Contact us: 01799 543222

How to keep track of your pensions

Archive for the ‘Pensions’ Category

How to keep track of your pensions

Wednesday, October 9th, 2019

A recent study has revealed the worrying statistic that over a fifth of all people with multiple pensions have lost track of at least one, with some admitting to have forgotten the details of all of them. With around two thirds of UK residents having more than one pension, this amounts to approximately 6.6 million people with no idea how much they’ve put away for their retirement. Double the amount of people admit to not knowing how much their pensions are worth.

It’s an undesirable side effect of the modern working world. Whereas in previous generations someone might stay at a single employer for their entire working life, the typical worker today will hold eleven different jobs throughout their career, which could potentially mean opting into the same number of pensions through as many different providers. The new legal requirement for all employers to offer a pension scheme through auto-enrolment is likely to add further complexities.

As a result, the Pensions Dashboard is set to launch in 2019 in the hope that it will make it easier for savers to keep track of their pensions in one place. Until then, however, there are four relatively simple steps to help you track down information on any pensions you’ve forgotten about:

  1. Find your pension using the DWP Pensions tracing service at www.gov.uk/find-pension-contact-details. Start by entering the name of your former employer to discover the current contact address for them. You’ll then need to write to them providing your name (plus any previous names), your current and previous addresses and your National Insurance number.
  2. In the case of a pension scheme which hasn’t been updated for a while, you’ll be required to fill out an online form to receive contact details. You’ll be required to give your name, email address and any relevant information to help track down your pension details. This could include your National Insurance number and the dates you worked for the company.
  3. You can also receive a forecast of your State pension either online or in paper format by going to www.gov.uk/check-state-pension. After entering a few details to confirm your identity, you’ll be told the date you can access your State pension and how much you’ll receive.
  4. Finally, and most importantly, once you’ve managed to track down all of your pension information, get some advice. Consolidating your pensions might be tempting to make managing your savings easier, but you also want to make sure you don’t lose out on any benefits by doing so. Before you make any decisions regarding your pensions, seek professional independent advice on what to do next.

Retire a little later?

Wednesday, October 2nd, 2019

This may seem a surprising suggestion. Surely most people are eagerly looking forward to early retirement, not thinking about postponing it? More time to travel the world, spend on the golf course or help out with the grandchildren sounds an enticing prospect rather than more years at work.

But times have changed significantly since the state old age pension was first introduced in 1909. In those days, it was paid to those aged 70 or more and people weren’t expected to live many years beyond that.           

Nowadays, the state pension can be taken at 65 (66 next year), although this does depend on gender and date of birth. Yet, at the same time, life expectancy has increased. People live on average at least another fifteen years beyond their three score years and ten. 

Back in 1948, a 65-year-old would expect to take their pension for about 13.5 years, equating to 23% of their adult life. This has risen steadily. Figures in 2017 showed that a 65-year-old would expect to live for another 22.8 years, or 33.6% of their adult life.

A significant number of people even live to 100 these days. So much so that the Queen has had to expand her centenarian letter writing team to cope with the number of people requiring a 100th birthday message from the Palace.       

According to the Office of National Statistics, the number of centenarians in the UK has increased by 85% over the last 15 years.This trend is set to continue so that by 2080 it is anticipated there will be over 21,000.

In recognition of the fact that people are living longer and spending a larger proportion of their adult life in retirement, a government review will consider increasing the state pension age to 68 between 2037 and 2039.  

Currently, if someone retires at 65 and lives to 100 it makes for a long retirement. Not only is it  expensive for the state to maintain, the individual is worried about outliving their finances rather than being able to get on and enjoy their retirement. The state pension was not designed to support a long period of limbo. 

Against such a backdrop, it makes sense for some individuals, if they are fit, healthy and capable, to consider working beyond their pension age. There is no longer any default retirement age at 65, so it is perfectly possible to do this.  

The older generation also have a great deal to contribute to an employer in terms of experience and commitment. In addition, it’s well known that going to work each day gives some people a reason to get up in the morning and also to keep young. There are many unfortunate cases where someone has worked all their life, looking forward to their retirement, only to fall seriously ill or die the moment they stop work.    

The number of 70 year olds in full or part-time employment has been steadily increasing year on year for the past decade, according to data from the Office for National Statistics. This hit a peak of 497,946 in the first quarter of 2019, an increase of 135% since 2009. 

