Independent Financial Advisers Glasgow News & Guides

The LV= State of Retirement Report has revealed that 6.25 million Britons aged over-50 (28%) have no pension plan in place and look set to rely on just the state pension in retirement, a huge increase on the 1.2 million people who live solely on the state pension today.

The basic state pension equates to an annual income of up to £5,587 and averages at £9,672 a year when you take into account additional benefit income (e.g. additional state pension, pensions credit etc). This is up to 51% lower than the income someone in the UK working full time on the minimum wage would earn, which is £11,477 per year.

Even with Government plans to introduce a Universal State Pension at £140 per week, this will still provide an annual income significantly below the minimum wage.

When asked if they could live on the equivalent of the minimum wage in retirement, 43% said they couldn't live on that alone and over a quarter (27%) said they would really struggle.

For those who have private pension savings, the average income in retirement is currently £7,488 a year. When this is combined with the state pension many people are still only living on marginally more than the minimum wage.

Over half (58%) of those set to retire within five years have become more concerned over the last year about their financial situation and their level of savings for retirement. The biggest worry is the rising cost of food and utilities (76%), followed by the general poor state of the UK economy and national debt (63%). The effect of low interest rates impacting savings (61%), high inflation (61%) and the recent reforms to UK pensions (44%) are all major causes of concern pre-retirees.

A new report from LV= has revealed that retirees in the UK have experienced a 33% increase in living costs since the year 2000.

Research reveals the total expenditure of the UK’s 10.6 million retirees equals £96 billion a year – this means on average a retired couple spends £17,922 a year and a single retiree spends £9,917 a year – or £190.70 a week. With the average pensioner in the UK receiving state pension income of £102.15 a week, retirees are spending up to £88.55 a week (or 87%) more than the average state pension.

The biggest dent to a pensioner’s overall wallet is from food and non-alcoholic drinks, costing £1,411 annually and equating to 14% of their annual spend. The second biggest emphasis of spending is on recreation and culture – single pensioners are spending an average of £1,337 a year.

Pensioners are burning up a tenth (9%) of their annual spend on utilities such as fuel, water supply and electricity – they now spend £918 a year, compared with £635 in 2000. Furthermore, although senior citizens receive discounted travel, the cost of transport and motoring costs (including petrol and vehicle maintenance) add up to an average annual bill of £1,217.

The cost of living has increased significantly since 2000. The biggest percentage rise on the cost of goods for pensioners has been on alcoholic drinks and tobacco which has increased by 57%. Food and non-alcoholic drinks comes second with a 45% hike.

Matt Trott, LV= Head of Annuities said: “Being a retiree in the UK doesn’t come cheap and people approaching retirement need to look at their retirement income options early, to ensure they get the most out of their savings to maintain a good quality of life in retirement.”

People approaching retirement will receive much greater support to get the best possible retirement income under a compulsory Code of Conduct launched by the Association of British Insurers (ABI).

ABI figures show that a third of people do not shop around for an annuity when they reach retirement and, as a result, may be missing out on a higher income, potentially losing thousands of pounds over the course of their retirement.

In addition, many customers who could qualify for an enhanced annuity, due to medical conditions or lifestyle choices, buy a conventional annuity, which may mean they miss out on a higher income during retirement.

The ABI’s Code of Conduct will ensure customers have access to information to enable them to make an informed decision about annuities appropriate to their needs and lifestyle in retirement. The Code continues the work of the ABI to improve customer engagement and contribute to the financial education of customers.

The Code of Conduct will require the ABI’s members to:

• Provide clear and consistent communications to ensure customers are able to make informed and proactive decisions about retirement income products, and are able to shop around for the most appropriate product.
• Prominently highlight enhanced annuities, and the much higher income they can potentially offer, and inform customers whether they offer these products, and how to find out who does.
• Clearly signpost customers to advice and support, both from regulated advisers and government-backed advice organisations.
• Establish transparency in the annuity market so that customers have a clear picture of how individual providers’ product offerings fit in with the wider market.

More than 10% of people who had planned to retire during 2012 are making alternative arrangements and putting off drawing their pension for the time being, according to the latest results from Prudential’s Class of 2012 research.

Of those deferring their retirement, a third claim they do not want to retire yet, while two thirds say they are putting it off because they can’t afford to retire as originally planned.

However, showing that giving up work before growing too old is still an aspiration for many, the average age of people planning to retire this year is 60 years old – a similar age to last year’s survey and seven months younger than in 2010.

