Pension news
Early retirement NEW RESEARCH from Prudential reveals that nearly two thirds (60%) of those stopping work this year are doing so before their expected state pension age or company pension retirement date. The average age of those retiring early is 57. Early retirees in 2018 could be facing a considerable hit on their annual retirement income, as the average expected retirement income, inclusive of savings and state pension, for those retiring early is £18,567, compared to £21,961 for those not retiring early. The East Midlands is the early retirement capital of the UK with 72% retiring early, closely followed by Wales: 69%; and Yorkshire and the Humber: 67%. Vince Smith-Hughes, retirement expert at Prudential, said: “Seeking guidance from the government’s free and impartial Pension Wise service or advice from a professional adviser can help people identify the best course of action to achieve their specific financial retirement goals at any stage in their working life.”
Pensions advice THE GOVERNMENT is being called on by Aegon, the international life insurance, pensions and asset management company, to double to £1,000 the annual tax and National Insurance exemption for employer-arranged pension advice. This follows the findings of the Engaging with saving (https://bit.ly/2GgjASD) guide the Confederation of British Industry published in partnership with Aegon. The exemption can be used to provide workplace advice on pensions, and on general financial and tax issues relating to pensions, to help employees make informed decisions on saving for retirement. The cost of advice varies between £75–£350 an hour, with the average cost being around £150 an hour. The report also revealed that nearly half of employers want greater clarity around the regulations for providing pension information in the workplace, so that businesses can talk openly to their employees about the value of the pension scheme without stumbling into giving financial advice. Kate Smith, head of pensions at Aegon, commented: “Employers play a vital role in the retirement savings of their workforce, but they need a helping hand from the government to ensure employees are on the right track to financial security in retirement. Auto- enrolment has been a great start in getting more people saving for their retirement. But too many people undersave. We need to try to change people’s mind-sets and get them starting to think earlier about what they want from their pension. Helping people to access advice via the workplace could make all the difference.” Money matters RESEARCH CONDUCTED by Barnett Waddingham – Generation WHY? - Money matters in 2018: an employee’s perspective (https:// bit.ly/2HzGeKi) – shows that 43% of the UK workforce think they will retire before the age 65, despite an inability to save for retirement due to the costs of day-to-day living. The survey of 3,000 UK workers also reveals that: ● 51% of respondents state day-to-day living costs as their top financial priority ● almost 60% don’t even have enough savings to last more than three months should they lose their income, and ● just 7% would consider approaching their employer for financial advice or guidance. A key theme is a breakdown in the relationship between employer and employee. People are drowning in financial woes, and employees don’t trust the company they work for to help them or have their interests at heart. Paul Leandro, partner at Barnett Waddingham, observed: “Our concern is that, especially for the younger workforce, where retirement seems so far away, opting out [of auto-enrolment into their employer’s workplace pension scheme] may seem like the most sensible option, especially as they are struggling to deal with the costs of today… Employers need to get closer to their workforce to understand their financial pressures of today.”
Pensions accounting THE SURVEY Accounting for Pensions conducted by Xafinity Punter Southall, the UK pensions consultancy, reveals that pension freedoms could cost UK companies £25bn which reflects a recent study by the Office for National Statistics that showed an extra £21bn of assets transferred out of UK pension schemes in 2017 compared to 2016. The survey also found that accounting assumptions do not reflect the impact of members leaving defined benefit schemes to take advantage of the new pension freedoms. Wayne Segers, principal at Xafinity Punter Southall, said: “Transfer values remain high and this is an attractive proposition for members, but these values are typically worth more than the accounting cost. For a £500m scheme even a small proportion of members leaving could add £7m to their accounting liabilities. However, the recent developments in life expectancy may offset this.” A recent study on life expectancy published by the Continuous Mortality Investigation (CMI) unit of the Institute and Faculty of Actuaries, provided further evidence that the low level of recent improvements in longevity may be due to medium- or long-term influences, rather than being a short-term blip.
| Professional in Payroll, Pensions and Reward | June 2018 | Issue 41 26
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