30 April 2012

Your State Pension Age

The age when you are entitled to receive any State Pension is increasing. There have been various legislative changes in recent years, and some announcements which are not yet law. Here's a quick summary.

For women, State Pension Age is rising from 60 to 65 between 2016 and 2018. It then rises for everyone to 66 between 2018 and 2020. That was in the Pensions Act 2011.

Current legislation is for an increase to 67 between 2034 and 2036, and to 68 by 2046. But in November 2011 it was announced that the increase to 67 is being brought forward to be between 2026 and 2028.

More information - and a pension age calculator - at
http://www.direct.gov.uk/en/Nl1/Newsroom/SpendingReview/DG_192159

... and it's always worth remembering that you can defer taking your State Pension in order to increase it a little, and also that State Pension Age has nothing to do with when you take other pensions (which could be before or after that age), nor with when you actually stop work.

27 April 2012

Can't we make it simple?

I reviewed our gas and electricity supplier at home recently and experienced something of the complication and confusion which I guess that financial advice clients experience!

My objective is always to make things as simple as possible so that clients can make an informed decision about something. But I'm all too aware that I am not always successful - partly because some things just are complicated (try explaining higher rate pension tax relief, or charges levied on unit trust funds, for example!), and partly because the Financial Services Authority expect all sorts of information to be provided so that people have the opportunity to fully know what they are getting into (good in theory but for many people it just confuses them).
So it was interesting to see the amount of information and understanding I needed to acquire even to be able to compare gas suppliers. Not only do you have a standing charge and a cost per unit, but these can vary depending on how many you use, what month of the year it is, etc.. Then you get different levels of fixed prices, early exit charges, billing options, payment options, and so on. And if you add in dual-fuel options then it really starts to get complicated.

Surely there's a case for keeping things simple - I might even be willing to pay a little more for something I understand - or to have access to someone who can explain it to me!

23 April 2012

Should you do a Tax Return?

Useful list from HMRC - when you need to do a tax return. If:
  • Self-employed
  • Company director
  • Income over £100,000
  • Savings / investment income over £10,000
  • More than £2,500 in untaxed income
  • Income from letting out property
  • Foreign income liable to UK tax
  • Employee claiming expenses of more than £2,500
Also worth doing (or at least telling HMRC) if:
  • You're a higher rate taxpayer and have made pension contributions or Gift Aid donations

12 April 2012

What You Need for a Good Pension

Continuing my recent theme on bad news for retirees (I promise to be more positive in future!)... I see some recent research* has looked at the required pension contributions to achieve a reasonable pension income.

In 2000, the average 30-year old could have expected to make contributions of 12% of salary in order to provide two thirds of their final salary from retirement at 65. In fact, it has turned out that they would have needed to contribute 39% of salary to achieve that. And of course to make up the shortfall later means you now have to increase contributions even higher to make up the difference!

It's difficult to see how anyone can make much of an impact on this shortfall - it's unfortunately a question of lowering expectations: working longer, cutting back retirement plans, raising money against your house, not passing on an inheritance, and so on.

If only you'd been a teacher, a nurse, or a civil servant...

*Alexander Forbes National Pension Index

9 April 2012

Bad News for Retirees

Although most people cannot now be forced to retire at a certain age, we don't exactly have complete flexibility on when we do. So it certainly doesn't seem fair that those who want to retire at the moment are liable to get a particularly poor deal.

That doesn't apply if the bulk of your pension income will come from a reliable defined benefit (final salary) pension scheme - such as public sector workers (although many don't seem to realise the value of what they have got).

But if you have a money purchase pension plan and are intending to buy an annuity, things have never been worse. And if you are a man, things will go downhill even further from December 2012. EU rules will stipulate that men - who until then get a better annuity rate due to shorter life expectancy - have to be offered the same rate as women. Women's rates may rise (or they may not!).

The only positive angle on the situation is that there are now a range of other ways of taking an income from your pension which may improve the situation. Advice is needed to navigate your way through the options, but it's essential to look given that these are decisions which will affect the rest of your life.

Good News for Investors?

The first quarter of 2012 has been good for investors, with share prices generally rallying. There is a bit more optimism around that there will be a global economic recovery, and that the eurozone will avoid a collapse. In particular, the US has been leading the world away from the threat of a general recession.

But (.. there's always a but!), the last few weeks have seen a hesitation in that forward progress and the financial world still feels pretty susceptible to any bad news. "There's little room for manoeuvre and no room for policy mistakes" says the IMF.

So it's worth keeping a good spread of investments, including fixed interest, and not going too strong on any one type of investment. Short term winners - not that we invest for the short term - include smaller company funds, and strategic bond (fixed interest) funds.

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