WAITING LONGER FOR YOUR PENSION

TODAY’S BLOG

WAITING LONGER FOR YOUR PENSION

The start of the next increase to state pension age (SPA) is still nearly five years away, at which point it will be phased up to 67 by April 2028.In the meantime, the Government has confirmed a rise in pension age for private pension provision that was originally suggested in March 2014.

THE NORMAL MINIMUM PENSION AGE – NMPA

The increase is to be made to the normal minimum pension age (NMPA). This is the earliest age from which non-state pension benefits can be drawn, subject to very limited exceptions. The current NMPA is 55, set in 2010 as 10 years below the then male SPA of 65. The new NMPA from 2028 will be 57, 10 years below what by then will be the SPA for both sexes.

BORN IN 1971 PENSIONS DELAYED

57 IS THE NEW 55

The Government has indicated that there will be exceptions to the higher NMPA covering:

  • Members of the armed forces, police and fire services pension schemes, who will have a ‘protected pension age’ of 55;
  • Anyone who has a protected pension age for scheme benefits arising from the last increase in NMPA; and
  • Anyone who, on 11 February 2021, had a right under a pension scheme to draw benefits before age 57. In this context, the right has to be unqualified, i.e. there must be no requirement for consent from any other person, such as a trustee or employer. It will also apply on an individual scheme basis, so you might find some benefits can be drawn before 57, while others cannot because consent is required.

It would appear that if you have a personal pension established by the February cut-off date, you will generally meet the ‘unqualified right’ requirement, giving you a protected pension age of 55. However, some experts believe this could change when the necessary legislation emerges. When the previous NMPA increase was made, there was no such protection for personal pension owners.

Born between April 1971 and April 1973?

If you were born on 6 April 1973, you are potentially the worst hit by the change, unless you have benefits that are subject to a protected pension age. That is because you will reach your 55th birthday on the very day the NMPA increase to 57 takes effect – unlike the changes to SPA, there is no phasing in of the change. If you were born in the preceding two years, you will be in the odd position of being able to draw benefits at age 55 until 5 April 2028, but then need to wait until you reach age 57 before setting up any new drawings from you pension.

A realistic retirement age?

The idea of retiring at 57, yet alone 55 may sound appealing, but is it at all realistic? Consider these two factors for a start:

1.    At age 57, the average man has 27 years of retirement ahead of him, while the average woman has 30, according to the Office for National Statistics. 1 in 4 of those men will live until age 92, the corresponding age for 25% of women is 94.

2.    From 2028, there will be a gap of at least 10 years before your state pension starts. With the current state pension of £179.60 a week, that means an income hole to fill of at least £93,400 (plus inflationary increases).

A recent report showed that the average age of those ‘retiring’ in 2021 was 60. However, it also revealed:

  • 37% had brought forward their retirement in the past year, with the three main reasons being pandemic related;
  • 27% will work part time to support themselves in retirement;
  • 37% were worried about not having enough money to last through retirement;
  • Two thirds of retirees risked running out of money in retirement according to calculations by the report’s authors, even though the planned average total spend was a modest £21,000 a year.

ACTION

The change to a normal minimum pension age of 57 is largely irrelevant – few people can afford to retire so early – but it might affect you if you plan to draw some benefits early, e.g. to clear a mortgage.

Are you sure your planned retirement age is not going to leave you among those two thirds who might run out of money before they run out of life? Thats the main purpose of proper financial planning – to help ensure that your funds do not run our before you do. The sooner you know where you are, the quicker you can, if necessary, make the necessary adjustments.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

WAITING LONGER FOR YOUR PENSION2021-09-27T19:34:16+01:00

PENSIONS AND DIVORCE

TODAY’S BLOG

PENSIONS AND DIVORCE

In 2020 something like 10,500 people shared their pension as part of divorce settlements. Obviously, those finally settling in a divorce last year are likely to have started the process before 2020, so the impact of pandemic lock-ins on marriages is not yet observable with data.

Pensions used to be a regarded as pretty dull, often a “last on the list” of a divorce, but of course their value has been greatly underappreciated.

As global equity markets have risen, the value of a pension fund has also reflected this (or should have) and they have become an increasingly important asset in divorce settlements, second only to the family home.

