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Life Expectancy Jumps 4 Months in 2010

Posted on Friday, October 21st, 2011 in News

The latest figures released from the Office of National Statistics (ONS) have revealed that life expectancy has risen by 4 months for both men and women during 2010.

The average life expectancy in the UK from birth is now 78.2 years for men and 82.3 years for women.  The average life expectancy for a 65 year old has also risen by two months.

The figures from the ONS have also showed that there is an ever-widening gap between the areas with the highest and lowest life expectancies in the UK, with the gap growing between 2004-2006 and again in 2008-2010.

“Life expectancy was highest in Kensington and Chelsea and lowest in Glasgow City in each period between 2004-06 and 2008-10.”

Whilst the trend of increasing life expectancy has been going for decades, the continued increased average life expectancy shows that overall the population’s health is improving.

The nation’s growing longevity has, of course, had an impact on pensions, with the coalition often citing this as a reason to raise the state pension age, along with other pension scheme proposals for public sector workers.

These recent findings from the ONS are based purely on mortality rates and the figures show that men who are currently 65 can expect to live for another 18 years, while the average woman of the same age should live for a further 20.6 years.

Life expectancy is highest in the South of England and lowest in Scotland, with the ONS highlighting the large difference between the areas.   This has been attributed to differences in income, health, economic deprivation and social class.

Those lucky enough to live in Kensington and Chelsea have the highest male and female life expectancy at birth between the years of 2004 and 2010.  They are expected to live an extra 2.1 years for men, and 2.7 years for women more than those who live in the rest of the UK.

Whilst life expectancy is growing in Glasgow City, it is not doing so at the same speed as the rest of the UK. The average man in Glasgow is expected to live to 71.6 years old and the average woman to 78 years old, some 13.5 years and 11.8 years less respectively than their counterparts in Kensington and Chelsea.

 

This is filed under: News
Added on Oct 21, 2011 by wendy | Comments 0

Scottish Widows computer error puts pension savings in wrong investments

Posted on Thursday, October 13th, 2011 in Annuities, News, Retirement Income

A computer glitch has meant that thousands of savers who have their pensions with Scottish Widows, saw their money placed in the wrong investments this month.   

The technical error could see the pension giants having to pay out millions of pounds in compensation to its customers to rectify the mistake.  The glitch could potentially leave pension savers overexposed to equities during a time of heavy stock market losses.

A spokesperson from Scottish Widows said that it was ‘too early’ to say exactly how many clients had been affected by the error, although estimates have the figure at up to 10,000.  The majority of the customers affected are within a decade of retiring and drawing their pensions.

The mistake was brought to the public eye via a leaked email which had been seen by the finance industry magazine ‘Money Marketing’.  The email talked of a ‘plan in place to rectify’ any damage that had been done.

A small percentage of the 2.5 million customers who save with Scottish Widows currently take advantage of their top of the range ‘life-styling’ pension option.  This scheme allows their investments to be rebalanced every quarter as per their wishes and opinions on the latest financial risks.

However, this computer error has come at a time where stock markets have been failing and the system has simply stopped making the right fund choices for its customers.   Anyone who had been investing heavily in equities will have undergone major losses.

This has led to Scottish Widow having to pay out compensation.  The company, who are owned by Lloyds Banking Group, has said that “no customer will be in a worse position” once they have received compensation for the breakdown in the system.

The company has issued a statement saying: “Scottish Widows has identified a system error affecting some customers who have bespoke life-styling rebalancing as part of their pension.

“We are working, as a matter of urgency, to identify the customers affected and put in place the appropriate remediation. Customers affected will not suffer any loss as a result of this error.”

Scottish Widows has promised to treat the matter with the utmost urgency but readily admits that it could take some time to fully fix.

 

 

This is filed under: Annuities, News, Retirement Income
Added on Oct 13, 2011 by wendy | Comments 0

Pensions and Isas hit by stock market losses

Posted on Friday, September 23rd, 2011 in Annuities, Annuity Rates, News

Stock market falls have bought about a 14% decline in pension savings since the start of the year.

The financial services company Hargreaves Lansdown, have released their figures showing the effect of the recent stock market losses are having on pension incomes in the UK.

At the same time ISAs have also been hit by 12.2% according to the financial information service Moneyfacts. An average shares ISA of £10,000 at the beginning of the year would now be worth just £8778.

