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 Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

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

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

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

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

WAITING LONGER FOR YOUR PENSION2023-12-01T12:13:03+00:00

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 Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

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

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

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

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

RETIREMENT PLANS BEFORE ITS TOO LATE 50+2023-12-01T12:13:07+00:00

INVESTORS NEED A POSITIVE OUTLOOK

TODAY’S BLOG

INVESTORS NEED A POSITIVE OUTLOOK

It may sound rather churlish, but it is true that investors need a positive outlook. There is little or no point at all investing if you believe that everything is getting worse. This is a feeling that becomes familiar with age, everything often seems to be getting worse, primarily because we are fed a diet of fairly dreary news stories and have a growing awareness of our inability to simply change the world or certain people.

Whilst I would not want you to think that everything is good or “fine” life is certainly much better for the most people on earth than it was say 100 years ago. The planet has a population north of 7 billion people and roughly 6 billion of them are, on global terms “doing ok” or better than “ok”. There are extremes of poverty and wealth of course, but there are a lot of people between those extremities. May I encourage you to have a look at gapminder.com for more detail about this

SOLOMONS IFA BLOG fiddler-on-the-roof-poster

Things are improving, but they could be better

Investors need a positive outlook, precisely because you are investing in the future, in that future, improvements will be made to the standard of living and innovations to improve our lives. Yes there are obvious problems that need addressing – fosil fuels, climate change, plastic in the oceans, but these and many other problems are solved by innovation. Innovation leads to patenting good ideas. Patent applications are in one sense evidence of good ideas that then require finance – capital…your investment.

Fiddler on the Roof

The musical “Fiddler on the Roof” has returned to the West End of London. Most of us know it from the 1971 film starring Topol and perhaps the most familiar song “If I were a rich man”. It is set in 1905, a touch over 110 years ago.  Tevye the milkman with his wife Golde and their five daughters live in Anatevka, Russia. The Jewish community coexist with the locals, but it is evident that this is a fragile relationship. They have the richness of a community and its rich traditions, yet life is evidently a struggle for them all.

It is interesting to compare what in 2019 someone in poverty might consider to be the trappings of wealth and what money could afford them to do, be and have. As for Tevye, his dream is of a house with 3 staircases (one going nowhere just for show), a wooden floor, to have some servants and not need to work. He would be respected and afforded time for spiritual reflection. By our standards today, Tevye has very little, in just over 100 years the standard of living for the typical milkman has risen considerably. We forget how much improvement has been made simply because we caught up by the present and trying to keep up with the future. We forget all the time. Investors capitalise on the momentum of human endeavour and a continual improvement in all things, many of which we do not yet even know we want.

Fiddler on the Roof is showing at The Playhouse, right next to embankment tube. Here is information – book an aisle seat if you are taller than 5’8” the legroom is poor, but the show is magnificent. See The Playhouse for tickets.

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 Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

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

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

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

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

INVESTORS NEED A POSITIVE OUTLOOK2023-12-01T12:17:28+00:00
Go to Top