If you do receive a spouse’s pension as part of a divorce settlement, it would be wise to make some contributions to your own personal pension rather than using for using it for day-to-day expenditure. As the value of pensions has surged in recent years it has become much more difficult to use spare cash to buy an ex-spouse out of their share of a pension. This is a major reason for 2020s high number of split pensions in divorces.

There are two different ways that a pension can be shared in a settlement. Firstly, a Pension Sharing Order will mean a direct transfer between one pension pot and another. The second, a Pension Attachment Order will mean the pension pot remains in the same hands as before, but the income derived from it is split. Sadly, in an understandable attempt to save money many have turned to DIY law and divorce is no exception. Where settlements are undertaken without legal representation, is often likely to create problems. This is because agreements made today may be reopened tomorrow if paperwork is filed incorrectly or is incomplete. Naturally, this is more likely than when professional lawyers are involved in proceedings. The caution expressed is warranted because these DIY divorces accounted for 58 percent of all divorce settlements in 2020/21 according to the Ministry of Justice. A striking example of the problems that may arise after DIY divorces came in 2016 when a successful green energy entrepreneur was ordered by the Supreme Court to pay his ex-wife £300,000 years after their split. This was the case because both parties had earlier neglected to waive the right to make more claims against each other. While not so bad for the party receiving £300,000, many may be startled to realise that they may be vulnerable to such claims themselves if they went through a DIY divorce. I certainly sympathise with the intention to save money, but there is a good reason why there are professionals. DIY is not without significant risks and complete responsibility.

TWO WAYS TO LEAVE YOUR LOVER

There are two different ways that a pension can be shared in a settlement. Firstly, a Pension Sharing Order will mean a direct transfer between one pension pot and another. The second, a Pension Attachment Order will mean the pension pot remains in the same hands as before, but the income derived from it is split.

Sadly, in an understandable attempt to save money many have turned to DIY law and divorce is no exception. Where settlements are undertaken without legal representation, is often likely to create problems. This is because agreements made today may be reopened tomorrow if paperwork is filed incorrectly or is incomplete.

58% TRY A D-I-Y DIVORCE

Naturally, this is more likely than when professional lawyers are involved in proceedings. The caution expressed is warranted because these DIY divorces accounted for 58 percent of all divorce settlements in 2020/21 according to the Ministry of Justice. A striking example of the problems that may arise after DIY divorces came in 2016 when a successful green energy entrepreneur was ordered by the Supreme Court to pay his ex-wife £300,000 years after their split. This was the case because both parties had earlier neglected to waive the right to make more claims against each other. While not so bad for the party receiving £300,000, many may be startled to realise that they may be vulnerable to such claims themselves if they went through a DIY divorce.

I certainly sympathise with the intention to save money, but there is a good reason why there are professionals. DIY is not without significant risks and complete responsibility.

That said, I remain confounded by the lack of attention to cashflow modelling in a divorce settlement. It would make the agreements easier to achieve with clarity about the needs of each party.

If you have a friend that is contemplating divorce suggest they get a proper cashflow done for them. You know where I am!

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

PENSIONS AND DIVORCE2021-09-07T17:30:28+01:00

GOOD COP STORY

TODAY’S BLOG

GOOD COP STORY

Regulation is a good thing. There are a lot of crooks out there and when it comes to your money, there are loads of ways crooks seek to part you from it. I may get exasperated with the process, find the focus often in the wrong place, but I can assure you that regulation is not easy, there is legal due process. It could and should be easier.

Scams and financial crime, adviser firms ripping people off and going bust end up costing the remaining advisers a lot of money. We are the insurance, or a large part of it, stumping up funds in the form of regulatory fees and levies, which are now at such alarming levels, that there is genuine cause to pause and wonder if any financial adviser is actually sustainable.

So some good news of bad guys getting caught and the FCA able to now get on with their job. Long story short…

Lots of people were ripped off moving their pensions into a SIPP, (there is nothing wrong with a SIPP, but as ever, its about being in the wrong hands). Once the money was in the SIPP, it was invested into what I can only describe as joke/scam investments that promise high returns. They pander to those that don’t understand the stockmarket (or investing) as the “investments” are not listed on the stockmarket. Its junk, simple as that. The “adviser” charged multiple fees, all of which were almost certainly way above a typical adviser fee/charge. These sorts of “non-regulated” investment funds (I struggle to even call it a fund) tend to pay enormous commission (they are not regulated).

