Pension delay for women – time for action

The Government is currently trying to pass a Pensions Bill that will equalise men’s and women’s state pension age at 65 in November 2018, and then raise it to 66 by April 2020. This is 6 years earlier than previously planned.  AGE UK and Saga are campaigning for the Government to rethink this proposal since it will result in a delay of up to 2 years for women born between 1953 and 1959 to receive their old age pension.

The campaign is gaining support amongst MPs and it was reported last week in the Sunday Times’ that the Treasury is now considering a reprieve for the hundreds of thousands of women affected.

The table below shows exactly how the proposed changes will affect them unless the government acts to stop this legislation becoming law.

Anyone affected should write to their MP and lobby them to stop this legislation altogether. Time is running out since the second reading of the bill is scheduled for the 20th June.

With the basic state pension worth around £5,000 a year, a woman facing a two year delay in receiving her state pension will lose out on a massive £10,000. … Continue Reading

Increase in state pension age for women

It’s been said that the state pension system assumes that if you’re a man you have a pension and if you’re a woman you have a husband. It has always been difficult for a woman to get a fair pension out of the system and recent changes have been no exception.

Women in their 50s face having to wait up to two extra years before they can claim their basic state pension, as a result of the Coalition Government’s decision to fast track the increase in state pension age from 2016 for both sexes.

In its Coalition Agreement, the Government promised that the pension age for women would not start increasing before 2020, but it now plans to increase their pension age from 2016.

Half a million women face a pension age rise of over one year and over 300,000 will face a delay of over 18 months.

There is clearly strong feeling that the Government is not acting correctly on this. Many women who have already retired to care for relatives or who are not well enough to work face an unexpected gap in their income which they will have extreme difficulty plugging. … Continue Reading

Equal rights equals equal costs, regardless of the evidence

The European Court of Justice ruling that gender cannot be a factor when insurance companies set annuity rates will create winners and losers, but mainly losers.

With women outliving men by around two years, female annuity rates priced on a gender basis are currently around 4-5 % lower than for men of comparable age.

For instance, a £10,000 pension fund would buy a 60 year old woman today an annual income of £553 compared to £582 for a man of the same age, a difference of 5.24%. (source Moneyfacts 2 March 2011).

Unisex annuity rates

But when unisex annuity rates come into force from 21 December 2012, healthy male annuitants aged 65 could expect to see their rates fall by around 3%, while women’s rates might increase by around 1%.

At age 70, men’s rates might fall by up to 5%, while women’s rates will still only increase by around 1% and at age 75, men’s rates could fall by as much as 7%-8%, while women’s rates might rise by 2.5%, according to Canada Life.

The reason for men losing more than women gain is because men currently purchase the bulk of annuities of the 465,000 annuities sold each year (and with larger pension funds), although this will change gradually as women have longer working lives and build up larger pension pots. … Continue Reading

Using the value of your home to support your retirement

Equity release – the facility to raise cash by taking out a lifetime mortgage against the equity in your home – generates much debate.

Is it a necessary evil to be used as a last resort or a respectable way of topping up one’s retirement income?

Much of the media has been unrelentingly hostile to equity release, arguing that it is an expensive, complex product which rips off the elderly, who may not understand its implications for inheritance or its interaction with state benefits.

These are all valid arguments. Equity release is expensive and the most you are likely to be able to raise is 50% of the value of your property. … Continue Reading

How annuities are funded and why the current rates are so low

Most people will buy an annuity when they come to retire but how do they work and why are annuity rates currently so poor?

An annuity is like a mortgage in reverse. An insurance company assessing the risk of underwriting an  annuity for a 65 year old man, will assume he will live for around another 18 years to 83 age (the average life expectancy for a male in normal health).

Billy Burrows of William Burrows Annuities says: “Once an insurer has decided on your likely life expectancy, it will then calculate how much capital and interest it needs to provide the annuity, with the yield being based on a long-dated bond.”

