Retirement planning lacking in the UK

 Retirement Planning  No Responses »
Jun 082011
 

 A recent survey by HSBC has found that only 39% of people in the UK have a financial plan for their retirement, a lesser percentage than peole in Malaysia and China.

The HSBC survey, which quizzed 17,000 people in 17 countries, concluded that up to 84% of people in Malaysia were making provision for retirement.

 Half of those asked in the UK thought they would be worse off in their old age than their parents. The survey found that people who were planning for their retirement had saved an average of £123,000 for retirement.  In the UK, this stood at an average of £53,000, although it was found that in relative terms, people in the UK still had pension options that compared favourably with many other countries.

About 21% of the people survey in the UK said they would rely on the state pension as their main source of income.  The National Association of Pension Funds said: “We must begin to think differently about the way we approach financial planning for retirement.

 ”The report suggests that Britons currently have a culture of dependency on the state, which is a false economy. People have to take greater personal responsibility for their retirement and rely less on the state, by planning more effectively and saving more for themselves.”

The Department for Work and Pensions said that it was introducing a system that automatically enrolled people into workplace pensions in order to tackle the issue of a lack of pension planning

 Posted by admin at 11:52 am  Tagged with: , ,

What is your state pension age?

 Retirement Planning  No Responses »
May 192011
 

We all used to acknowledge that that you could claim your state pension at 65 for men and 60 for women. Under the previous government plans, based on recommendations from Lord Turner, to steadily increase the state pension age to 68 for both men and women over the next four decades. 

 In May 2010, the Conservative and LidDem coalition Government initially signalled its intention to bring forward a rise in the state pension age to 66 for men to begin in 2016. However, the Government said it will have to rise even higher in following years. This could see many Britons working today wait until age 68 or even 70 before they get their state pension. 

 In the March 2011 Budget, the Government also revealed plans to link the state pension age to life expectancy in the future. 

 If the pension age rose from now in line with the change in life expectancy over the past three decades (since 1981), someone born in 1970 could be forced to wait until 71.  

  A fresh-faced twenty-something starting out in the world of work today could see their state pension age hit 75. 

MEN  state pension age – a rough guide • Under 32s…………………………… can get state pension at 68*  

• Aged between 32 and 41………………….. can get state pension at 67*  

• Aged between 42 and 56…………………….can get state pension at 66  

• Aged between 56 and 57…….can get state pension at 65 + (see below) 

• Older than 57………………….can get state pension at 65 

 WOMEN state pension age – a rough guide 

• Under 32s…………………………….can get state pension at 68* 

• Aged between 32 and 41…………………..can get state pension at 67*  

• Aged between 42 and 57………………..can get state pension at 66 

• Aged between 56 and 60…….can get state pension at 60-65 (see below) 

• Older than 60…………..can get state pension at 60  

New changes for women only: 

  Proposed changes for women

New changes for women AND men 

  Proposed changes for women and men

 Posted by admin at 2:03 pm  Tagged with: ,

Alternative pension savings

 Retirement Planning  No Responses »
May 192011
 

Pensions are different things to different people, but they go in and out of fashion as ways of saving for your retirement.  Here  are a few pension alternatives.

1. Save in an ISA 

If used properly, an ISA is a good alternative to a pension. 

ISA’s are ‘tax free savings vehicles, just like pensions.  This means that the Government only taxes you on your savings once, ths is in the form of an income tax on your earnings. 

With Isas you’ve already paid your tax and can rest assured that the rules won’t change and the returns in the pot should remain tax free. 

You can put your money in either a cash Isa, which is basically a savings account, or into a stocks and shares Isa – which is a fund that will pick shares, property or bonds on your behalf. 

From April 2010, everyone over 18 years of age has been able to save up to £10,200 per annum, of which £5,100 can be in cash. 

Saving MoneyThink of Isas as long-term savings account – a growing fund that shouldn’t be touched unless it’s absolutely necessary, and even then, replaced when possible. 