Cheers to the FCA

HANG ON DOMINIC, I HAVE A SIPP, SHOULD I WORRY?

Do we move pensions to SIPPs? Yes, often! Because they can be brilliant, cheap to run and offer a vast range of REGULATED retail funds for us to use to grow your money. Some are more expensive than others, but our job is to select one that is suitable for you (if it works, cost effective, value for money, provider financially robust etc). Our fee structure is easy to understand 1% a year.

What rip off advisers do is charge the SIPP all sorts of fees and pick “funds” (not regulated ones) that pay them additonal “fees” as well. The driving motivation is to fleece the investor, not to make good investment decisions, but to take as much money out of your pension for themselves. Let’s call a spade a spade.

TIME FOR A CELEBRATORY DRINK

I am delighted, with the news that these criminals have been caught! I may even pour myself a drink before noon to celebrate. Sadly, it will likely take years to attempt to get money back to investors, most of it won’t be returned, it will leave many in dire straits for their own retirement plans and all of them will understandably think all advisers are untrustworthy and so continue to perpetuate the story that investing is bad, advisers are bad, pensions are bad, the stockmarket is bad… yet it is precisely because they didnt use a proper adviser, or a proper investment that its ended up like this. Very sad, wont help encourage people to save, more likely to cause the reverse!

NOT SOPHISTICATED INVESTORS

Something like 2,000 investors were persuaded to move their pensions into a SIPP and then placed the money into “alternative assets” such as tree plantations, hot pods and property in Brazil. Something like £92m was moved into these “assets”. That’s actually a low average pension size of about £46,000 – so these 2,000 people hadn’t saved much either, it probably was their life savings in pensions. So, whilst I risk generalising, these are not sophisticated investors, they are precisely the opposite and less able to tell a investment duck from a swan.

There is more to it than this (see the links at the bottom) but suffice to say the FCA are now ready to deal with the company, its Directors and will attempt to get client money back. Here I have to admit to cynicism, as £92m will almost certainly never get returned, I imagine 10% of it is more likely.  The Directors of Avacade and Alexandra Associates have already been ordered to pay £10.7m in restitution to investors (averaging £5,300 to each investor). Somehow I suspect to hear “ we don’t have the money, its been spent on legal fees, defending the indefensible, and a Ferrari or two…. Oh and the company is now bust”.

So if you have a friend that has ever had any contact with Alexandra Associates (UK) Ltd, or Avacade Future Solutions (AA) or Craig and Lee Lummis, please urge them to get in touch with the FCA. In truth you probably don’t, because £46,000 in a pension fund is not likely to be the sort of friend you have unless they are quite young.

Well done FCA, very glad to see another one caught. I do however wish you would name and shame the SIPP providers that not simply allowed, but facilitated this to happen.

EVIDENCE & LINKS

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

GOOD COP STORY2021-08-05T12:23:02+01:00

ARE YOU BEING SCAMMED?

TODAY’S BLOG

ARE YOU BEING SCAMMED?

OK I admit that I am often sceptical about surveys, the sample sizes are often too small to infer anything of significance. However, in this instance, even if the survey is bogus it is certainly worth reminding you about scams – and something that you can and ought to pass on to your friends.

A survey for Liverpool Victoria (LV) found that about 14% of the adult population (about 7.6m adults) have been hit by a pension scam. Double this number were concerned that they might fall prey to a scam (a pension scam to be precise). Half admitted that scams were hard to spot and around 41% wanted help knowing how to do so and how to prevent being scammed.

WHY TARGET A PENSION?

Aside from your home, your pension is probably your largest or most valuable asset. Scammers know this, they also know that the majority of people don’t know much about pensions, find them very dull and full of jargon. They often don’t realise how much they are worth and rarely treat them as though they are the family heirlooms that they are.

As your adviser (if not yet, then get in touch) I have been explaining the importance and value of your pension for many years. You know that we focus on using the most modern pensions to take advantage of pension freedoms and evidence based low-cost investment strategies. It is your future source of income (or a current one) and may well be something you leave to your beneficiaries.

ARE YOU BEING SCAMMED?