Vince Smith-Hughes, Prudential’s retirement income expert, said: “One thing this year’s retirees have in common is actively making choices about when and how they will retire. Although many people think the idea of retiring as early as 60 is out-dated, the majority of this year’s retirees are defiantly sticking to that plan. It’s likely that many of these people will have accumulated benefits in final salary pension schemes that generate an acceptable income in retirement – perhaps signalling that the golden era of retirement for baby boomers isn’t over yet.

“It is, however, undeniable that there is a new retirement reality for a significant number of retirees. People are living longer, and for many, the very real prospect of a thirty year retirement is either unpalatable or unaffordable, hence the decision by many to continue to work. Retirement is also becoming a more opaque concept, with many people working part-time, either out of necessity or desire.

“To stand the best chance of having a comfortable retirement, which starts when you want it to, it’s important to seek professional financial advice on saving for a pension and on what post-work income options are available. Saving as much as you can as early as you can will help you to gain more control over your retirement."

The European Commission has published a White Paper on adequate, safe and sustainable pensions, which looks at how the EU and the Member States can work to tackle the major challenges that confront our pension systems.

It puts forward a range of initiatives to help create the right conditions so that those who are able can continue working - leading to a better balance between time in work and time in retirement; to ensure people who move to another country can keep their pension rights; to help people save more and ensure that pension promises are kept and people get what they expect in retirement.

The White Paper proposes, in particular, to:

• Create better opportunities for older workers by calling on the social partners to adapt work place and labour market practices and by using the European Social Fund to bring older workers into work. Enabling people to work longer is a major focus of the European Year 2012 for Active Ageing and Solidarity between Generations;
• Develop complementary private retirement schemes by encouraging social partners to develop such schemes and encouraging Member States to optimise tax and other incentives;
• Enhance the safety of supplementary pension schemes, including through a revision of the directive on Institutions for Occupational Retirement Provision (IORP) and better information for consumers;
• Make supplementary pensions compatible with mobility, through legislation protecting the pension rights of mobile workers and by promoting the establishment of pension tracking services across the EU. This can provide citizens with information about pension entitlements and projections of their income after retirement.
• Encourage Member States to promote longer working lives, by linking retirement age with life expectancy, restricting access to early retirement and closing the pension gap between men and women.
• Continue to monitor the adequacy, sustainability and safety of pensions and support pension reforms in the Member States.

As the economy continues to falter, employers in the US have become increasingly reticent about their employees' ability to successfully save for retirement, according to a new survey by Aon Hewitt. In response, employers are embracing innovative solutions to help rethink their retirement benefits plan strategies and assist their employees in better preparing for retirement.

Aon Hewitt surveyed more than 500 large U.S. employers, representing over 12 million employees, to determine their current and future retirement benefits strategy. According to the findings, just 4% of employers are very confident that their workers will retire with adequate retirement assets, down substantially from 30% in 2011. Additionally, only 10% of plan sponsors feel very confident that their employees are taking accountability for their own retirement success. Fewer than one-in-five employers (18%) are confident that workers will be able to manage their income during retirement.

While more than half (52%) of employers will focus on encouraging workers to take greater accountability for their retirement savings in the year ahead, they aren't asking employees to do it all on their own. Almost half (44%) of employers will focus on helping workers retire with enough money and most (60%) say that they will place a greater emphasis on helping employees understand and use the employer-provided resources available to them.

Employers also continue to enhance their defined contribution (DC) plan features. As in years past, plans will continue to add automatic features, in addition to expanding savings choices and offering employees more resources to help them meet their needs while in retirement.

Automatic enrollment has been one of the biggest retirement trends in recent years, and will continue to be in the year ahead, albeit with an enhanced focus on outcomes. Currently, 55% of plan sponsors automatically enroll workers in their employer-provided defined contribution plan, up from 24% in 2006.

Nearly one in five of those planning to retire this year will do so with outstanding debts, according to new figures released by Prudential. The Class of 2012 research looks at the finances and expectations of those planning to retire this year, and found that the average amount owed by debtor retirees is £38,200.

The proportion of people retiring in debt this year (18%) has fallen slightly from 20% in 2011. However, the average amount owed has increased by more than £5,000 from last year’s figure of £33,100 per person retiring with debts.

Outstanding mortgages and credit card bills make up the bulk of the Class of 2012’s debt. Half of those with debts owe money on their home loan and more than half (51%) are struggling with outstanding credit card bills.

The results of the survey also give an insight into the effects of outstanding debt on the finances of a new retiree. On average, those planning to retire this year with debts will be making monthly repayments of £260, which equate to a fifth of their expected £1,290 a month income.

Paying off debt could take this year’s retirees an average of nearly four years and 8% of those who will still owe money when they retire in 2012 say that they will never be able to pay it off. One in four say that they will be making repayments of £500 or more a month.

