A demo in Westminster and a 100,000 signature petition protesting about plans to raise the state pension age are causing a stir with ministers.

The Department of Work and Pensions (DWP) wants to put the age people start receiving their state pension up to 66 years old by 2020 – and has even hinted the change could come earlier.

But ministers are under pressure from MPs and protestors following a day of action in Westminster whipped up by unions, consumer groups and women’s organisations.

Inside Parliament, around 160 MPs have put their names to an Early Day Motion calling for the reform to be dropped.

This rising wave of protest has led to Pensions minister Steve Webb announcing the DWP will ‘reflect’ on their proposals.

The main issue at stake is a perceived unfairness to women who will have to wait longer than men for their state pension to start paying out under the new proposals.

Women are the main pension losers

Supporters claim fewer women have private pensions and savings to fall back on to bridge the gap, and as many care for children and relatives, they can’t ease their financial stresses by going out to work.

The plan to up the state pension payment age to 66 could leave up to 2.6 million women with a gap of up to two years without any income. -  and in that time they will £10,000 of pension payments.

The National Association of Pension Funds (NAPF) is also urging the government to put a brake on reforming the state pension age.

Chief executive Joanna Seagers said: “The current plans unfairly put women in their late 50s on a much faster path to a later retirement, leaving them little time to prepare.

“The government must protect this large group of women by giving them enough space to plan ahead, and it needs to revisit that aspect of the Pensions Bill.”

Millions of people are expected to struggle as they cope with a smaller retirement fund than they expected to. Reports suggest that retirees will likely see a significant decrease in income as they face the prospect of hardship in the coming years.

Future predictions suggest that people are unlikely to see a return on their investment for some time to come. Analysts have predicted annuity rates and income for the foreseeable future. People are likely to notice a significant decrease in their retirement funds.

Experts consider that middle income earners will rely on the UK government for support in the coming decades. This suggests that millions of people will have to compromise on their plans to enjoy their twilight years. Retirees will likely find that will need to account for every penny as they make their weekly budget stretch.

The latest report describes this as a ‘squeeze’ on middle class pensioners. Frankly I’m not sure the word ‘squeezed’ quite does it justice!

UK retirees need a more generous government if they are to survive during difficult times. A few extra pounds will likely help retirees with their daily living expenses and allow them to have a reasonable quality of life. Some middle income earners receive a better retirement deal than other workers.

The best piece of advice that anyone can give retirees is to save as much money as they can during their working life. This often falls on deaf ears as people choose to buy the latest technological gadget available. If you choose to save for your retirement you will not be sorry that you did.

The pensions bill 2011 was confirmed last month, to be honest there was nothing really new, it included:

• Increase in State Pension Age, increase in the state pension for men and women to age 66 by April 2020, and womens SPA rises to 64 in 2018.
• National Employment Savings Trust, implementation of autenrollment
• Default retirement age to be scrapped

Ross Altmann, the SAGA director general stated that it was unfair on women as most of those affected were already in the 58-64 age group and had planned their retirement to begin earlier. There can be a three year age difference in pension age for some women born only a day apart.

What these sort of reports suggest is that those saving for retirement need to ensure they have a diverse range of saving options and not just rely on any state funding for retirement. Of course with anything that is paid for by the government they will reserve the right to change the terms as has happened with the state pension age.

Steps you can take to catch up on a shortfall

If you are in your fifties, pension planning has never been so important, which is why there are a number of steps you should take to improve your pension prospects if you discover you have shortfall. Planning for retirement is one of the biggest financial challenges people face and the one you can least afford to get wrong.

In the final ten years prior to your planned retirement date, to begin with you need to calculate what you are worth. As a starting point establish what your likely state pension entitlement will be. You should also contact the pension trustees of your current and previous employers, who will be able to provide pension forecasts, as will the companies managing any private pension plans you hold.

Next you need to look at how much income you will need in retirement. It’s important to be realistic. You may spend less if you are not commuting to work, but don’t forget to include holidays, travel and any debts you may still have.

If you are currently on target to receive less than you will need, you should obtain professional advice about how you could make up a shortfall. During the final ten-year period in the run-up to your retirement, it’s crucial that you maximise savings. This may not only mean contributing to pensions but into other investments that may include Individual Savings Accounts (ISAs). You also need to consider whether options such as retiring later or working part-time beyond your retirement date may be a more realistic way of meeting your retirement goals.
It is not only how much you save but where it is invested that can make a difference, so you should also review your investment strategy. Use this opportunity to carry out an audit of existing pension plans; look at where they are invested, how they have performed and what charges are levied on them. Don’t forget also to find out whether there are guarantees on any plans.

As part of your review, look at the diversification of your assets, as this can help protect against sudden market movements. With a ten-year time frame, investors need to weigh up the risks of equity investments against safer cash-based products.

Generally, the nearer to drawing your pension you are, the less investment risk you should take. But over this period it is reasonable to include equities within a mixed portfolio, particularly given the very low returns currently available on cash. Bonds, gilts and some structured products may also provide a halfway house between cash and equities.

When you enter the next phase of your retirement planning – five years or less to go – you need to review your specific retirement goals. Obtain up-to-date pension forecasts and review your retirement plans.

Consider moving stock market-based investments into safer options such as cash, bonds or gilts. If there is a sudden market correction now, you may have insufficient time to make good any losses.

If you’ve lost details of a pension scheme and need help contacting the provider, the Pension Tracing Service may be able to help you trace ‘lost’ pensions and other investments.

It’s also important to maximise savings. Save what you can, utilising pensions, ISAs and other investments. Also don’t forget to consider your spouse’s pension. If you have maximised your pension contributions it is also possible to contribute into a partner’s pension plan.
Higher earners and those in final salary schemes should ensure any additional pension savings do not exceed the lifetime allowance, as this could mean you end up having to pay a tax bill.