BEWARE THE FREE LUNCH (REVIEW)

However, for those that do not want an ongoing relationship with their adviser, minimising costs is a significant appeal, having a “free” pension review – well music to their ears rather than any recognition of alarm bells. For most of my working life financial advice has been generally touted as free. It isn’t, it never has been and that is frankly the biggest source of all the problems.

COLD CALLING

A friend of mine, Darren Cooke started a lobby in 2016 to end cold calling. Most advisers joined the movement which resulted in the banning of cold-calling about pensions from 2019. Yet it still happens. It is banned, but there you are.

PENSION LIBERATION

There is no such thing, unless you consider liberating your pension from you a form of liberation – I call it theft. You cannot access your pension before age 55 except for a very, very rare number of instances. Safer to assume you cannot.

Moving your pension to a SIPP (Self-Invested Personal Pension) is absolutely fine BUT only if you are using properly regulated funds within it. Not offshore weird stuff like teak farms or storage boxes, car parks or some other daft “asset” that I can actually set on fire.

NEW FREEDOMS, NEW TEMPTATIONS

Taking your pension is much easier than it used to be. There are new (2015) pension freedoms which have made pensions much better than they were. However, with greater freedom has come greater choice and increased responsibility – yours (and mine). A crook will exploit some basic knowledge (rules have changed) pander to misinformed opinions about stock markets “they are risky and lose you money” and will offer something that sounds altogether better – guarantees, no stock market involvement, high returns -much better than your cash and sometimes money now…. All for free.

Sadly, many do not remember the adage “if its too good to be true, it probably isn’t”, fewer still seek out a financial adviser and if they do, may well be befuddled by what restricted or independent means (invariably a restricted adviser will not mention it, even though they are meant to do so clearly). When a regulated adviser provides advice, he or she is liable for it. I can assure you that we take this very seriously as the liability rather unreasonably, extends beyond the grave.

HANG UP

If you have a friend that you think is being scammed or you are approached yourself, hang up the phone and get in touch with me. I have seen too many people get scammed for one lifetime. A good site to check out is the FCA SCAM SMART site.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

ARE YOU BEING SCAMMED?2021-07-09T18:52:31+01:00

HOW MUCH FOR A HAPPY RETIREMENT?

TODAY’S BLOG

HOW MUCH FOR A HAPPY RETIREMENT?

Doubtless your will have heard of Which? Magazine. They conducted a survey recently in an attempt to understand how much is really enough for people to have a comfortable retirement. They concluded that a two-person household needs an average annual income of £26,000 for a comfortable retirement.

However you have coped with the pandemic, many people have not been able to spend money in the way they normally would. Many have saved the sums that would have been spent on holidays, travel, commuting, work clothes, weekday lunches, meals out and so on. This has given many of us the opportunity to pause for thought and reflect on how much we spend and the lifestyles we lead.

Some people have elected to retire earlier than they had planned, some have had this forced upon them. In practice, the warning signs for higher unemployment have been around for some time. We shall all begin to see the reality of things once the lockdown ends properly and the furlough system comes to an end. I do not see this going well. I implied, no… I stated that the Budget in March worked on the assumption of unemployment rising by 500,000 over the next 2 years with the largest increase in the current 2021/22 tax year.

A BREAD & BUTTER LIFESTYLE

£26,000 OR £19,000

Anyway, many have been giving thought to how much income they are likely to need when they stop earning. In February, Which? asked around 7,000 retirees about their spending.

The findings can be used as a guide to how much people are likely to spend and how much they might need to save, factoring in the state pension and tax bills. Couples need a pot of around £155,000 alongside their state pension to produce the annual income for a comfortable retirement of £26,000 via pension drawdown – or just over £265,000 through a joint-life annuity. Two-person households would need around £442,000 in a drawdown plan to fund the luxury retirement target (£41,000 per year) – or £589,000 if they’ve taken the full 25% tax-free lump sum available at the outset. If you opt for the guaranteed income provided by a joint-life annuity, you’ll require an initial fund of around £757,000.