 An ISA is probably the most obvious alternative to a pension.  Although the tax man doesn’t offer tax relief on the investment as he does with pensions, growth is generally tax free and you can have access to your fund at any time. With a pension you are restricted to taking benefits from age 55 at the earliest and only 25% in cash, the remainder as a taxed income. 

A couple can now invest up to £20,400 each year into stocks and shares Isas. Like most pensions, investors need to ensure that they are comfortable with the level of risk they are taking as all the tax efficiency could be wiped out if the wrong funds are chosen and fund values fall significantly. However over the long term, Isas have proved to be an excellent and highly tax efficient way of saving for retirement. online-internet-banking.jpg

2. Your employer’s Save As You Earn scheme 

Many large employers offer their employees share option schemes, which are increasing in popularity as a way of providing staff with an opportunity to have a stake in the company that they work for. 

These SAYE or ‘Sharesave’ schemes,  allow employees to save between £5 and £250 per month for three, five or seven years. Employees get a tax-free bonus if they complete the savings plan, on top of the money they have saved.  Employers usually provide employees with the option to in SAYE schemes which can give the employee a discount of up to 20% of the share price at the launch date. 

‘Employers grant employees an option at outset and can give a discount of up to 20% of the share price at launch. At the end of the period, employees choose either to use the money saved, plus the bonus to buy shares, if buying the shares would generate a profit, or have their contributions and bonus returned, if this would give the higher return.’  The only real downside is that employees don’t receive a bonus on thier share valuation at the end of the SAYE period.  

3. Using the equity in your home 

One option that has become increasingly popular as house prices have increased  is to use the equity in your home to help with your retirement financing.  This option basically means that as you move up the property ladder in your early years, you can watch the value of your home increase.  Then when you need money in retirement, you can downsize or take out an equity release plan to release all that cash. 

‘If, for example, you buy a large house, property prices rise, and then you downsize, you’ll be left with more pound notes in retirement.  It can be a good way of escaping capital gains tax. 

However, as with most things this option may only be viable if house prices rise just before your retirement, watch out for a housing crash. 

Another plus is the emergence of a genuine option in equity release. The market has improved significantly in recent years and now offers a genuine retirement funding solution for older people, according to experts. But you will essentially be borrowing the equity and watch unpaid interest on it roll up over time against its value. 

 Posted by admin at 1:04 pm  Tagged with: , , ,

Will you get the full State pension?

 Retirement Planning  No Responses »
Oct 102009
 

Women ‘missing out’ on pensions

pounds and penceTens of thousands of women are missing out on a state pension because of rules affecting part-time staff, experts say.  The Pensions Advisory Service says people who earn less than £95 per job – no matter how many positions they hold – do not get pension credits.

It says such staff are often women who could boost future entitlements by making small changes to their jobs.   The government says reforms will make pensions fairer and more generous for women from 2010.   Until then part-time workers can make voluntary contributions to build up credits, it adds.

Small changes?

Entitlement to the full state pension is based on the number of National Insurance contribution credits made by workers or those on certain state benefits – currently 44 years for men and 39 years for women.  Women who have at least 10 years of contributions will usually be entitled to a reduced pension.

The Pensions Advisory Service, an independent voluntary organisation grant-aided by the Department for Work and Pensions, says only a third of woman currently get a full state pension.   It says many women work in low paid part-time jobs and therefore miss out on National Insurance contributions.   Contributions are not payable on earnings less than £110 a week but those who earn between £95 and this level are given a credit towards a pension by the government. 

Malcolm McLean, chief executive of the Pensions Advisory Service, says a small pay rise could be worth thousands of pounds in a future larger state pension.

“There could be thousands of women earning less than £95 a week either in single of multiple employments who are unaware that by increasing their hours or work slightly and increasing their pay up to the lower earnings limit neither they nor the employer will be required to pay National Insurance contributions but they will be treated as having paid them.”

From 2010, both men and women will need to have paid contributions for 30 years to claim a full state pension.

 Posted by admin at 9:32 am  Tagged with: , ,
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