Don’t leave it until the last minute to decide what you will do with your pension plan. Some people fail to consider their options properly and simply buy the first annuity offered by their pension provider. This can significantly reduce your income in retirement and there is no second chance to make a better decision.

There are now many more retirement alternatives, from investment-linked and flexible annuities to phased retirement options, as well as the conventional annuities and income drawdown plans. To find out what is most appropriate for your particular situation, you should obtain professional advice.

Source: Smart Money from Retirement Solutions

Here at annuitysupermarket.com everyday we are asked many questions abut pension annuities. Most retirees only ever buy an annuity once and therefore most have never encountered the jargon that goes with pension annuities. So we thought we would put this list of the 5 most popular questions we get asked:

1. What is a Pension Annuity?
When you retire, your pension fund must be converted into a regular, sustainable income which is called an annuity, this annuity will be paid to you for the rest of your life.

2. When can I buy a pension Annuity?
You can buy an annuity after the age of 55. You do not need to have retired to buy an annuity, you can buy your annuity and continue working if you wish.

3. Do I have to buy an annuity through the pension company I saved with?

No. You can consider their illustration but you are not compelled to purchase your annuity with them. You can choose to take your pension fund to the entire market and choose who you buy your annuity from – this is known as the open market option. The amount of income you get from your annuity will vary between different insurance companies, so it’s a good idea to do some comparisons before making your decision.

4. Can I provide an annuity for my dependants?

Yes, but it will only be payable in the event of your death. You can chhose a joint life annuity that pays all or a percentage of the income you were receiving. Or you can choose a minimum guarantee period that your income will be paid for.

5. I am in poor health will I qualify for enhanced annuity rates?

Possibly, we may be able to offer you an enhanced lifetime annuity if you’re a smoker or suffer from certain medical conditions. We will need to take full details of your conditions and put them to a medical underwriter.

Those buying annuities may soon have to wait until their late 60s according to Kenneth Clarke, the justice secretary, who said that across Europe “the retirement age will drift up into the late 60s” and expected the chancellor, George Osborne, and the work and pensions secretary, Iain Duncan Smith, to be “locked in discussions about that”.

Of course you don’t have to be of state pension age to be able to take your annuity income. Annuities are available to purchase from age 55, obviously the younger you are when you purchase an annuity the less income you are likely to receive. This is because one of the main factors that determine annuity rates amongst other things is age. Annuity rates are based on average life expectancy and the fact that some people live longer than anticipated and some people die earlier than expected.

You also do not need to be retired to take your annuity, you can take your annuity and continue to work. Taking the annuity may help you to phase in your retirement allowing you to reduce your hours by topping up your income from the annuity. With the expected rise in retirement age imminent this route will become a popular option for many over 65s.

The recently appointed coalition government are making radical proposals to review the UK pensions system. With the demise of final salary pension schemes and the fact that recent Panorama TV programme highlighted the heavy charges some pension providers charge, a review of the pension system is long overdue.

Family Pensions

The coalition government are very keen to give people greater flexibility with pensions which for most are seen as very restricted. The new thinking is that you will be able to pass on your pension fund to your family as a lump sum, there will be a tax charge in the region of 55% which may seem hefty but it is currently 82% for those over age 75.

Other new initiatives are the introduction of ‘flexible drawdown’ plans and these may be introduced from April 2011. There are no plans to change the current age at which you can draw pension benefits which is age 55.

The government is also planning to raise the age you can take your state pension to age 66 from 2016, there is also likely to be further increases in the age you take your state pension after this.

Here at annuitysupermarket.com we think most of the proposed government pension initiatives are very positive and because the shift in demographics as people are living much longer and are also healthier for longer, we feel the government is proposing a balance that will enable them to maintain the state pension.

For those approaching, but not having yet attained age 65 in 2010, many may feel aggrieved by the many changes in pensions legislation and moving of the goalposts. The new coalition government have already put together consultation to raise the state pension age from 65 to 68, potentially within the next decade. Annuity rates are at their lowest for 15 years and life expectancy is the highest ever.

People plan many years in advance for retirement and as they approach the end of the plan get rocked by moving goalposts that foil their plans.

John Lawson, the head of pensions policy at Standard Life, said: “Economic necessity has forced people to approach retirement in a different way. Gone are the days when people worked in the same job for 40 years and went from full-time work to full-time retirement overnight.” Today, he said, many people start to reduce the hours they work before retirement – often as a result of a career change or redundancy – and then will continue to work beyond 65, often part time. Figures show there are now more than 800,000 people in the workforce who are aged 65-plus, an increase of almost 20pc compared with two years ago.

Today, retirement could quite possibly last as many as 30 years, life expectancy is on the rise and each decade the life expectancy increases. With the demise of final salary pension schemes many future retirees may have to rely on other assets such as their home to see them through their retirement years.

I know the feeling, a large envelope from your pension provider full of retirement quotes has just dropped through the letterbox, you didn’t realise it but its only six months to retirement. The pack is full of all the information you need to vest your pension.

But, before you rush to fill in all the forms and send it back, read through it carefully. You will find that somewhere, most probably in the small print it says you can get retirement quotes from the open market and take your pension fund elsewhere to buy them.

Why get retirement quotes elsewhere?

You know if I had a pound for every time someone said that then I would be living the life of Reilly somewhere. What many retirees fail to understand is that just because you saved your pension with the insurance company does not mean you have to take their retirement quotes. You have the right to shop around and you should take it. I know its a pain but it could make a difference of thousands of pounds to your income throughout your retirement years.

Don’t make the mistake 279,000 people each year make, take some time to research the open market and see if you can get better retirement quotes elsewhere. Use the services of an IFA and it will make it even easier.