The current stock market problems have directly hit those who had saved money in private pension plans and had cashed them in to purchase an annuity.  As not only have retirees seen their pension funds decrease, but the annuity rates have fallen as well.

With stock market falls looking set to continue, those who are looking to cash in their pensions over the next few months stand to lose even more money.

The report from Hargreaves Lansdown shows that a personal pension fund of £100,000 for a 65 year old has fallen to £91,840 since the beginning of the year.  This gives a projected annuity income of £5,571, a decrease of £926 a year.

There has been a very negative effect on annuity rates over recent weeks. Billy Burrows, financial adviser for the Better Retirement Group has said that for every £100,000 invested in a private pension fund, the annuity income achievable has dropped by an average of £360 a year, a decrease of 6% since July 2011.

Mr Burrows said: “Those approaching retirement at the moment will find themselves between a rock and hard place,”

“Those who have not seen the value of their pension pots fall over the last few months may wish to bite the bullet and buy an annuity because even though rates have fallen there are still some reasonably good rates around.

“Those who have suffered the double whammy of falling pension pots and falling annuity rates are in a more difficult position and perhaps some type of phased or flexible approach to retirement should be considered.”

 

This is filed under: Annuities, Annuity Rates, News
Added on Sep 23, 2011 by wendy | Comments 0

Companies Offering Cash for Pensions

Posted on Friday, August 19th, 2011 in News

Thousands of workers are being offered cash incentives to trade in their gold-plated pension schemes.

Accountancy giants KMPG have released a report that shows 90,000 people have been offered cash incentives to leave lucrative pension schemes.  Currently one in four employees are accepting these less than generous terms for a cash pay-out and numbers are expected to increase to 750,000 over the next five years.

Pensions Minister, Steve Webb, has warned that these offers are often being mis-sold to employees and demanded that the bad practices be highlighted so that the Pensions Regulator can put plans into place to ensure that they weeded out.

Companies are keen to get rid of ‘gold-plated’ pension final salary pension schemes, which offer employees pensions that are based on earnings and length of service.  Newer and more affordable schemes, called defined contribution schemes, are being sold to workers that are based purely on the stock market and therefore much more risky to the customer.

Because these types of pensions invest all of the pension fund into the stock market, no guarantees of retirement income can be made, furthermore a lot of these schemes will not be inflation-proof or provide a widow’s/widower’s pension should they need to. These benefits would need to be bought with an annuity which could prove costly.

Steve Webb is worried that people aren’t looking further than the immediate cash incentive that they are being offered to trade in their much better pensions, fearing that in the current financial crisis people will accept some money up front to help ease their money worries but come to regret it later.

The Pensions Regulator is keen for people to realise that such transfers are rarely a good idea and that they would be much better staying with their final salary pensions.

Often employers are found guilty of giving out incorrect information regarding the newer pension schemes and not fully explaining the risks attached.  A lot of employees don’t seek out independent advice and they are given little time to come to a decision by being told that any incentives are only available for a limited time period.

Chief Executive of the Pensions Regulator, Bill Galvin, remarked: Pension transfers are an extremely difficult financial equation – most members find it impossible to understand their options unaided. The offer might look attractive, particularly with cash as an incentive. But poorly informed decisions are likely to be regretted years later.

“We believe such offers won’t be in most members’ best interests, and have pointed out that employers run significant risks in offering incentives to members to transfer out of these [final salary] schemes.”

Different firms are offering different incentives to get employees to opt into the new schemes.  For example: Hotel chain, InterContinental, recently offered former employees a 25% cash sum to transfer from their final salary pension scheme to a defined contribution one.  ITV offered its employees a one-off increase to pension payments if they agreed to release any future inflation-linked rises.

PricewaterhouseCoopers (PwC) ran a recent survey which revealed that more than 33% of pension schemes were considering offering its customers incentives to switch, a huge increase from 5% a year ago.

The defined contribution schemes do suit some people though, employees in poor health, the unmarried and those who are concerned about the future value of their current pension scheme may benefit from switching their pension plans, although they should always seek out independent advice before making their decision.

 

This is filed under: News
Added on Aug 19, 2011 by wendy | Comments 0

Public Sector Workers Have Pensions 8x Bigger than Private Sector Workers

Posted on Thursday, June 23rd, 2011 in News

Public sector employees will retire on up to eight times more pension than workers employed in the private sector.