For single-person households, achieving a comfortable retirement would mean a pot of around £192,290 alongside the state pension to get to an annual income of £19,000 via pension drawdown, or £305,710 through an annuity. For a retirement at the ‘essential’ level, single-person households would need £77,350 in a pension drawdown or £123,365 to buy an annuity plan to meet an annual target income of £13,000. A couple receiving the current average amount of £155 each per week will get just over £16,000 a year to add to private pensions. Pension drawdown figures are based on the savers withdrawing all of their income over 20 years from the age of 65, with investment growth of 3%, inflation at 1% and charges levied at 0.75%.

TWADDLE – THAT THING ABOUT ASSUMPTIONS

So let me respond by clearly saying “twaddle!” but it’s a helpful guide.That is all it is, there are huge holes in the assumptions and thinking, for starters, assuming a 2 decade retirement. Life rarely happens so “neatly”.

Over the years our processes have evolved with the technology that is available. We stress test your financial plan each week. Considering the likelihood of your life expectancy to the tenth percentile… which means the 1 in 10 chance you live a really long time. We consider sustainable income levels that fluctuate with inflation and changing investment returns based upon historical facts rather than regulatory unicorn utopias.

In any event, why would you care about a survey where your lifestyle is dictated? Surely your financial plan should be about protecting and ensuring that your current lifestyle endures as long as you do…. Or do you want less?

That’s why it is important, no – why its vital to have your own plan, based on sensible assumptions that we review together. Unless you have some mind-blowing news for me, you get one life and the clock is ticking. So have your own plan, know what you want and check with us that you are on track.

Need help? Know someone that does? get in touch... share the truth. It won’t hurt.

Its Your Lifestyle: how much is enough?

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

HOW MUCH FOR A HAPPY RETIREMENT?2021-06-23T18:13:55+01:00

RETIREMENT PLANS BEFORE ITS TOO LATE 50+

TODAY’S BLOG

50+ SLEEPWALKING TO RETIREMENT NIGHTMARE

A growing number of people are at risk of being unable to afford a decent standard of living after retirement, according to a new report released this month. The report, ‘What is an adequate retirement income?’ estimates a quarter of people approaching retirement, the equivalent to five million people, are at risk of missing out on the income they need.

The report by the Pensions Policy Institute, sponsored by the Centre for Ageing Better, warns millions of people between the age of 50 and the State Pension Age are running out of time to prepare financially for retirement. That’s about 11 million people.

  • Around 3 million will not receive a minimum income
  • Around 5 million will not receive a personally acceptable income
  • Around 10 million will not receive a comfortable income

As a reminder, someone turning 50 this year would have been born in 1971, the year that T-Rex had a summer hit single “Get It On”, Clive Dunn was number 1 with “Grandad” and Rod Stewart “Maggie May”. The year that Gary Barlow, Clare Balding, Amanda Holden, Charlie Brooker, Ewan McGregor and David Tennant were all born, I doubt any of these will have a pension problem, but the majority of those born before 1971 look set to do so. It was also the year that the great David Hockney (83 and still working) completed one of his most famous works “Mr & Mrs Clark and Percy” (below) You can see Hockney’s work “The Arrival of Spring, Normandy 2020” at the Royal Academy until 26 September 2021.

Hockney 1971 Mr & Mrs Clark & Percy

PAIN IS COMING FOR THE UNPREPARED

The research found a low state pension, increasing unemployment and the transition to workplace pension schemes reliant on employee contributions are all factors leading to this risk. It warns this is an immediate cause of concern for those currently in their 50s and 60s. Not only that, but generations to come also risk being pushed into poverty if action isn’t taken to address financial insecurity in retirement, the report warned. It found 90 percent of people of all ages with Defined Contribution pensions may be at risk of falling short on their expected retirement income.

Despite recent measures such as auto-enrolment having resulted in more people saving into their workplace pensions, savers aged over 50 spend less time in auto-enrolment schemes and consequently benefit less. Most pension contributions remain inadequate, and challenges for savers have been exacerbated by COVID-19. The report also highlighted that those aged over 50 had the highest redundancy rate during the pandemic and warns that this age group is more likely than younger groups to experience long-term unemployment.

Worryingly, increasing job losses and unemployment levels may result in the generation currently approaching retirement being pushed out of work and left with a pension that does not provide them a decent standard of living. The report calls for a new consensus on what adequacy means, urging the Government to build a consensus between employers, industry, unions and individual stakeholders on what an adequate income in retirement is. Furthermore, Ageing Better is calling on employers to match workplace pension contributions at a higher rate, as well as better support for groups at risk of financial insecurity.