So rather than just worry about whether you will have enough for your retirement, maybe it makes sense to keep working a little bit longer.  

Five million pension savers at risk from scammers

Wednesday, September 11th, 2019

A joint warning from The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) says that five million pension savers could be risking their retirement pots due to scammers. Which has left people feeling, as you can imagine, a little bit worried. 

The regulators’ warning came after research revealed that 42% of pension savers could be at risk of falling for common tactics used by scammers. The survey questioned more than 2,000 adults aged 45 to 65 and came up with some rather astonishing results. 

The research suggested that cold calls, exotic investments and early access to cash are among the most effective tactics utilised by scammers. It later found that 60% of those who are actively looking for ways to boost their retirement income are likely to be hooked by a scam. 

Further to this, the survey found that 23% of those enrolled in pension schemes would pursue high risk, exotic opportunities if offered to them, while 17% said they would be interested in early access. Of all respondents, 23% said that they’d actually discuss their pension plans with a cold caller. 

Pensions and financial inclusion minister, Guy Opperman, said that scammers were, “nothing short of despicable.

“We know we can beat these callous crooks, because the message out there does work. Last year’s pension scams awareness campaign prevented hundreds of people from losing as much as £34m, and I’m backing this year’s efforts to be bigger and better.” 

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said: “It doesn’t matter the size of your pension pot – scammers are after your savings. Get to know the warning signs, and before making any decision about your pension, be ScamSmart and check you are dealing with an FCA authorised firm.“

The warning comes after the FCA revealed more than £197m was lost to scams in 2018. Two victims even lost more than £1m each! 

You can check out information on how to stop scammers on the FCA’s ScamSmart website

If you have any concerns about a phone call you’ve received or any other communications from an unfamiliar source, get in contact and we’ll make sure to steer you away from any scams. 

July Market Commentary

Thursday, July 4th, 2019

Introduction

Many of you will know the old stock market adage: ‘Sell in May and go away, and come on back on St. Leger’s Day.’ 

The theory was that with everyone out of London for the summer season there was little business to be done and the stock market drifted lower. These days, of course, we live in a very different, very connected world where the London stock market is affected far more by relations between the US and China than it is by deals done at Royal Ascot and Henley. And if you had ‘sold in May and gone away’ then you’d have missed out on an excellent month: with just one exception, all the world’s leading stock markets rose in June, some of them by significant amounts. 

This was despite June being another month where the US/China trade tensions continued to simmer, where Chinese industrial output fell to a 17-year low and where India also faced tariffs from the US President – and inevitably responded in kind. Although there was a glimmer of light at the G20 summit at the end of the month, as the US and China agreed to a pause in hostilities, with talks on solving the trade dispute set to resume.

Stock markets also overcame gloomy news from the World Bank, which had opened the month by suggesting that the global economy was weakening. It was now predicting global growth of just 2.6% in 2019, and a very slight increase to 2.7% in 2020. Inevitably ‘international trade tensions’ were to blame. 

There was also a bleak long term forecast on jobs. Oxford Economics forecast that up to 20m manufacturing jobs around the world could be lost to robots and automation by 2030, with the people replaced by the robots finding that comparable roles in the service sector had also been squeezed by AI. 

One job up for grabs is, of course, that of the UK Prime Minister. The battle to succeed Theresa May has been fought down to two – Boris Johnson and Jeremy Hunt. We will have a decision by the end of July: whether the winner will be able to command a working majority in Parliament will be a different matter.

UK

For a change, the UK section of these notes is not awash with ‘retail gloom.’ No doubt that will return, for now let’s start with the good news…

Despite all the uncertainty, UK consumer confidence hit an eight month high in May, with unemployment continuing at a record low level and wages growing faster than expected in the three months from February to April. 

Wage growth for the period was 3.4% with official figures confirming wage growth of 1.4% after inflation had been taken into account. Despite this, though, many people continue to need more than one job to make ends meet, with estimates from the TUC released at the end of the month suggesting 1-in-3 people are now working in the ‘gig economy.’ 

…And if you like your glass half-empty, the rest of the month’s news would have been just what you were looking for. 