A recent survey by the Office of National Statistics (ONS), has shown that there is a big difference between the final salary schemes, also known as Defined Benefit schemes, that those working for the public sector have, to the Defined Contribution schemes that are commonplace in the private sector.

Up to 40% of civil servants, teachers and council workers etc. who are aged 50 to 64 and on final salary pensions will have an average of £161,200 in their pension funds, whereas 44% of private industry employees have amassed only £22,000.

Tom McPhail, Head of Pensions Research at Hargreaves Lansdown has warned that we are becoming a generation of two-tier pensioners, with the gap between public and private sector workers’ pensions becoming very worrying.

He was quoted as saying “The picture today is a far cry from the 1960s when 12 million employees were active members of final salary schemes.

“By contrast, today in the private sector just 39 per cent of men and 28 per cent of women are building up a pension in any form of an employer-sponsored scheme and only 11 per cent are in final salary schemes.

“But final salary scheme membership in the public sector is 87 per cent for men and 82 per cent for women.”

Annuity Direct spokesman, Bob Bullivant, added “This comes as little surprise and underlines what is shaping up as a two-tier society – the pension haves and have-nots. People need urgent, coherent advice if millions are to avoid a penurious retirement.”

Most employers have moved over to Defined Contribution plans, meaning that the employees themselves take all the financial risks.  They also have to make much higher contributions to receive the same pension that a final salary plan would offer.

However, public sector union leaders are currently fighting Government proposals that its members should pay more into their state-funded pensions, retire at a later age and have their pension plans changed from final salary plans to the defined contribution schemes.

Brendan Barber, the TUC General Secretary said: “Britain is getting ever more unequal. People at the top have been awarding themselves big pay and pension increases, while those in the middle and the bottom have been falling behind.

“Now we learn this will get worse when today’s workforce retires. Private sector workers are the victims of a race to the bottom.”

The effects of these changes are clear to see, a basic annuity that would guarantee an income of £9,600 a year to a worker on a final salary pension would only offer £1,320 to an employee on a Defined Contribution scheme.

 

This is filed under: News
Added on Jun 23, 2011 by wendy | Comments 0

Quick on the draw savers disregard annuities

Posted on Saturday, June 4th, 2011 in Annuity Rates

Retirement savers look set to discard annuities in favour of income drawdown, so they can control their pension funds for longer.

Independent financial advisers have confirmed they expect more retirees to put off buying an annuity to squeeze as much cash as they can out of income drawdown.

The finding, in research by pension provider Skandia, 80% of IFAs said they expected their clients to delay annuity purchase when they retire.

Most IFAs (59%) believe income drawdown is appropriate for 10% – 30% of clients, while 18% consider income drawdown is a good strategy for more than half of clients.

Income drawdown rules came in to force on April 6 as part of the government’s ongoing pension reforms.

Flexible or capped drawdown options

Drawdown comes in capped or flexible options, depending on the financial circumstances of the pension holder.

The aim is to make managing pensions easier while making sure enough money is left in the fund to last through retirement.

Flexible drawdown lets investors take income from their funds as long providing they can show they have a separate income of £20,000.

Skandia expects income drawdown to gain more popularity as pension holders become more sophisticated and take over managing their retirement savings.

Annuity purchase delayed

Adrian Walker, head of retirement planning at Skandia said: “Income drawdown has always been popular for those who have sought greater control of their retirement income. The sweeping changes to drawdown rules takes this one step further, making income drawdown more flexible and more accessible than ever.

“With the  changes in legislation around the flexibility of taking pension benefits beyond age 75 linked to the wider new income drawdown rules, we expect more people will delay their annuity purchase in favour of using income drawdown – and our research findings support this.”

Despite the attractions of income drawdown, some pensions experts have warned that delaying the purchase of an annuity for too long can result in missing out on several thousands of pounds of retirement income.

This is filed under: Annuity Rates
Added on Jun 04, 2011 by admin | Comments 0

Care Home Fees Rocket to £26,000, Forcing More Pensioners to Sell Their Homes

Posted on Tuesday, May 31st, 2011 in Long Term Care

This year will see thousands more pensioners forced to sell their properties due to inflation-busting increases in care home costs.  The average cost of long-term care homes has soared by more than 31% over the past few years in some parts of the UK. Throughout Britain long-term care residents will be charged more than £26,000 per year, an increase of 22%.

