Pensions

Lucy Warwick-Ching

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Lucy Warwick-Ching

The announcement of a May 6th election has triggered a flurry of policy statements from the political parties.  So what are the three main parties saying about pensions? 

A handy tip sheet on their flagship policies has just landed in my email inbox from Hargreaves Lansdown, so I’ve summarised it here:

LABOUR:

Flexible retirement
The government has brought forward a review of the default retirement age, currently set at 65; the options include abolishing the default retirement age or increasing it
Meanwhile Harriet Harman has been quoted effectively pre-empting the result of the review by calling for a complete abolition

Lucy Warwick-Ching

I just met with Dave Harris, managing director of sales and marketing for Living Time to discuss the growing possibilities for people approaching retirement. 

For some people, a traditional drawdown plan or a self invested personal pension will work well in retirement. But Mr Harris points out that there are now a few new solutions in the market, which will give you a certain regular income and capital outcome over a fixed period. These are called fixed-term annuities and variable annuities.

Before you can decide which plan to go for, Mr Harris recommends being armed wih the right questions to ask your adviser when researching a retirement product:

Lucy Warwick-Ching

With just a couple of months to go until April 6, when income tax will rise for higher rate taxpayers, experts are urging people to review their pension provisions.

Some of the factors that need to be considered include:

* How to use up your allowances

* Changes to retirement ages

* Uncertainty over annuity rate directions

* Retirement options, drawdown, temporary annuities

* Government auto-enrolment plans

To help you with those difficult issues Tom McPhail, pensions specialist at Hargreaves Lansdown, will answer readers’ queries on end of year tax planning for pensions on Thursday 18 February at 3pm.

For more information about this Q&A and to read the answers to your questions go to the indepth Q&A page or mailto:ask@ft.com?subject=mcphail.

Lucy Warwick-Ching

So there were no surprises in the Bank of England’s decision to halt quantitative easing and hold the base rate in February. But what did those in the know have to say about it?  It seems that while some questioned whether the policy had worked, others said it had been positive for the UK.

Nick Hopkinson, Director of Property Portfolio Rescue on the possible affect on property:

“The Bank of England has dug a hole for itself by committing to such a vast Quantitative Easing programme and it is about time that the scheme was halted. QE and the artificially low base rate are combining to drive up inflation, creating another asset bubble. The Bank is now faced with the simultaneous need to control inflation and to avoid pulling the rug from beneath the economy as it struggles to recuperate.

“With the future uncertain, financially stretched homeowners coping with the reality of higher taxes and falling household incomes should take action now to ensure they are not at risk of falling into mortgage arrears when the base rate is increased and repayments are pushed up.”

Alice Ross

Compulsory annuitisation is such an awful phrase. Most people think it’s an awful concept too. These people include the Tories – and as of yesterday, it’s looking more likely that something might be done about it.

Lucy Warwick-Ching

There are a number of important changes to pensions coming into force, this year, some requiring action before the end of the tax year in April.

Ben Smaje, managing director at Kennedy Black gives us five top tips to ensure you get the most from your retirement planning:

1. If you are aged between 50 and 55 and plan to start taking benefits from your pension in the next few years, then you should consider starting now. The statutory minimum retirement age is rising from 50 to 55 on 6th April, but if you crystallise your benefits in advance of that date then you will not fall foul of the change.

Ellen Kelleher

  
This afternoon, Tom McPhail, head of pensions research with Hargreaves Lansdown, sent a list of how-to-web sites for those seeking advice on pensions. Here are three suggestions:

Direct Gov www.direct.gov.uk
 
This is a government site with information on a host of subjects, from battery recycling to blue badges for disabled motorists. The pension section has a series of sub-sections including a Beginners Guide to Pensions, State Pensions, Pension Credit, Company and Personal Pensions, National Insurance etc.

Hargreaves Lansdown www.h-l.co.uk
 
The Hargreaves Lansdown site has a library of free consumer guides on pension and tax planning and investing, as well as fund manager interviews, calculators and stock analysis, telephone helpdesks with real people who know what they are talking about and access to advisers if needed. Unlike the other two listed here, Hargreaves Lansdown is a commercial organisation but all the information is free; no jargon, no gurus, just helpful.