Hopefully your financial plan demonstrates that you will have enough or you know what the future looks like and have a plan to do something about it. However, I do want to labour this point… many of your peers, friends and family are unlikely to be as well prepared as you. Whether its Mr & Mrs Clark or Smith, the vet bills for Percy will be fairly unwelcome in retirement. So please urge them to get some advice, send them this blog post in an email and tell them to get in touch with us. I know the pictures of you finally out and about enjoying normal life after lockdown are all good to share, but do your real friends a favour, share our details with them! We can help prepare them for the future, making the most of the remaining time.

Share This Story, Choose Your Platform!

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

RETIREMENT PLANS BEFORE ITS TOO LATE 50+2021-06-23T17:35:16+01:00

The Sting in the Tale Of Your State Pension

TODAY’S BLOG

THE STING IN THE TALE OF YOUR PENSION

If you are a client, even a very new one, you will know that one of the many things we check is your State Pension. This has two key elements to check – your State Pension forecast and your National Insurance record. Have a look here to get yours again (click here)

I know that many are frustrated by their State Pension age or entitlement to it. You will doubtless have heard about women who believe that they were never properly told about the equalisation of State Pension Age (SPA) which has resulted in them waiting longer than their 60th birthdays to collect their weekly State Pension.

I am not going to “get into” the debacle of WASPI and the unfairness or otherwise of equalisation, earnings and careers. In my limited experience, most Governments fail to communicate well and most of us vote based on little evidence and plenty of personal bias. Few people take the time to check Government records, most of us live in the hope that fairness is achieved. There is a further sting in the tail of this tale…

You may have picked up that the state pension has been underpaid for an estimated 200,000 women, so it would be “sensible” to check your entitlement regularly. I am going to make this clearer…. CHECK YOUR STATE PENSION.

Solomons IFA State Pensions Sting in the Tale..

DOUBLE STANDARDS

Those working within the financial sector know well that there is not really a time-barring for complaints. However our wonderfully inept Government doesn’t have to suffer the same criteria, responsibility is something that is simply passed along to the next gaggle of woefully hapless sycophants, or ignored, denied and moving on….

State Pension payments are understandably important to millions of people right across the UK as a source of income in retirement, however, due to an error at the Department for Work and Pensions (DWP), thousands of women may find they have been underpaid their entitlement. The issue arises for those claiming the old state pension due to rules about how much a woman could receive. Under the system, married women who were looking at a limited state pension in their own right were permitted to claim a 60% basic state pension sum. This was based on the National Insurance record of their husband at the time.

Women were only allowed to undertake this action, however, if the sum was bigger than the state pension they would have received based on their own National Insurance record. An uplift to the state pension sum should have been applied automatically since March 2008. However, due to a system error, in certain circumstances some women did not have this increase automatically applied.

Individuals retiring before this date needed to make what is being described as a “second claim” to uplift their state pension sum. These women will have needed to take action, however, the DWP stated it wrote to those affected telling them what they could do next. Issues, however, arose when certain women stated they received no such correspondence and were thus left out of the loop. Women who have been impacted will have missed out on potentially years of higher state pension payments.

However, another issue is arising for women which is causing further strain. Under present rules, individuals can only get backdated payments for the boosted state pension sum for 12 months. This means many have missed the opportunity to receive years of contributions. Rectifying the issue, though, is likely to provide significant peace of mind to the female state pensioners who have been impacted.

The DWP is now taking action to contact those individuals who may have been hit by the error. However, experts such as former pensions minister Sir Steve Webb have urged women to take action by contacting the DWP if they feel they have been affected.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

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GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

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The Sting in the Tale Of Your State Pension2021-06-21T13:55:10+01:00

The State Pension – What’s Ahead

TODAY’S BLOG

THE STATE PENSION INCREASE

In early December the Department for Work & Pensions announced the proposed increases to benefits for 2021/22. Most of the working age benefits and the earnings-linked pension benefits, such as the old State Second Pension, will rise by 0.5%, in line with annual CPI inflation to September 2020. However, the new state pension and its predecessor will both increase by five times as much.