UK house prices slipped in May in a subdued market and – not helped by car plant shutdowns – figures showed that the UK economy had contracted by 0.4% in April. Car manufacturing fell by 24% in that month, with the Society of Motor Manufacturers and Traders saying that production is now 45% down on a year ago. 

With the continued uncertainty over Brexit and the ongoing global trade tensions, audit firm KPMG forecast that UK GDP growth will be 1.4% in 2019, falling to 1.3% in 2020, with both figures 0.2% down on the firm’s forecasts in March. 

Hand in hand with the race to succeed Theresa May – covered below – went the ongoing debate on the future of HS2. Boris Johnson has admitted to ‘serious doubts’ but leading business groups (including the CBI and the IoD) have urged the Government to commit to the project, arguing it is vital for the UK’s infrastructure. 

By the end of the month the gloom-mongers had won the battle, with the consumer confidence that had been so high in May turning a complete 180 degrees. By the end of June consumers were feeling negative about both their personal finances and the general outlook for the UK. 

Fortunately this view was not shared by the FTSE 100 index of leading shares, which rose 4% in the month to close June at 7,426. The pound survived the buffeting of bad news to end the month unchanged in percentage terms, trading at $1.2696. 

Brexit 

As we mentioned in the introduction, the race to succeed Theresa May is now down to two – former Foreign Secretary and ex-Mayor of London, Boris Johnson, and the current Foreign Secretary, Jeremy Hunt. The final decision will be taken by Conservative Party members, with the result announced on Tuesday 23rd July. 

All the indications at the moment are that Boris Johnson will win – he is an overwhelming favourite with the bookmakers – so what does he have to say about Brexit?  

Part of the reason he is such a firm favourite is that he has given a commitment that the UK will – deal or no deal – leave the EU on 31st. With so many top positions in the EU currently changing, and with many heads of government – Ireland’s Leo Varadkar is the latest – resolutely trumpeting the ‘no re-negotiation’ line, leaving without a deal is becoming a real possibility. Whether you see this as ‘crashing out’ or very sensibly moving to World Trade Organisation terms probably depends on whether you voted Remain or Leave. 

What a Johnson victory may well mean is an early Budget. At the moment the Budget is scheduled for November. However, Boris Johnson is reported to want to give the economy a real shot in the arm before the UK leaves the EU, so there could well be a tax cutting Budget in September, with cuts to both higher rate tax and stamp duty. 

Europe 

Among a media storm questioning her health after being seen shaking, German Chancellor Angela Merkel vowed that her coalition government will continue. This despite the surprise resignation of Andrea Nahles, leader of the coalition’s junior partner, the Social Democratic Party. 

If the political clouds are gathering over Mrs Merkel, the economic ones may be gathering over Germany as a whole following the release of more gloomy financial news. 

Industrial production in April was down by 1.9% compared to the previous month, with exports 0.5% lower than the same period in 2018. The Bundesbank – Germany’s central bank – is now predicting growth of just 0.6% this year, compared to a forecast of 1.6% growth it made in December. 

Clearly this is bad news not just for Germany but for the whole of Europe, as the slowdown in China and the US/China trade dispute continue to impact the German economy. 

There was more bad news in the car industry as Volkswagen announced plans to cut ‘thousands’ of jobs as part of a modernisation drive. Meanwhile BMW joined forces with Jaguar Land Rover to co-operate on electric cars as the traditional car makers continued to battle against new entrants to the market. 

There was more bad news on jobs as Deutsche Bank revealed plans to cut 15-20,000 jobs – although those would be worldwide cuts, not just in Germany. Meanwhile in the wider European economy the ECB said that it would keep interest rates on hold at the current record low levels until at least the middle of 2020, as it continues to try and spark some life into the Eurozone economy. 

And, as they say, all good things come to those who wait. After 20 years of negotiation it was finally announced that the EU had agreed a trade deal with Mercosur – the South American trade bloc which includes Brazil, Argentina, Uruguay and Paraguay. Brazil’s President Jair Bolsonaro called it “one of the most important trade deals of all time.” Whether Irish beef farmers, suddenly facing competition from South American imports, will agree is another matter…

There was plenty of ‘beef’ in European stock markets in June, as both the German and French indices rose by 6% in the month, to close at 12,399 and 5,539 respectively. 