For those pensioners needing care in nursing homes they will have to shell out even more money, a staggering average of £44,600 each year.

Whilst there are large regional variations in the increases in care home fees, only the London region raised its average costs less than inflation, leaving pensioners to deal with a postcode lottery when it comes to how much their long-term care costs.

As things stand, the elderly currently have to pay for their long-term care themselves if they have assets over £23,250, which includes their properties.  Once their savings have been spent in the care system, they will then need to sell their homes to continue funding their long-term care.

We estimate that more than 20,000 pensioners each year need to sell their homes to pay for care.  This obviously denies their family their inheritance in a lot of cases.

The charity, Age UK, have compiled the latest comparison figures using information from the healthcare analysts Laing & Buisoon. They show that throughout the UK in 2010/2011, the average cost for a residential care home was £504 which equates to £26,308 per year.

This cost has risen from £412 a week or £21,424 a year in the past five years.  On average fees have risen by 22% or in cash terms, £5000.

Nursing home care has also risen 19% in the same time period, from £585 a week to £694, or from £30,420 each year to £36,088.

More and more elderly are expected to have to sell their properties in order to pay for their care if residential home fees continue to rise quicker than inflation.  1 in 3 women and 1 in 5 men over the age of 65 are expected to spend an average of two years in long term care.

The most expensive care homes are in the northern Home Counties (e.g. Essex and Hertfordshire), where pensioners pay £610 a week on average, an increase of 29% over the past five years.  The North West has the lowest residential care home costs, averaging £435 a week.

Scotland (31%) and Wales (30%) have seen the biggest rises over the past five years, in Scotland costs have gone from £413 a week to £542 and in Wales they have risen from £360 to £468 per week.

Surprisingly London saw the smallest increase, where costs only rose by 6%.

This is filed under: Long Term Care
Added on May 31, 2011 by wendy | Comments 0

Pensioners Losing Out By Not Declaring Their Medical History

Posted on Tuesday, May 24th, 2011 in Annuities, Enhanced Annuities

Not declaring your full medical history could cost you between 10% and 20% of your retirement income, new data has shown.  Purchasing a pension annuity is one of the most important decisions that we make financially, but a lot of people are missing out of thousands of pounds worth of retirement income by not revealing the correct information.

The majority of retirees use the pension that they have accrued over the years to buy an annuity, which will then guarantee an income for the rest of their retirement.  The annuity rates have been at rock bottom for the past few years, yet most people could be getting better rates by telling their providers about all of their health issues, no matter how small, that could potentially shorten their life expectancy

Currently only 1 in 5 people buy an ‘impaired annuity’ which is a policy that due to health problems will give the client a larger retirement income.  A new trial has shown that 7 in 10 people approaching retirement age will actually quality for an impaired annuity over a regular annuity. Most individuals are not aware that declaring mild and non-serious conditions could increase their income considerably.

Just Retirement recently got together with many Independent Financial Advisers (IFAs) to trial a scheme called Tele-underwriting. The purpose of the trial was to get clients to talk to a medical professional before they saw an IFA.  The results of this pilot showed that customers often qualified for an annuity increase of between 20% and 25%

This rise in income can be quite significant.  For instance, a standard annuity bought with a pension fund of £50,000 would give you £3,100 a year.  However, should you declare that you have been diagnosed with high blood pressure or cholesterol problems you could well qualify for an extra £350 per year.

Heavy drinkers and smokers would also qualify for more income.  A smoker would typically get an extra £660 per annum, which if you lived for 20 years into your retirement would equate to over £13,000.

It’s vitally important that all medical issues are raised at the point of buying your annuity, as they cannot be changed further down the line.

Many pensioners are confused about what information to give and many are under the impression that a poor medical history will work against them and they will end up with less retirement income, when the opposite is true.

When financial giants Aviva surveyed their customers that found that only half of them understood that any medical information they supplied would affect their lifetime income.  Of these clients a further 22% were of the opinion that their income would decrease due to a medical complaint.

It seems that pensioners are often accepting the default option made available to them without fully understanding the implications and what they could actually qualify for.   This has been noted more with those with company pensions, where only 1 in 20 pensioners are offered an enhanced annuity.