The costly Triple Lock

Both new and old (basic) state pensions benefit from the Triple Lock, which currently requires an increase which is the greater of:

  • Earnings growth;
  • Price inflation (as measured by the CPI); and
  • A floor of 2.5%.

For the 2021/22 increase, the 2.5% minimum was a clear winner, with earnings growth at the bottom of the trio. As the chart shows, in this context earnings growth is a misnomer; earnings fell by 1% over the year because of the impact of the pandemic.

State Pension 2021/22 Triple Lock

10 YEARS LATER… NOT ON PLAN

Over the ten years to 2021/22, the 2.5% floor has been the basis for four increases, something which was probably not anticipated when the Triple Lock was announced by the coalition government in 2010. Then, as now, the Bank of England’s inflation target was 2.0%. Earnings were expected to outpace inflation by 1% or more, making the 2.5% floor a safety net that probably would only be called upon in a deep recession.

It has not worked out that way. Earnings and inflation have virtually matched each other over the period at just under 2%. In other words, there has been no increase in the buying power of average earnings over the past ten years. In contrast the Triple Lock has delivered a real terms increase of almost 11%. If you are on the receiving end of the Triple Lock, that is good news, but if you are under State Pension Age (66 now, don’t forget) it means more government expenditure you have to finance.

Looking ahead

The Triple Lock has been widely criticised by experts ranging from the Institute for Fiscal Studies to the Pensions Select Committee for being an unnecessarily expensive protection that creates intergenerational unfairness. In private politicians would generally agree but, at the last Election, all of the mainstream political parties committed to retaining the Triple Lock. The pensioner vote is not one to put at risk.

The pandemic may have changed that mindset. Last year the government introduced emergency technical legislation to ensure the Triple Lock would work in the face of zero earnings growth. However, the measures put in place only applied for a single year. There have been suggestions that, if no action is taken, an earnings bounce in 2021 as the economy recovers could mean a 5% 2022/23 increase under the Triple Lock formula at a time when inflation is below 2%. Given the dire position of public finances, such a scenario would offer Rishi Sunak the golden opportunity to justify a reworking of the Triple Lock.

But…  

Despite the new state pension’s outpacing of inflation and earnings growth, it will remain a distinctly modest sum in April 2021: a maximum of £179.60 a week. Viewed another way, that is equivalent to just over 20 hours’ work at the National Living Wage rate for 2021/22 (£8.91 an hour) or a little under one-third of current average earnings (£560 a week). No wonder the UK is likely to remain in bottom place of the OECD’s league table based on the proportion of earnings replaced by state pensions…

ACTION

If you want to check your projected state pension benefit, CLICK HERE TO GO TO THE STATE PENSION SITE.

The state pension is not enough for a comfortable retirement. Make sure you talk to us about how you should be supplementing it – preferably before the Budget.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

The State Pension – What’s Ahead2021-01-28T17:03:57+00:00

TAX YEAR END PLANNING PART 1

TODAY’S BLOG

TAX YEAR END PLANNING PART 1

As you will have gathered, the Chancellor Sajid Javid resigned on 13 February just a month before his first Budget. There will be many that offer reasons for this, perhaps some of them will be something resembling the truth, but as they say “a week in politics is a long time”. We have a new Chancellor – Rishi Sunak (who?) … who sent most of us into a google spin. He’s the 39 year-old who worked for Goldman Sachs immediately following graduating from Oxford in 2001, who he left in 2004 to become a Hedge Fund 2006-2010. He became an MP in 2015 taking over William Hague’s seat in Richmond, Yorkshire.

As a result of the rather sudden changes in arguably the most important job in UK politics, there was concern that the Budget may have to be resceduled. However we have been reassured that 11 March remains the date for the 2020 Budget date. We also have an effective deadline for tax-year-end planning. There could be a range of measures announced on 11 March (normally operative from the beginning of Budget day) which could impact on such planning. The Government has loosened the purse strings on capital investment, but in terms of day-to-day spending it has little room for manoeuvre. The Treasury may thus be tempted to make some subtle tax changes to boost its coffers.

Rishi Sunak - UK Chancellor

PENSIONS

More than in most years, 2020 is the year to ensure you make your pension contributions before the Chancellor delivers his speech. As explained earlier, the risk of a major pension tax reform, potentially reducing higher rate tax relief, is greater now than for some while.

