but not as we know it
That brings us in a roundabout way to the thorny issue of savings. If we are only just going to get enough from the government to survive on the responsibility is on us all to save up now for retirement. The government thinks so too that’s why it’s making every employer in the UK automatically enrol the vast majority of their employees in a workplace pension scheme.
There are reams of research to show that most of us have been seduced by the live fast spend fast culture that the last few decades’ prosperity have 
brought us. The Oddfellows issued a report last year that showed that less than one in five people had any idea what they needed to be saving up for when they stopped working. Yet there’s a feeling that when the new pension rules come in a significant number of people will opt-out. Although they won’t have to pay the contributions required they’ll also lose the employer’s contribution.
Opt-out or Opt-in?
There’s got to be an argument to say that by all means they can opt out but they still get the employer’s money. After all as a little salesman outside a carpet store in Jaisalmer said to me (on only about 100 occasions) “Something is always better than nothing”.
Our view is that eventually the ability to opt-out will disappear as so much of our future state pension planning depends on us taking responsibility for our own savings. Once it’s gone we’ll be in the situation where pension membership is compulsory – just like we were up until the 80’s when the then Conservative government abolished compulsory pension membership. Twenty odd years later and we’ve come full circle only the pension benefits on offer are a shadow of what they were in the 80’s.
A Cunning Plan?
I fear that as a nation our behaviour must change if we are to avoid living on £140 a week. I think that there is no silver bullet. Yes we need compulsory saving. If we are not going to do it ourselves we need help. But we also need to get basic financial education back into the schools. I recall the local saving bank coming into our local primary school in Dundee many years ago to collect savings. Most of the class saved something. Now you can get a credit card as soon as your 18.
Our policy to sorting out the financial health of our population has got to be more joined up and less of a knee-jerking, zig-zag of sound bite policies.
Oh, and by the way, something was indeed better than nothing. We eventually bought a wall hanging from the wee man in Jaisalmer and it still hangs in our lounge ten years later!
Steve Clark
Lord Hutton’s 27 Recommendations
It’s been another very busy day on planet pensions! As we mentioned last week the Independent Public Services Pensions Commission under Lord Hutton has issued it’s final report.
Professional Pensions have done an excellent summary of the 27 recommendations made by the Committee. You can click through to the article here.
In short Hutton has recommended a move to a Career Average Revalued Earnings Scheme for future service across the public sector. He is strongly of the opinion that promises made under the current structure should be protected. That means older longer serving employees will still get the promises they have been given if the government protects the past service element.
So the main impact will be felt by younger employees or those with little past service. Interestingly he has also recommended that future public servants should not be given access to Defined Benefit scheme so we probably have to look forward to some form of Defined Contribution arrangement for new joiners.
Like all these things the devil is in the detail. We’ll be reviewing the contents over the next few days and no doubt there’ll be further articles on the subject.
One thing is for sure that something has to change if the public service pension promises are to remain affordable for future generations. It is a brave government that has decided to grasp this particular nettle rather than, like their predecessors, bounce the problem down the line.
These reforms must also dovetail with the changes to the Basic State Pension to ensure a uniformity of approach. It’s going to be a busy time over the next few years.
As is always the case…….watch this space!
The Devil is in the Detail – Retirement Age Regulations Published
You’ll probably remember that we wrote in our blog recently about the removal of the Default Retirement Age from April. The post is here.
Just a short post today to keep you up to speed. As you know we aim to trawl through all the information slushing about online to bring you stuff that’s relevant, fresh and that we think you’ll find interesting. If you are not one of our clients we’re sure that your advisers will be doing the same for you, won’t they?
Those all round good eggs at DLA Piper LLP have issued an update on the new regulations that have been issued by the government regarding the removal of the Default Retirement Age. In the old days the ink would still have been wet it’s the information is so fresh!
You can click through to the article here. There’s some really good stuff in there on Group Insured Benefits and the Transitional Arrangements as well as an excellent summary under Implications. I must say that the stuff that DLA Piper issue is really good like that in giving a good clear summary.
The insured benefit stuff isn’t quite as we were led to believe. In the previous post we wondered whether the government would “walk the talk”. Well the good news is that it has – almost.
The exemption only applies to employees who are the older of 65 or State Pensionable Age. At the moment that’s not a problem as they are broadly the same – younger for women. The government are planning to move us all to a State Pensionable Age of 68 in the future. That means you could be looking at covering employees up to 68.
Employers will need to give some thought to whether they still want to provide benefits like life assurance, income protection and critical illness to employees over State Pensionable Age.
As if you didn’t have enough on your plate to think about!
A couple of bits of background reading
As ever nothing stays the same. Just a short post to include a couple of links to some good material that I have been sent by the very nice people at Herbert Smith LLP and DLA Piper LLP. We thought we’d include the links and a little bit of background to save you the time. We try to scour the web for this sort of thing so our clients don’t have to!
Herbert Smith – Round up of pensions developments
Click here a good overview of everything that’s going on in the world of pensions. If your organisation participates in a final salary multi-employer pension scheme there’s a good write up of a Scottish case. It involves an insolvent employer and a £20m debt. We won’t say any more it’ll only spoil the ending!
There’s also a good article on a TUPE case where some employees ended up getting taxed on a compensation payment for loss of benefits on a TUPE transfer. Buyer beware is the motto for TUPE transactions.
DLA Piper LLP – Be Aware
Click here for the February edition of the DLA Piper Employment Law publication Be Aware.
There’s some good stuff on the removal of the Default Retirement Age and what you can and can’t do. There’s also a good round up of what’s on the horizon legislation wise. Finally, the At a Glance section is a good overview of the various pay rates, maximum awards etc.