US 

The month did not get off to a good start in the US, as figures showed that the economy had only added 75,000 jobs in May, far fewer than the 180,000 analysts had been predicting. It is possible that another month of poor figures could see a cut in interest rates from the Federal Reserve – something the President has long called for. 

The figures showed that wage growth was also sluggish, although US unemployment remains at a 50 year low of 3.6%. 

Something that wasn’t sluggish – and hasn’t been sluggish through much of 2019 – was the performance of the virtual currency Bitcoin, which has risen from £3,133 at the end of March to £9,335 by the end of June. Bitcoin is, of course, a virtual (or crypto) currency and in June, Facebook announced that it would be launching a virtual currency of its own – the Libra – in 2020. 

This virtual currency already has the apparent backing of Uber, Spotify and Visa and with bank JP Morgan also creating its own currency – the JPM Coin – June 2019 may turn out to be the month when virtual currencies took a major step forward. 

Staying in cyberspace there was bad news for two US cities as Lake City in Florida followed Riviera Beach in paying a ransom (in Bitcoin, inevitably) to hackers after their computers had been offline for two weeks. According to reports, workers in Lake City disconnected computers within minutes of the attack but it was too late: they were locked out of email accounts and residents were unable to make payments and access online services. The ransom was reported as $500,000 (£394,000) and it is surely only a matter of time before the same thing happens to a local council in the UK. 

Fortunately Wall Street was not held to ransom and, in line with virtually every other major world stock market, the Dow Jones index enjoyed a good month, rising by 7% to close June at 26,600. 

Far East 

We have covered the US/China trade row above – at least the month ended with a commitment to restart the talks aimed at ending the dispute. But in June it was the China/Hong Kong row that really made the headlines, as the Hong Kong legislature sought to allow extraditions to mainland China, arguing that it “would keep Hong Kong a safe city for residents and business.” 

This sparked huge protests and some of the worst violence seen in decades, with protesters worried ‘keeping the city safe’ will inevitably come to mean ‘not criticising the Chinese government.’ 

There are also worries that the proposed legislation might damage Hong Kong’s status as a global financial centre. “The proposed legislation would undermine Hong Kong as a hub for multinational firms [and] as a global financial centre,” said a Washington-based think tank. Despite the protests, the legislation is likely to go ahead at some point. 

Another long term worry for China is the spread of its deserts, apparently caused by global warming, deforestation and overgrazing. At least in June it took comfort in the arms of Japan as Shinzo Abe and Xi Jinping had what appeared to be a friendly meeting ahead of the G20 summit, with the US/China trade wars and tensions about North Korea seemingly bringing the two countries closer together. 

All the leading Far Eastern stock markets were up in the month. Despite the protests Hong Kong led the way, rising 6% to 28,543. The South Korean market was up by 4% to 2,131 while China’s Shanghai Composite Index and Japan’s Nikkei Dow were both up by 3%, to end the month at 2,979 and 21,276 respectively. 

Emerging Markets 

If the US economy got off to a bad start with the jobs figures, the Indian economy got off to an even worse start in June as it lost the ‘fastest growing economy’ title to China. 

Figures for the first quarter showed the economy growing at 5.8% – mightily impressive compared to economies in Western Europe, but below the 6.6% recorded in the previous quarter and below the 6.4% posted by China. 

Worse was to follow a few days later as the US imposed a 10% tariff on a series of Indian imports including imitation jewellery, building materials, solar cells and processed food. Inevitably this led to fears of job losses and – equally inevitably – India was quick to retaliate as it imposed tariffs on 28 US products, some as high as 70%. 

Will this mean a US/India trade dispute to mirror the US/China dispute? While it looks unlikely, India was the only one to fall in June, dropping 1% to end the month at 39,395. 

Meanwhile the markets in both Russia and Brazil moved up in the month: both markets were up by 4% in June, with the Russian market closing at 2,766 and the Brazilian market going through the 100,000 barrier to reach 100,967. 

There was clearly good news for the South American economy with the trade deal agreed with the EU which we have mentioned above. There was less good news for Argentina and Uruguay in the middle of the month. A massive power outage left both countries completely in the dark, wiping out power to tens of millions of people. Argentine President Mauricio Marci has promised a “full investigation.” As soon as he can find the light switch…

And finally…

We have mentioned cyber-attacks above and one company particularly badly hit was Norwegian aluminium producer Norsk Hydro, who saw 22,000 computers go offline in 170 locations around the world. The company refused to pay the ransom demanded and instead fought back against the hackers using the latest cutting edge technology: the pencil and paper. 