Annuity rates are influenced by four factors: life expectancy, the yield (or return) an insurance company can obtain by investing the annuity money in gilts and corporate bonds, the insurer’s internal operating expenses and the cost of meeting EU reserving requirements, known as Solvency II. … Continue Reading

Time to end shoddy treatment by banks and building societies

It’s bad enough having to put up with miserly rates of interest, but banks and building societies ‘ behaviour towards savers just compounds the misery.

Just setting up a new savings account these days can sometimes be a nightmare.  Endless anti-money laundering and security checks make it all horrendously tiresome.

Once you have cleared all these hurdles, you then have the job of managing the account, while keeping abreast of all the terms and conditions, which seem to be getting increasingly complex.

Its all in the detail

For instance, most top paying accounts incorporate an introductory bonus lasting six to 12 months, after which the return is likely to fall off a cliff, so you have to keep shifting your hard earned cash around to keep up with the best rates.

Then there are varying notice periods and limits on the amount and number of withdrawals you can make in one year.

The Nationwide eSavings Plus account, currently paying 2%, can’t be closed after three withdrawals, (when the rate drops to 0.1%), so savers who slip up on this are locked into this paltry rate for the rest of the year. It’s the financial equivalent of being mugged and imprisoned, all in one go! … Continue Reading

Will long term good or short term cuts dictate pension policy?

You may not know it, but a battle royal is being played out behind the scenes between the Treasury and the Department for Work and Pensions. On one hand, the Treasury is keen to make cost savings wherever and as quickly as possible, whereas the DWP, led by Iain Duncan Smith is keen for Nest to go ahead.

At issue is the future of the proposed nationwide pension scheme, Nest, (the National Employment Savings Trust), which was due to be introduced from 2012 onwards, but in now under review.

Nest would involve around seven million workers in the UK (who are not currently members of company pension schemes) automatically being signed up for pension saving by a process called ‘auto-enrolment.’

… Continue Reading

The State pension – how the low paid can end up subsidising the well-off

If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck; that is of course unless we are talking about the state pension.

Despite the fact many of us consider it part of our overall pensions saving plan and that we all contribute to it, the state pension is a blunt instrument that has no means of adapting to the varying circumstances of the individual.

Unlike other pension types, there is no flexibility to drawer earlier rather than later and there is no increase in benefits for those with a short life expectancy. The net effect of this is that those in some of the poorest places in the UK can end up subsidising those in the most well off. … Continue Reading

Don’t rely on your pension scheme provider to sell you the best pension

A firm of lawyers recently warned that some annuitants could have grounds to make legal claims against  pension providers, trustees or financial advisers if they were not properly made aware of their annuity options at retirement.

When you approach retirement, pension scheme trustees (if you are in a company scheme) or your pension provider should alert you to the facility to shop around for an annuity.

This facility is called  ’the open market option’  and it allows you to scour the market for annuity quotations, rather than having to accept the quotation from the company you saved with for a pension.

But research by the Association of British Insurers shows that only 35 per cent of annuitants move to another provider, 33 per cent shop around but stay with their existing provider and 33 per cent do nothing.

This is a scandal because smokers, the obese and those with a life reducing medical condition could increase their annual income by 30 per cent (compared with what their existing company or insurer offers)  because they may be eligible for a ‘lifestyle’ or ‘impaired life’ annuity which pay more because of their reduced life expectancy.

Even common conditions, such as type 2 diabetes, arthritis and angina or just being on regular medication, could qualify you for a higher rate, so it is well worth flagging this with your pension scheme trustees or your financial adviser when you come to buy an annuity.

But  those approaching retirement are not always made fully aware of these choices, often because of poor communication on the part of insurers and scheme trustees. … Continue Reading

Will your pension support you for the rest of your life?

With average life expectancy at age 65 now about 82.4 years for men and 85 for women (ONS October 2009) and steadily increasing, anyone buying an annuity today faces some pretty tough decisions.

The annuity they are buying will be part of the income they will have to live off for the rest of their lives, which for those retiring at 65 will on average be 17.4 years for men and 20 years for women. All of whom will obviously hope and plan for it to be much longer and for many it will be.

So do you buy an annuity for life which pays the same amount, year after year, with no protection from the ravages of inflation, or do you opt for inflation-linking, which is prohibitively expensive?

… Continue Reading