More pension changes
The landscape in the world of pensions continues to evolve at a rapid pace. The news last week that the government have proposed further changes to state pension should come as no surprise. What are the changes and what impact does it have? Below is a table setting out the proposed change.
On or before April 5, 1970
Between April 6, 1970 and April 5, 1978
Your State Pension age is currently 67. It would increase oto between 67 years and one month, and 68 years, depending on your date of birth.
After April 6, 1978
No change. Your State Pension age remains 68.
This change is another step in the direction of individuals needing to take ownership of their own situation when it comes to being able to be free from work.
There have been a number of pointers in this happening over the last 20+ years. In 1995 the Government planned to raise the pension age for woman from 60 to 65 by 2020, unfortunately this was speeded up in 2010 and we are seeing the effects of this now.
The introduction of stakeholder pensions in 2001 came and went with very little success. Auto Enrolment came into focus in 2012 and has had more success due to the stringent rules that apply. Our payroll department inform me that opt out figures locally are a lot lower than the national average which is currently at 12 per cent, this should be seen as somewhat of a success however with contribution levels to increase in the next two years will this remain the same?
In the past few years there has been a drive for individuals to use their own initiative when it comes to pension savings. There is still a great divide with people actually seeking financial advice.
Research conducted by the Pensions Policy Institute for LV= has found that in 2016 there were more than 30,000 people who took out an annuity with their existing provider and missed out on additional income by not shopping around. In total, they lost out of an additional £130m, which equates to around £4,000 each.
At the same time, LV= research found that people are increasingly expecting their retirement income to cover more than just the essentials, which means their money needs to work even harder. Nearly six in ten (57 per cent) of those planning to retire in the next five years want their retirement income to also cover home maintenance costs, while 53% want it to cover holidays and a quarter (24 per cent) say they’d like to leave money behind as an inheritance.
In addition, one in six (17 per cent) want to be able to use their retirement income to help their children or grandchildren with a property purchase, and 14 per cent would like care costs to be covered as well.
Taking professional financial advice is the best way for someone to ensure their retirement savings meet all their needs and aspirations for building funds up or taking benefits.
* Contact Phil on 01768 864466.