…And June really was nostalgia month as 1990s toys are apparently making a comeback on a wave of millennial nostalgia. If you were in a school playground in the 1990s – or your children were – you may remember Tamagotchi (digital pets) and they’re being re-joined on shelves by Teenage Mutant Ninja Turtles, Power Rangers and Polly Pocket. There is also, according to analysts, an increasing market for the films of the same era as grown-up millennials feel nostalgic for their childhood.

If you haven’t made your fortune from your own version of Cash in the Attic, perhaps the answer is to get serious about Crazy Golf. You may have thought Crazy Golf was just a game to play at the seaside, but now the ‘sport’ is dreaming of Olympic recognition and hosting a series of championships up and down the UK. 

While Tiger Woods was pocketing $2m (£1.6m) for winning the US Masters, near-namesake Mark Wood, a local council finance manager, won £50 as he was crowned UK Crazy Gold champion. The secret? According to the sport’s insiders, it is to keep your ball safely tucked inside a sock. That way, it keeps an even temperature and rolls consistently. 

Get out there! With that vital piece of inside information there’s nothing to stop you…

Defined Contribution vs Defined Benefit

Wednesday, May 15th, 2019

As defined contribution pension plans overtake defined benefit (in terms of money paid into schemes) for the first time ever, more and more people are taking an interest in how the two differ and the relationship between them. The Office of National Statistics (ONS) has reported that in 2018, employee contributions for defined contribution pension pots reached £4.1bn, compared to the £3.2bn that employees contributed to DB schemes.

With April 2019’s increase to minimum contributions for DC schemes seeing employer contribution hitting 3% and employees contributing 5% towards their pension, the trend of DC contribution increases in relation to DB isn’t set to slow any time soon.

So before DB Pensions become a distant memory, let’s take a look at exactly what they are. A defined benefit pension, which is sometimes referred to as a final salary pension scheme, promises to pay a guaranteed income to the scheme holder, for life, once they reach the age of retirement set by the scheme. Generally, the payout is based on an accrual rate; a fraction of the member’s terminal earnings (or final salary), which is then multiplied by the number of years the employee has been a scheme member.

A DB scheme is different from a DC scheme in that your payout is calculated by the contributions made to it by both yourself and your employer, and is dependent on how those contributions perform as an investment and the decisions you make upon retirement. The fund, made of contributions that the scheme member and their employer make, is usually invested in stocks and shares while the scheme member works. There is a level of risk, as with any investments, but the goal is to see the fund grow.

Upon retirement, the scheme member has a decision to make with how they access their pension. They can take their whole pension as a lump sum, with 25% being free from tax. They can take lump sums from their pension as and when they wish. They can take 25% of their pension tax free, receiving the remainder as regular taxable income for as long as it lasts, or they can take the 25% and convert the rest into an annuity.

One of the reasons for DB schemes becoming more scarce is that higher life expectancies mean employers face higher unpredictability and thus riskier, more expensive pensions. This is a trend that looks likely to continue. If you’re unsure of how to make the most of your pension plan, it’s recommended to consult with a professional.

Auto-Enrolment changes put pressure on SMBs

Wednesday, May 15th, 2019

April 2019 saw the increase of minimum contributions to auto-enrolment pensions from 5 per cent of wages to 8 per cent. With employers now required to contribute 3 per cent, rather than their previous 1 per cent, the Federation for Small Businesses (FSB) has warned that this could put “substantial” pressure on small businesses.

The Institute of Fiscal Studies (IFS) has reported an increase of workplace pension participation amongst small business employees of around 45% as a result of auto-enrolment. That means that businesses who employ between 2 and 29 workers will be seeing a significant extra cost towards pension schemes. These costs aren’t necessarily as daunting for larger businesses, but in the words of Mike Cherry, National Chairman of the FSB, “The costs involved for smaller employers are substantial, in terms of both expenditure and indeed their time, as they have grappled with finding a good provider and setting up whole new systems. Now that the 3 per cent rate has hit, the burden will be greater still.”