Men retiring in debt this year are likely to owe substantially more than women, with average debts of £45,300 compared with £29,400 for women. Around 20% of men expect to have debts when they retire compared with 16% of women.

A generation of 'Wearies' – Working, Entrepreneurial and Active Retirees – could be forced to continue working into their seventies and beyond due to hardships caused by the looming pensions crisis.

Effectively ruled out of employment by age, they will set up their own businesses, according to the study for Friends Life by think tank Future Foundation. Many of tomorrow's OAPs will look to supplement their retirement savings by becoming self-employed in their later years.

Many are likely to supplement their income buying and selling goods on websites like eBay, while others will turn their front rooms into offices or cottage industry workshops or a nursery. Those with manual skills might set up gardening or home help businesses to make money helping neighbours, academics predicted.

Martin Palmer, head of corporate benefits marketing at Friends Life, said:

"We're expecting the traditional image of the pensioner with slippers and rocking chair to change completely.

"Many will not have saved adequately for a secure retirement and, with years of fiscal austerity taking their toll, by 2020 many people in their seventies simply will not be able to afford to give up working.

"Necessity is the mother of invention and Wearies will be among the most innovative and entrepreneurial contributors to the UK economy, despite their senior years."

People from across Britain were asked about their attitude to working in retirement as part of the study, entitled "Pensions: Crisis and Reforms".

Over half (51%) of those who are already retired said they would be prepared to do part-time work to boost their pensions. But the figure rises to three-quarters (75%) among those who are yet to retire.

Women have more financial independence than ever, with increasing numbers in charge of household finances.

But though they may excel in budgeting for the family, new research shows women still lag behind when it comes to pensions.

A study by the Future Foundation for Friends Life has exposed a gulf in understanding across the genders with men more aware of how much their pension is currently worth, how much income they will have in retirement and whether they will be able to retire early.

The survey also showed men are more likely to realise they can change how much they save and where their pension is invested.

Experts said the study suggests that women face a "rougher ride" than men over coming years. It found that 59% of women were not saving for a pension, compared to just over half (52%) of men.

Nearly two-thirds of men (65%) said they knew how much their pensions were worth, compared to only half of women (50%), while more than two-thirds (68%) of men claimed to know what their retirement income would be compared to fewer than half (49%) of women.

When it came to where their pensions were invested, 48% of men were aware, compared to just 37% of women. And 59% of men said they understood they could alter contribution levels compared to only 39% of women.

Asked whether they knew whether their pension would allow them to retire early, nearly two thirds of men (63%) claimed to know compared to just 47% of women.

Pensioners will benefit from the biggest cash increase to their basic State Pension from next April as it goes up by September’s Consumer Prices Index of 5.2% - an increase of £5.30 a week.

On the one year anniversary of the Silver RPI, published by Age UK Enterprises, latest findings show that over 55s have seen an 18% rise in living costs since 2008 – almost 5% more than the general population. This means that someone aged 55 or over is now, on average, £978 a year worse off than official measures recognise. This increases to over £1,100 in additional annual costs for those aged 65-69.

A recent publication from the Office for National Statistics has revealed that in September 2010 only 48% of female pensioners received a full Basic State Pension (BSP), compared with 87% of male pensioners. Many women in the current generation of pensioners failed to build up full or near-full BSP entitlement under the system in place before 6th April 2010, mainly because of broken work histories and part-time work patterns.

The effects of inflation can seriously damage retirement wealth. New data released by Standard Life shows that a 90-year-old who retired in 1981, when petrol cost 35p a litre, would have seen the purchasing power of a £10,000-a-year level pension income fall to just £3,207 today.

Public confidence in pensions has hit a record low in the ongoing fallout from the financial crisis, according to the National Association of Pension Funds (NAPF).

The Department for Work and Pensions has published research exploring how people feel about their standard of living and income in retirement and their feelings about their financial future.

A new report to be published by think tank IPPR suggests that being out of work for more than two years severely curtails the chances of someone getting a new job. IPPR analysis indicates that 100,000 older workers aged 50+ who lost their jobs at the start of the recession are now at risk of being forced to retire earlier - with a lower pension - than they planned.

Standard Life has revealed the top retirement hotspots outside the UK. These are: 1st Spain; 2nd Australia; 3rd USA; 4th France; 5th Ireland.

Millions of Brits are seeing their retirement dreams undermined by the rising cost of living and inadequate financial preparation for their retirement, according to new research.

The findings of the latest Saga Quarterly Report reveal a sharp fall in standard of living for older generations. For the third quarter in a row, Saga's Quality of Life Index has fallen, as soaring price levels continue to erode living standards.