Pensions Update November 2013

Pensions  update      November 2013 Gaeia is joining the debate and calling for the Government to increase auto enrolment contributions to up to 15%. Gaeia provides retirement planning advice and looks after many group pensions. When providing advice to clients and information to employees, we’re often asked about how much should be put away for retirement. We’ve long advocated, as a general rule, putting as much as 15% of total income into pension contributions in order to ensure a reasonable income in retirement.  And we’re pleased to hear that Joanne Segars, Chief Executive of the National Association of Pension Funds (NAPF) agrees. Speaking at the October’s NAPF conference, Ms Segars noted the success of automatic enrolment, but felt that low contribution rates were an outstanding issue for the pensions industry. “There aren’t many of us who think that the 8% contribution is enough to deliver a decent pension. It’s a good start and certainly better than zero, which is the reality for too many today. But now we are going to have to brave up to this issue, as 12 or 15 per cent are more commonly seen as being the right kinds of benchmarks. We need to start managing expectations now – and set the trajectory so it is a gradual increase. This is a challenge for the next Government – not the one after that or the one after that. I recognise that it’s difficult to have these types of discussions, but we can’t dodge them”  she said. The other area discussed was what happens at retirement. NAPF's research shows that £1bn leaks out of the annuities market each year because people choose inappropriate options within their annuity for their lives, and/or accept the annuity offered by their pension provider without question which very often is poor value. Gaeia can provide annuity advice using Open Market Option to research which alternative annuities are available which in turn should hopefully improve the level of retirement income paid to clients. The difficultly often is for those individuals with smaller schemes where advice isn’t cost effective. Ms Segars states "This isn't just the case for individuals. It's true, too, for schemes trying to get the best deal for scheme members. Our members tell us they can't get access to broking services on decent terms for their scheme members because the scheme is too small or the employees too low pensioned. That cannot continue. It's why the NAPF is investigating what steps we can take, and what services we can offer, to help ensure our fund members and their scheme members get decent outcomes. So watch this space." The other alarming news that came out this month was contained in The Scottish Widows Women and Pensions Report 2013 which shows the latest pension savings position for women and, for the first time, breaks these insights down by age group. Many women are still relying on a partner’s pension planning in retirement and do not realise that this will be either much reduced, or nil, on a partner’s death in retirement. Gaeia strongly encourages all our clients to plan for retirement in their own right and this report confirms that this is an urgent priority for many women. This is an extract of some of the alarming figures contained in the report:

Age   ranges

Findings

18-21 year olds

  •   81% don't have a pension scheme.
  •   30% aren't saving for a pension as they don't  understand them.

22-29 year olds

  •   54% don't have a pension scheme.
  •   83% don't know what an annuity is.

30-39 year olds

  •   21% expect to rely on their partner's income in   retirement.
  •   35% are unsure how automatic enrolment affects them.

40-49 year olds

  •   23% prioritise supporting their children over   retirement saving.
  •   24% expect to rely on their partner's income in   retirement.
If you are approaching retirement and want to know whether or not you should seek advice, just give one of our advisers a call.   Sources: http://www.napf.co.uk/ http://www.scottishwidows.co.uk/extranet/Working/about/reports/womens-pension-report   SGHTBlog/291113

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