But with 70 per cent of UK workers employed by small businesses now on workplace pensions as a direct result of auto-enrolment (first introduced in 2012), employees seem to consider it as an attractive prospect. They too have seen an increase in their minimum contributions, from 3 per cent to 5, and so sacrificing a higher portion of their monthly wages has been accepted as a move that does come with its own benefits. Predictions from investment firm Hargreaves Lansdown state that in real terms, the average employer will see £30 of their monthly wages go towards their pension pot which, on average, results in total pension savings increasing by around £55,000.

Employers, on average, are predicted to now contribute £55 a month to the average employee’s pension pot, an increase from the pre-April figure of £37. These increases aren’t all bad news for employers however; Guy Opperman, Minister of Pensions, sees them as the opposite. “Automatic enrolment has been an extraordinary success, transforming pension saving and improving the retirement prospects of more than 10 million workers already. The increased cost on employers has been phased in over time so firms have had the opportunity to adapt. Pension contributions are a valuable employee benefit which firms use to attract and retain good people. This is true of small and large firms alike.”

House of Lords urges Government to scrap triple lock

Wednesday, May 8th, 2019

The triple lock guarantee currently secures the rise of state pension payments at the beginning of each tax year. However, after an investigation by the Select Committee on Intergenerational Fairness and Provision, a case has been made for the removal of the guarantee.

In its report, Tackling Intergenerational Unfairness, the committee outlined that the maintenance of the guarantee was “unsustainable.” After a consultation, the TaxPayers Alliance told the committee that the current process was “egregiously unfair,” that the state pension was rising rapidly “at a time of spending restrictions on young people” and due to the deficit in public spending, state pension rises were being paid for by future generations. The pressure group then urged the government to put a freeze on state pensions.

The Select Committee conceded that there was in fact a case for spending restraint, although later in the report it stated that “it does not seem fair for people reliant on the state pension to fall behind working people.” It continued: “Nor, on the other hand, is it fair for them to have their incomes lifted at a faster rate than that experienced by working people.”

Another criticism was made by the committee in reference to the National Insurance (NI) system, mentioning that: “The reality of longer working lives should prompt the government to rethink the NI system” as NI contributions do not fund state pensions, despite being used as a criteria for eligibility. The age at which contributions are made was also scrutinised, with the committee stating: “It is not fair that only individuals under the state pension age pay this tax.”

In his summary, the committee chair, Lord True, declared, “both young and older people recognise the contribution the other makes and the challenges they face,” going on to criticise the government, saying that the understanding between generations “could be undermined if the government does not get a grip on key issues such as access to housing, secure employment and fairness in tax and benefits.”

The committee has called upon the government to “take steps to deliver a fairer society” and now awaits a reply from the Treasury.

6 bad habits to avoid during retirement

Wednesday, May 8th, 2019

Planning for retirement can be complicated, as anyone approaching the end of their working life will tell you. However, navigating the myriad of choices, both financially and socially, doesn’t have to be such an enigma. Here are a few tips to help you avoid common bad habits that retirees often fall into:

1. Spending your pension fund money

Yes, that’s right. If you delay spending your pension and spend other available cash and investments first, you could keep your money safe from the taxman. Not spending your pension fund money until you have to may also help the beneficiaries of your estate avoid a large inheritance tax bill.

2. Taking the full brunt of inheritance tax

Inheritance tax can cost your loved ones vast sums if you were to pass away. There are plenty of ways to protect them from losing a large portion of your estate. Strategies such as making gifts or leaving assets to your spouse are an effective way to avoid the tax, among other valuable strategies.

3. Failing to have a plan

Many retirees have multiple avenues of income to provide for them during retirement. Making the most out of those streams of revenue is key to a stress free retirement, as unwise investment or poor planning can lead to unnecessary worries. We recommend contacting a financial adviser in order to set out a plan that’ll let you focus less on worrying about income and more on enjoying your well-earned retirement.

4. Not taking advantage of the discounts

There is an absolute boatload of price slashes available to retirees over a certain age. This ranges from discounts on train fares to reduced prices of cinema tickets. We recommend that all pensioners takes full advantage of these discounts as every penny saved provides more financial security for yourself and your loved ones.

5. Thinking property is the only asset worth having

Property can be a valuable source of retirement revenue, but it’s not the only way to create more income. Property can often incur maintenance expenses for landlords and take up time to resolve that could be spent making the most out of your retirement (though there are many pros and cons to the pension vs property discussion).

