Savers of every hue have little to savour

For millions of Britons with hard-earned cash savings, there’s a battle to find better-than-negligible savings rates in the face of inflation at an erosive 4%.

For the soon-to-be retired, nervously holding their private pension pot, it’s the struggle to squeeze the most from risible annuity rates on offer (recently to be further damaged for men after a European Court of Justice ruling outlawing gender bias in pricing).

Meanwhile savers with money invested in the stock market must watch while the knock-on effects of global uncertainty from natural disasters, economic upheaval and social unrest pitch their funds to the wind.

And older savers with little put by and desperately unsure whether they’ll be better off with or without savings must continue to grapple with complex means-tested benefits in the hope of not losing out.

But there’s another potential danger to add to all these savers, and it’s usually one that emerges perilously out of the blue – the cost of long-term care.

Savings – whether from you, a parent or family – can suffer a monstrous blow when you, or more likely one of your parents, can suddenly no longer cope alone and must go into care. … Continue Reading

Saver shock at retirement

Any insurance salesman will give you the ‘you can never have too much insurance’ patter. While this isn’t technically true, one de facto form of cover has long been wrongly ignored by many retirement savers because of potential cost and opaque information on whether to ‘buy’ it. We’re talking about defined contribution pension pots being ‘fire-proofed’ and the insurable event is inflation, specifically the RPI. Unfortunately, the majority of retirees don’t take out an index-linked pension because the financial hit is so great, yet its implications are far-reaching.

An RPI-proofed policy is the only investment guaranteed to beat inflation for pensioners, yet many prefer not to invest in them.

However, retirees who take out a ‘level’ fixed annuity (or annual income for life in exchange for a lump sum) can be pole-axed by the annual rises in the cost of living. With only a set sum of cash every month, the creeping price of fuel, food, bills et al can clobber the finances over the years. … Continue Reading

Sharing the risk gives savers a share of the profits

“Jill-T” wants to borrow enough to be able to afford a 2^nd hand car; nothing fancy, she says, just a couple of grand for a robust little runner will suffice to take her to work and back (and one that won’t fail to start on dark freezing mornings).

Getting her hands on the cash, though, has proved a real struggle.

The banks have so far shunned her on account of missing a couple of credit card payments in the past 18 months.

Ditto the building society who frowned upon her request for extra cash after finding her credit record was ‘not sparkling enough’. … Continue Reading

Dear Pensions Minister – It’s time to act in the best interest of savers

Dear Steve,

Do you have a tin ear? I hope so since, as Pensions Minister, you’ll no doubt have to listen to countless voices trying to wheedle their way on policy – including many from well-heeled and comfortably snug executives woefully manhandling the pensions and savings industry.

Yet, with your nascent responsibility for industry reform – four months into the job isn’t long, I admit – you’d do better instead to hear the distress calls from ordinary savers and workers who mindfully put cash into private retirement savings and pension funds.

In online forums and financial chat rooms bubbles a bilious fount of fear, loathing, distrust and disgust towards the industry for which you’re responsible.

Take a look at the sentiment that venomously drips from these very recent postings on diverse forum discussions on saving, pensions and Charlie Bean – the hapless deputy Bank of England governor – whose sledgehammer sensitivity, see Bank of England admits that its policy is to penalise savers, stuck in the craw of many.

“There was a time when we used to laugh at old people who kept their money under the mattress because they didn’t trust banks – now it looks like the voice of experience talking!” bemoans James B from Wales. … Continue Reading

Nudge nudge save save

When Monty Python melds with social public policy, you know you’re breaking new ground – either that or all else in mainstream politics has fallen by the wayside.

The comedy sketch starring Eric Idle’s hopelessly louche “Nudge, nudge, wink, wink” character was recently nimbly paraphrased by civicbehaviour – a project involving the universities of Manchester and Southampton – into the rather less salacious ‘nudge, nudge, think, think’.

In short, its entirely unfunny premise – building on the 2008 book Nudge by Richard Thaler and Cass Sunstein – is that of the ‘nudge’, a canny use of the power of the state to try to change our behaviour for society’s broader benefit.

How? By keeping an element of consumer choice (as opposed to the expensive deadweight of regulation) but one that also so-called ‘nudges’ us towards a beneficial result for society. … Continue Reading

Why save when you can inherit?

Is any kind of pension planning better than none?

That poser might seem like a no-brainer – surely any savings strategy is superior to a void?

Yet an emerging thread of what might gently be described as ‘last throw of the dice’ thinking looks set to challenge this.

Here’s the mooted long-term savings plan as roughly outlined by an increasing number of clients (mainly in their early 40s) when talking to their financial advisers (and passed on with incredulity to me or others equally agog at the oft haphazard direction of the UK’s pension savers).

“I know it might sound macabre but my main pension is the inheritance from my parents,” is how their pitch begins. … Continue Reading

Welcome to the UK pensions saving casino

Picture a shabby casino whose lights are grubby and dim, making it tricky to get a clear view of what’s going on. There’s a sordid air about it, a palpable sense of despair at repeatedly handing over piles of cash only to end up empty-handed. A weary resignation pervades that, in reality, only the House ever wins.

This isn’t any old seedy rundown joint, though, it’s the UK pensions saving casino where most of its millions of working citizens must play if they want to build a lump sum big enough to provide a private pension in retirement.

Given the slow-burning national unease about inadequate pension provision, it might seem faintly ludicrous that the majority of today’s savers – bar those in final salary schemes – must take such a huge gamble with their money. … Continue Reading

Who will benefit most from NEST?

Nest, the name for the proposed shake-up of Britain’s private pension provision, was the canniest of choices.

As well as a deliciously neat acronym for the National Employment Savings Trust, it exuded a kind of feathery, cosy comfort to reassure the nation’s pension savers that their cash was to be kept in a good home.

Yet the notion of a national nurturing homestead for the nation’s pension savings suddenly looks rather shaky, as a new Government has brought along a fresh pensions perspective with it.

The Con-Lib coalition has now set in train a review – launched by pensions ministers – of the proposed scheme that could expose its sclerotic conflicts and prompt a distorted rethink of whether savers can really benefit from compulsion to save. … Continue Reading

Is our pension system slipping into retirement?

Stumble? You can barely move for tripping over dire warnings about the paucity of the nation’s pension savings.

Over the past few weeks, it’s been hard not to have been floored by a handful of heart-stoppers.

Nearly half of workers approaching retirement fail to put aside any cash on a monthly basis, insurer Aviva warns.

Its report targeted a demographic that proved unsettling, suggesting that those currently between 55 and 64 have amassed fewer savings; carry larger mortgages; and are less likely to own their home than those who had already retired.

The size of the sums might surprise you but people in this age group typically nurtured roughly £8,600 savings, it found (and, worryingly, 20% still owe more than £75,000 on their mortgage). … Continue Reading

We trust banks with our money, but can we trust them to treat us fairly?

Banks really do like to push savers round.

I don’t mean in a gentle mocking playground manner, with teasingly average interest rates and cheeky account Ts & Cs.

I’m talking brutal bully-boy behaviour, shoving customers roughly up against the wall to then merrily mug them in blinding daylight.

You can feel the frighteners from just a glance at their money menaces.

First up, theft of your tax-free allowance: some banks pay comedic rates on cash individual savings allowances (ISAs) as low as 0.1%.

Such generosity means you’d need normally need to bag all of….0.125% to earn this. … Continue Reading