One important point to check is whether you have any unused annual allowance from 2016/17, when the maximum annual allowance (before tapering) was £40,000. You have until the end of 2019/20 to use up this past allowance, or it is lost forever. However, it can only be utilised once your full annual allowance for the current tax year is exhausted. So, for example, if you are not affected by the taper rules and you have £10,000 annual allowance unused from 2016/17, to mop it up completely would require a total contribution of £50,000 in 2019/20 – £40,000 for the current tax year and £10,000 carried back three years.

Unused relief can also be used from later years, but once you have paid the current year ‘entrance fee’, the excess contribution is offset in chronological order, starting with 2016/17. Under current rules unused relief can be carried forward for three tax years (hence the 2016/17 deadline), but that principle – and the rate of tax relief – could change.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

TAX YEAR END PLANNING PART 12020-02-18T18:46:52+00:00

TAPERED ANNUAL ALLOWANCE – NHS

TODAY’S BLOG

TAPERED ANNUAL ALLOWANCE – NHS

The Tapered Annual Allowance was introduced from 6 April 2016. It has caused considerable problems for members of the NHS pension scheme in terms of excess tax charges due to the formulas used in the calculations.

Admittedly having a good pension is a nice problem to have, but when faced with an excess of say £60,000 (by calculation) this generates a tax bill of typically £27,000. I have seen some that are much higher.

Therefore, many Consultants and senior NHS staff have really been forced to reduce their sessions (NHS pay) or take a break from or leave the pension scheme entirely – which is nuts. This is essentially a tax charge on money that has not yet been paid (it is paid at retirement).

After much badgering, a compromise has been reached for the current tax year 2019/20. In that a political promise has been made that the excess tax charge will permit the pension scheme to pay the charge and the employing NHS Trust will pay now compensate for this when the pension starts (my short version). This has now been confirmed for the English and Welsh NHS Pension Scheme.

NHS Annual Allowance 2019/20

Superficial Fix

There is as yet, nothing NEW stated about the 2020/21 tax year (there are restrospective juggling adjustments that can be made towards the end of the year, but these are daft) – but we do have a Budget coming in March, so we hope the ludicrous Tapered Annual Allowance will be scrapped then. However, this ought to apply to everyone, not simply NHS employees.

The Annual Allowance – Simplified, Quick Overview

In very simple terms the Annual Allowance is a maximum of £40,000. This is the total that can be paid into pensions by you and your employer. It reduces by £1 for every £2 of income over £150,000.  The allowance reduces to a minimum of £10,000 once an income of £210,000 is earned. In short, you can invest more into your ISA. However, for those in final salary schemes and the NHS in particular, the calculation is not really about how much is paid in, but how much the pension grows by and then multiplied by 16. So, if your pension increased by £1500 for the year that’s £24,000. Not the 14.5% of salary you must pay to be in the scheme. Its way more complex than this, but to save time, go with my summary.

It Is Political – Government and the NHS always are

In view of the impact that pension rules are having on senior NHS staff and their ability to work their normal hours, and with winter bringing the usual rise in demand for NHS services, NHS England and now NHS Wales and NHS Improvement have decided to take exceptional action. An extract from the announcement is given below:

‘This action will mean that:

·         Clinicians who are members of the NHS Pension Scheme and face a tax charge in respect of work undertaken this year (2019/20) as a result of breaching their annual pension allowance will be able to defer this charge (by choosing ‘Scheme Pays’ on their pension form) meaning that they don’t have to worry about paying the charge now out of their own pocket.

and:

·         The NHS employer will make a contractually binding commitment to pay them a corresponding amount on retirement, ensuring that they are fully compensated in retirement for the effect of the 2019/20 Scheme Pays deduction on their income from the NHS Pension Scheme in retirement.

Watch Out For…

Clinicians are therefore now immediately able to take on additional shifts or sessions without worrying about an annual allowance charge on their pension for 2019/20.

Local NHS employers are being asked to actively promote this development to affected staff as they plan for extra capacity and staffing over the winter period.’

This measure will only apply to the 2019/20 tax year as new flexibilities are being introduced from 2020/21.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

TAPERED ANNUAL ALLOWANCE – NHS2020-01-21T10:33:00+00:00
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