6. Buying into scams

When you retire, it seems that all kinds of people come crawling out of the woodwork to give you a “great” investment opportunity or insurance policy. Tactics can include contact out of the blue with promises of high / guaranteed returns and pressure to act quickly. The pensions regulator has a comprehensive pensions scam guide that’s definitely worth a read.

DB pension protection following the British Steel debacle?

Thursday, April 25th, 2019

The treasury has made a promise that since the mismanagement of private pension transfers from the British Steel Pension Scheme (BSPS), the FCA will make an effort to “stamp out bad practice.” So what exactly happened, and what comes next?

Members of the (Defined Benefit) BSPS were given the choice to transfer to a new scheme, sponsored by Tata Steel UK but with lower indexation, or to go into the Pension Protection Fund (PPF), the UK’s pension lifeboat fund which cuts benefits by 10% for those who are yet to retire. 83,000 of the scheme’s 122,000 members opted to transfer to the new BSPS with reduced benefits (but higher payments than those that transferred to the PPF) but roughly 2,600 members requested a transfer from the (DB) BSPS to private arrangements.

The advice that these 2,600 people received is under fire for being unsuitable, with several firms subsequently being barred from undertaking pension transfer business. In fact, the regulator found only 48.1% of the advice that it investigated could be considered suitable.

That’s where the FCA comes in. The Financial Conduct Authority is a financial regulatory body operating independently of the UK Government. It’s financed by charging fees to members of the financial services industry. Specifically, it regulates financial firms (both retail and wholesale) which provide services to consumers and thereby maintains the integrity of the financial markets in the United Kingdom.

Officially, its role includes: “protecting consumers, keeping the industry stable, and promoting healthy competition between financial service providers.” But what’s changed to help curb the chances of this happening again? In the words of John Glen, the Economic Secretary to HM Treasury; “The new rules on pension transfers provide advisers with a framework to better enable them to give good quality advice, so that consumers can make better informed decisions”

As for your pension, most DB schemes, as well as the defined portion of hybrid pension schemes based in the UK, are eligible for protection, however there are some exceptions. If you’re unsure about your scheme, the Pension Protection Fund provides a full list of qualifiers and conditions at https://www.ppf.co.uk/your-scheme-eligible.

Time to cut out the jargon from pensions

Wednesday, April 3rd, 2019

People simply aren’t saving enough into their pension funds. Despite the relative success of the auto-enrolment rollout and the increase of minimum contributions from 5% to 8%, there’s still a culture of misunderstanding surrounding pensions. With a reported 51% of the public believing that the minimum contributions are in line with the recommended rate of saving, this is unfortunately not the case. With experts generally recommending a figure closer to 13%, something needs to change for people to have a real understanding of their pensions.

IFA firm Portafina conducted research in February 2019 on a sample of over 2,000 people between the ages of 18 and 70, designed to find out how much we know and, more commonly, don’t know about the world of pensions. The figures paint a pretty clear picture that something needs to be done. With less than 1 in 5 (19%) knowing exactly what a pension is, 72% not knowing when they would be able to withdraw money from a private pension and 31% having no idea when their pension would be taxed (and a further 40% thinking they knew, but being wrong) clearly there is an issue to be addressed.

So why is it that we don’t understand? It might be because of all the technical jargon. In fact, 85% of those surveyed in the Portafina report said that if they received clearer information about their pension in plain language and direct, coherent graphics, they would be able to make more informed decisions. When confronted with 7 common examples of pension related terms, only 37% knew what some of them meant, with a quarter not understanding any of them at all. Perhaps this is just a symptom of a larger problem regarding the lack of financial education available.

According to the Government guidance, since the introduction of financial education to the national curriculum in 2014, pupils at key stage 4 should be taught about “income and expenditure, credit and debt, insurance, savings and pensions, financial products and services, and how public money is raised and spent.” Despite this, estimates put the figure of schools actually delivering this education at around 40%, as although it’s compulsory for secondary schools, academies and free schools are not bound by the official curriculum.

It’s a shame that so many people are missing out on the benefits and later life income available through proper pensions practice. If you, like many others, feel that you need the jargon done away with and pension information delivered in an understandable and accessible way, please do ask for advice from a professional.