22 Jan, 2013
Pension actuaries ignored the greatest risk of all time
According to the latest report from Anglia Ruskin University, pension actuaries have not correctly analysed the risks in certain pension schemes because they left out those posed by climate change and resource scarcity.
The report questions how such professionals ignored 'the biggest risk humanity has ever faced' - despite the fact that these issues have been known for years and the consequences could spell disaster for companies.
Conversely, recent reports also explain that global warming and its associated challenges could wipe out the entire defined benefits pensions industry within 30 years, if companies do not rapidly change course. Experts wrote that ‘the assets of pension schemes will effectively be wiped out and pensions will be reduced to negligible levels’. If the neglected resource constraints are in fact significant, this means that the current models will persistently understate the value of companies’ liabilities.
This could indeed spell disaster for millions of workers who will lose their entire nest egg and will be forced to rely only on their basic state pension, at a time when prices of food, energy and water are rocketing.
If you wish to learn more about safeguarding your pension, speak to a deVere Financial Adviser today.
63% agree that UK pensions are too complicated to understand
A survey by the Department for Work and Pensions found that 63% agree with the statement that the UK pension system is so complicated that one cannot really understand the best thing to do.
The study comes at a time when the UK Government proposed sweeping reforms that would see Britain adopt a one-size-fits-all state pension system. Scheduled to take place in 2017, only 4 years away, the basic pension replaces just 37% of the median retiree’s working income, compared with 61% of the average OECD country. Workers are therefore confused about what their retirement income is going to be.
Pensions experts commented that the move comes without surprise as the UK Government is drowning in its debt. Indeed, the cost of state pensions would rise from 6.9% of GDP in the current tax year to 8.5% by 2060, without such reforms.
Moreover, employees and employers who have contracted out of the state second pension scheme are currently entitled to a discount on their national insurance contributions – which will disappear in five years’ time, thus pushing up their tax bill. This will undoubtedly create more problems for employers who are already struggling to cope with regulations, increased longevity and poor investment returns.
During such times, the deVere Group has created simple, tax-efficient pension planning vehicles that facilitate UK pension holders in planning a comfortable retirement. Speak to a deVere Financial Adviser to learn more.
‘Con trick’ flat-rate state pension expected in 2017
Following months of speculation, the Government is shortly expected to announce that a flat rate state pension will come into force in April 2017.
A universal flat-rate payment, what is expected to be the biggest overhaul in the UK pensions system in decades, would see new pensioners receive merely £144 plus inflation per week – regardless of the contribution they paid during their working life.
Those affected are said to include more than a million private sector workers enrolled in final salary schemes and an estimated five million public sector workers.
However, GMB trade union national officer Brian Strutton warned of ‘a very serious consequence’. He explained that employers are facing an increase in National Insurance contributions of about 3.4% of the NI ranking earnings, whilst for the six million employees affected it will be an extra 1.4%. Most DB scheme employers and members will simply find this unaffordable.
Moreover, the unfairness of a flat rate that makes no distinction between poor and wealthy pensioners is also likely to cause a stir.
The National Pensioners Convention immediately condemned the announcement as a ‘con trick’ for future generations, claiming that women who take time out of work to care for their children will suffer because pensioners will have to make national insurance contributions for 35 years, rather than the current 30, to benefit from the new pension.
Meanwhile, some newspapers have reported that the government is expected to announce that those who have not paid National Insurance for at least 10 years will not qualify for a state pension, whereas those who have paid for less than 35 years will see their pension reduced.
If you wish to learn more about alternative pension planning arrangements that could secure you and your family a comfortable retirement, speak to a deVere Financial Adviser today about retirement planning.
Pensions to be extinct by 2050
pensions will cease to exist according to experts in the field as young
people today are not saving money for their retirement, opting instead
to spend money on today.
Research by pension groups has
indicated how people aged 25 to 34 years old today are not choosing to
save ‘because young people see having immediate access to savings as far
more important than putting money aside for their retirement’, the Telegraph
has reported. The research found that only 12% of people in their 20s
and early 30s have created a pension pot to start saving into — ‘despite
the Treasury offering tax relief on retirement savings’.
result contradicts the recent action taken by the British government to
implement a mentality of saving through the auto-enrolment scheme.
Instead, these young people are opening individual saving accounts
rather than pension pots so they can dip in this sum whenever they need
Indeed, according to pension group experts ‘the word
“pension” does not resonate with Generation Y. Immediate access to
savings is far more important to them than the 2% bribe that is tax
‘Pension saving among young people is extremely low’
because they seek to pay off their student loans; they seek to buy a
house and ultimately they seek to enjoy life but unless they prepare
financially for their retirement years they then must let go of their
‘entirely unrealistic’ assumptions as the research also found how most
of them believed they would retire on £30,000 a year.
Telegraph reports that ‘for this £30,000 figure to be reached, a
25-year-old would have to save £400 every month until they reach
retirement age, assuming an annual return of 5 per cent. Meanwhile a
35-year-old would have to save £750 a month’.
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