This is filed under: Annuities, Enhanced Annuities
Added on May 24, 2011 by wendy | Comments 0

Long Term Care Costs Could Be Capped at £50,000

Posted on Thursday, May 19th, 2011 in Long Term Care

The Health Secretary Andrew Lansley has put together a commission of experts who are looking at capping the cost of long term care for pensioners to a maximum of £50,000, the equivalent of the average cost of two years residential care. If this goes ahead it would mean great news for thousands of pensioners who are forced to sell their homes each year to cover the rising cost of their long term care.

Once the bill of a pensioner’s residential care has reached £50,000 any remaining monies would be paid for by the state.

Currently, any care home or residential care charges are unlimited, and this system forces over 20,000 pensioners each year into using up their assets and selling their properties.  In a lot of cases the cost of their long term care wipes out their children inheritance.

Those supporting the proposal say that if people were aware of the cap they would be able to better plan for their futures, taking our insurance, annuities or equity release schemes to meet their care costs.

However, opponents to the changes dismiss this, stating that many pensioners will still be forced to sell their houses, particularly if both a husband and wife become ill and require long term residential care, potentially faced with a bill of £100,000.  They suggest that those who have paid taxes all of their working lives shouldn’t have to pay a penny towards their long term care.

They would like to see private insurance companies offer policies to ensure that pensioners are protected from the maximum of £50,000.

Opponents to the changes also reject the proposed ‘Death Tax’ which had been put forward by the Labour party before the general election last year.  The ‘death tax’ would have seen everyone pay £20,000 for an insurance scheme regardless of whether or not they needed long term care.

The assembled commission has found that 25% of pensioners won’t require any care at all, whereas 10% will require care that costs over £150,000, and 1% would require long term care that could reach up to £400,000.

In response to the opposition for the proposed changes, the review team stresses that an aging population means the State cannot afford to pick up the total cost and that capping the fees at £50,000 is the preferred option of the Commission on Funding of Care and Support.

The chairman for the commission Andrew Dilnot said “My impression is that what people want most is a resolution. There’s a pretty widespread feeling that it’s not unreasonable that people have to pay something, but they don’t want to face losing everything.”
Other options that are being considered are pensioners paying a percentage of their care costs with the rest of the bill being met by the state, or the state paying to a certain level and then individuals paying their costs past this point.
Public support was behind the capping option with a third of people agreeing it was a fair method. The commission’s report found that this option was favoured most by people aged 31 to 64 and from higher income backgrounds.

The benefits identified with capping were that it enabled people to plan for their financial futures better as well as limiting the individual’s liability, with the end result being less people having to sell their homes to pay the residential care bills.

Currently only people with financial assets, including property, of less than £23,000 will get their care costs paid for by the state however, the commission is also considering raising this figure or having it on a sliding scale as other options.

This is filed under: Long Term Care
Added on May 19, 2011 by wendy | Comments 0

Brits Losing £780 in Disposable Income

Posted on Tuesday, May 3rd, 2011 in News

We are having less and less money to spend each month, as earning are said to be falling for the 4th year in a row, something not experienced since the 1870s.  Consumers in the UK are facing an average drop of £780 a year per household or 2% of their disposable income.  This shortfall has come about because of various government tax increases, cuts in spending and a rise in inflation rates.

The immediate future looks just as bleak with forecasters suggesting that things are unlikely to improve until the end of 2012, when inflation is estimated to peak at 5%.  It’s more likely that it will take until 2015 for the financial situation to improve and for us to reach disposable income peak previous seen in 2009.

Financers have warned against the Bank of England looking to increase interest rates in a bid to curb the rise in inflation, citing that in this uncertain financial era any raise in interest rates could be disastrous.  Roger Bootle, Deloitte’s chief economic adviser states:

“Given high debt and given all the other pressures on consumers and given the state of the housing market, I think even a small increase in interest rates could prove to be very dangerous.

Were interest rates to rise, conditions would arguably be the worst for households since 1952.”

Households will look to offset this income deficit by decreasing their spending and as a result spending in general is predicted to decline by 1% this year, with a further 0.5% predicted for 2012.

This is filed under: News
Added on May 03, 2011 by wendy | Comments 0

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