Independent Financial Advisers Glasgow News & Guides

The top priority for people intending to retire this year is saving money to ensure they have enough to live on in retirement. Nearly six out of ten people (57%) said saving will be a top priority, according to new research from Prudential.

The insurer’s Class of 2012 study, which looks at the finances and expectations of those planning to retire this year, also found that women are more likely than men to prioritise saving during retirement – 62% of women will make this a priority compared with 52% of men.

Although saving money is a key focus, those intending to retire this year are still determined to have a fun-filled retirement. More than a third (36%) say that spending money on travelling the world will be a priority for them, while 43% will make spending money on enjoying themselves a priority.

Vince Smith-Hughes, retirement income expert at Prudential, said: “Today’s retirees are likely to spend longer in retirement than previous generations so it is encouraging to see that they understand the importance of saving money to ensure they can live comfortably. Saving shouldn’t be regarded as something that suddenly stops once you retire, and the current generation of retirees seems to be more aware of this than ever before.

“Saving as much money as possible, from as early an age as possible, is the best way to ensure you can afford a comfortable lifestyle in retirement. Consulting a financial adviser can also be an important step in helping retirees to make the most of their pension pots.”

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.

The TUC has urged the government to freeze the lower thresholds in the auto-enrolment regime - keeping the bottom of the earnings band on which contributions have to be paid (£5,564) and the earnings level at which auto-enrolment is triggered (£7,475) - at their current levels.

The government is set to introduce a new earnings trigger for auto-enrolment, following their review, which recommended that workers should only be auto-enrolled once their earnings rose above the income tax threshold (£7,475). They would still pay contributions from the bottom of the earnings band.

However, the TUC argues that women would be the main losers from the new earnings trigger as the vast majority of workers with pay between the lower limit of the earnings band and the income tax threshold are women working part-time. The auto-enrolment trigger should therefore be frozen, says the TUC.

The TUC believes that linking auto-enrolment with the income tax threshold is particularly damaging given the coalition plans to increase it to £10,000.

A TUC analysis of official earnings data shows that the new earnings trigger could eventually stop around two million women from being auto-enrolled into pensions.

More than half of corporate financial advisers think that up to 30% of UK workers could opt out of the government’s new auto-enrolment regulations due to be introduced from October 2012.

Independent research from Aviva shows that the majority (98%) of corporate advisers expect some degree of withdrawal by employees from workplace savings schemes they would automatically be enrolled into. Around 20% predict that half of all employees will opt-out, a further 59% forecast that there will be up to a 30% drop out rate, while only 2% expect there will be no drop out. Most worryingly though, half of all corporate advisers think that the largest proportion of opt outs will be in the 35 and under age group.

The research highlights the importance of engaging employees on the benefits of saving in the workplace early, particularly amongst younger workers, many of whom will be saving into a pension for the first time.

Of the top five reasons advisers gave as the main barriers to saving amongst the 35 and under age group, the largest proportion (80%) say they don’t think younger workers can afford to save, while:

• 72% say that they have other financial priorities
• 69% believe that they think they are too young to worry about their retirement
• 63% don’t think they trust pensions
• 47% say that they don’t think the younger employees understand the benefits of a workplace pension compared to other kinds of saving.

The widespread view amongst advisers is that younger workers live in the "here and now" and have other things to worry about at the moment, a view that is echoed by this age group themselves, whose main current financial goals are to buy a house (36%); pay off debts (34%) and pay off their mortgage (20%).

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.

The Government must not make a u-turn on its plans to start automatically enrolling all workers into a pension from next year, the National Association of Pension Funds (NAPF) has warned.

A staggering 38% of British adults (13.6 million) do not have a pension, according to new research. Equally alarming is the fact that 1.4 million people who are 55 and older do not have a pension in place.