TPAS www.pensionsadvisoryservice.org.uk
 
Independent voluntary service grant-aided by the DWP, the TPAS website has news, calculators, guidance, telephone advice and links to other government sites. Straightforward. User friendly. No jargon here.
 

Lucy Warwick-Ching

“Pensions without the piffle” is the catchline for an industry website which claims to be able to cut through the jargon of the pension industry.

The site, which will be run by newly-recruited pensions guru Steve Bee and is called JargonFreePensions.co.uk, will go live on Thursday with Bee’s first blog since joining as managing pensions partner from Scottish Life.

As a follower of Steve’s blog BeeHive – one of the few pensions news and analysis blog to be written in non-technical language – I will be logging on on Thursday to see if Bee really can cut through the jargon that seems to swamp the retirement industry.  

 Related links

Cutting through the pensions jargon (Money Show podcast, Aug 29 2009)

Ellen Kelleher

Analysts from the Pension Protection fund are offering a belated Christmas gift to those of us who have lost sleep over the erosion in the value of our pension schemes. They say that the financial position of the UK’s 7,400 private final salary pension schemes improved in December, falling from £93bn to just £33bn during the course of the month.

But the news is not cause for celebration in all social circles.   Pensions adviser Fraser Smart, a director at Buck Consultants, is skeptical about the PPF’s research and claim the exposure of a number of pension portfolios’ to risky assets remains too high. Here are some of his concerns:

“These numbers belie the seriousness of the national pension fund deficit.   The improvement in the deficit level indicated by the PPF results from a combination of  high equity market returns and a simultaneous increase in gilt yields, following on the heels of technical changes to the calculations in October which had already reduced the liabilities by £70 bn.  It means we’re now seeing some of the most favourable opportunities for funds to secure their liabilities and de-risk affordably for the best part of two years.  But a very large number of private schemes are avoiding de-risking because, we believe, of the fear of locking in deficits.  Funds must ask themselves where the greater risk lies -  crystallising the value of liabilities in relatively favourable conditions or to continue to expose funds and their members to the mercy of volatile markets. 



The FT’s Money blog is a forum for the latest news and insights from the UK’s personal finance scene. Matthew Vincent, the editor of FT Money and his team of reporters will upload their views and insights on what’s happening in the industry and how this affects people’s finances.

This blog is no longer active but it remains open as an archive.

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About our bloggers

Lucy Warwick-Ching is the FT’s new Money Online Editor and has been a UK Companies reporter covering tobacco, pubs and leisure companies as well as the deputy editor on House and Home.

Matthew Vincent is the FT’s Personal Finance Editor and was previously the editor of Investors Chronicle, where he also devised the award-winning online video The Market Programme, and produced the BBC-FT standalone magazine ‘How to be Better Off’. He presents the weekly FT Money Show audio podcast, and previously worked on the BBC TV programmes Short Change and Pound for Pound.

Alice Ross is deputy personal finance editor of FT Money. She specialises in pensions, investments and investment trusts. Alice joined FT Money in April 2008 - prior to that she was deputy editor at Money Management magazine.

Ellen Kelleher has been a personal finance reporter in the UK for close to four years. Before arriving in London, she worked in the FT's New York bureau where she covered the insurance sector.

Steve Lodge is a personal finance reporter on FT Money specialising in savings.


Josephine Cumbo has written about all aspects of personal finance but currently specialises in insurance. She also covered company news for FT.com. Prior to working at the FT she was a news reporter for the ABC.

Tanya Powley is a personal finance reporter on FT Money specialising in mortgages and the housing market. Tanya joined FT Money in November 2009 after working in Australia covering personal finance for the Australian Financial Review and its sister magazine Asset. Prior to that, Tanya wrote about mortgages for UK trade newspaper Money Marketing.

Jonathan Eley is editor of Investors Chronicle, and has been with the title for ten years. Before that he worked for newswires and trade journals in London, New York and Hong Kong.

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