Tuesday 28 May 2013

Pension Changes

The new state pension – which will be introduced no earlier than April 2017 – will be equal to £144 a week in today’s money. All state pension rights accrued under the old system will be recognised, so people will not lose any pension they have earned.


Individuals will have to make 35 years worth of National Insurance contributions in order to receive the full amount and will have to accrue a minimum number of qualifying years – probably between seven and 10 – to be eligible for any state pension at all. The Department for Work & Pensions calculates, by the 2040s, more than four-fifths of people achieving state pensionable age will receive the full flat-rate pension payment.

The National Association of Pension Funds (NAPF) has welcomed the announcement, describing the new system as “a much-needed shake-up that will ultimately help millions of pensioners and savers”, adding: “A flat-rate system dovetails with the recent auto-enrolment reforms by helping workers see what they need to save in their new workplace pension.” However, the NAPF also warned the transition needed to be managed “carefully”.

The government believes at least half of all people reaching state pension age before 2050 are likely to be better off under the new system. In particular, self-employed people and women who have left the workplace to bring up children are likely to benefit. On average, 750,000 women who reach state pensionable age in the decade after the introduction of the new system are expected to receive an additional £9 a week in today’s money.

Nevertheless, many people will not benefit from the new system, including those who reach state-pensionable age before April 2017 and, while it does improve the ‘safety net’ for British pensioners, it should really only be seen as part of an overall retirement plan.

Wednesday 22 May 2013

Pensions Update

Meanwhile, according to Scottish Widows’ ‘Women & Pensions Report’, 43% of women will rely on joint savings with their partners in order to fund their retirement. Only 17% of women believe their own savings will be sufficient to fund their retirement, compared with 30% of men. Yet one in three UK marriages now end in divorce within 15 years and so it is important women take charge of their own retirement plans. After all, alongside accepting the inevitability of old age, we should also accept the possibility of unforeseen events.


At the same time, women are saving an average of £776 a year less than men for their retirement. Scottish Widows calculates a 30-year-old woman who maintains this average annual rate of saving will save £29,800 less than her male counterpart by the age of 65. More worrying still, 26% of women are saving nothing at all for their retirement, compared with 19% of men.

Of course, it is not always easy to plan for the future, particularly in an environment of rising prices. Pressure on household budgets can make it a challenge to find additional cash that can be earmarked for retirement. Nevertheless, it is worth reviewing your current expenditure to see how your lifestyle would be affected by retirement. Most of us have a finite number of years in which to put aside money for our old age and it is never too soon to start.

Above all, you need to plan early to allow yourself as much time as possible to build your nest egg. Take control of your future – your financial adviser can help you to develop a suitable long-term savings strategy for you. The only thing you cannot afford to do is nothing.

Monday 13 May 2013

Managing debt

For many people, debt is a necessary part of everyday life – for example, few people are able to buy a home without a mortgage. If properly managed, debt can be a useful tool – but it is essential to remain in control.


You are unlikely to receive more interest on your savings than you will pay on your borrowings. It is generally prudent therefore to concentrate on paying down your debts before you focus on savings. Nevertheless, you should still aim to have a cash buffer you can access in an emergency – as a rule of thumb, enough to last you for three months.

Don’t ignore debt – it will not disappear. If you have debts on top of your mortgage, the most sensible strategy is to try to pay off any outstanding loans, using your savings if necessary. You should always clear your most expensive loans first, although you should check in case there are charges for early repayment. According to the Money Advice Service, the most expensive debts are incurred through credit or store cards, unauthorised overdrafts, catalogue shopping, payday loans and door-to-door loans.

Nevertheless, bills such as mortgage or rental payments, electricity or gas bills, council tax, income tax or VAT remain top priority. Failure to keep up with these payments could result in loss of energy supply, perhaps the loss of your home and maybe even a prison sentence. Although credit-card debt is expensive, failure to pay will not end in prison, although you might face court action and the seizure of your possessions.

According to research by Nationwide Building Society, more than half of UK credit cardholders would never consider doing a balance transfer on their credit cards. However, by not moving their balance, people are not taking advantage of a useful way to manage their debt and could be missing out on making savings.

Debt consolidation services allow you to combine all your loans into one. However, they are a relatively high-risk strategy – their long-term cost can be very high, and they are usually secured against your house, putting your home at risk if you do not manage to keep up with the loan repayments.

If you are having problems, take expert advice from your financial adviser or a free debt advice agency, or talk to the Citizens Advice Bureau. Above all, make sure you are in control of your debt. Don’t allow your debt to control you.