Should you be worried during significant market falls?

The South West of England appears to be the place to live if you want a long, healthy and safe retirement, according to a new league table of pensioner well-being developed by Prudential. The league table, which uses a combination of census data and results from the insurer’s own retirement research, ranks the top 20 counties in England and Wales according to several measures of the wellbeing of their pensioner populations.

According to the league table, six of the top 20 counties for pensioner well-being are in the South West of England, with Devon coming out on top of the rankings, Dorset in second place, Gloucestershire seventh, Wiltshire 12th, Somerset 13th and Cornwall 19th . In another boost for pensioners in the region, Prudential’s own retirement research also recently found that the South West saw one of the largest year-on-year jumps in expected retirement incomes among this year’s retirees – with new pensioners expecting to live on 19 per cent a year more than those who retired in 2014.

The pensioner well-being league table rates each county against a number of indicators including the ratio of healthcare workers per head of population, the length of time a pensioner can expect to live once they’ve retired, and the annual incidences of crime per thousand members of the county’s population. Outside of the West Country, Norfolk and Powys also rank highly in the league table. Six counties in the South East of England make the top 20, which overall is made up of 17 English counties and three Welsh.

Topping the pensioner well-being league table, Devon’s largely rural make-up results in a relatively low 50.1 crimes annually per thousand people – well below the national average of 56.7. The county’s pensioner life expectancy is in the national top 10 for both men and women – the average 65 year old Devonian man can expect to live for another 19 years while a woman can expect to live for another 22 years. Devon also has an above average number of healthcare workers per thousand people at 65.6 compared with the 60.9 national average. The Prudential also states that according to their research, of those retiring in 2015 more than a third (36%) of those in the South West of England say they will be able to afford to leave an inheritance to their families – well above the UK average of 29% .

A single Lifetime ISA for everyone should be created with all tax reliefs on pension contributions being scrapped, a leading figure at the Centre for Policy Studies (CPS) has proposed, according to an article published by the CPS. Research Fellow Michael Johnson said the opportunity has come for a radical overhaul of savings after the Chancellor launched a consultation into the future of the pensions tax regime in July.

Mr Johnson believes all tax reliefs on pensions contributions should be scrapped, along with the Lifetime Allowance, as a simplification measure. Here’s the majority of his idea:

“What should replace private and occupational pensions? We now have an opportunity to replace a ludicrously complex retirement savings vehicle with a fairer, more cost effective, simpler and transparent arrangement. Last year, I proposed a single Lifetime ISA for everyone, to be included in the auto-enrolment legislation. Allocated at birth, it would serve from cradle to grave, signalling the emergence of a lifetime savings agenda.”

Each post-tax £1 saved (irrespective of source, that is, including employers’ contributions) would attract 50p from the Treasury, up to an annual limit of, say, £4,000. This is double the rate of incentive that basic rate taxpayers currently receive via tax relief, and a total of £12,000 is more than adequate savings capacity for almost everyone. Treasury and post-tax employer contributions should be locked in until retirement (perhaps with income and capital growth); thereafter they could be accessed in the form of a tax-exempt ISA Pension.

An annuity, perhaps for a minimum of ten years, fuelled by the 50p incentive which, being flat rate, would address today’s fundamental conundrum that because Income Tax is progressive, tax relief is regressive, is grossly unfair. And it is patently failing the next generation.”

Last year the Centre for Policy Studies published proposals to abolish all Income Tax and employer NICs relief on pension contributions, to be replaced by a redistributive 50p incentive per £1 saved, paid irrespective of tax-paying status.

What do you think of the CPS’ ideas? Is this the way forwards for our pensions and savings?

The value of your investment can go down as well as up and you may not get back the full amount you invested. The value of tax reliefs depends on your individual circumstances. Tax laws can change.

The government is about to offer an attractive deal to top up the state pension. From October, those who have reached retirement age before April 2016 can buy extra state pension on attractive terms by paying lump sum ‘3a’ National Insurance contributions. A 65 year old could get £572 a year from a £10,000 investment, more than three times what they would currently be getting in interest on a typical savings account. Like the state pension, the income will be index-linked, and half the income will be paid to a widow or widower. The deal will be especially attractive to women and the self-employed who have not accumulated rights to a full state pension.

Our comment: Some people will benefit hugely from this scheme, but for those without a partner who will inherit their pension, or who are in poor health, the deal may not be worthwhile.

City of London and Metropolitan police have joined forces in a campaign to shut down investment scams, says the Financial Times. Alarmed by a rise in the use of prestigious City offices as a base by scammers, the City authorities have also joined in. Landlords are being targeted – they should investigate the bona fides of tenants and several have been fined for not doing so. Official data show that £1.7 billion was lost to fraud in 2014 but everyone agrees this is a substantial under-estimate. The proactive approach is clearly having some effect: when the police booked their own stand at an alternative investment exhibition, several exhibitors pulled out at the last minute. 

Our comment: There have been many fraudulent schemes investing in wine and diamonds and the whole alternative investment sector requires a high degree of scepticism.