dailymail.co.uk

Work until 70 to claim your state pension: Ex-FCA chairman Lord Turner to argue retirement age should be raised to cut costs
A rise to age 70 by 2030 would force millions in their 50s to wait up to three years longer to draw their pensions
State pension age is already set to rise to 66 by 2020 and 68 by 2046

The former chairman of the City watchdog is urging the Government to make people in their 50s work until the age of 70 before they can claim a state pension.
Lord Adair Turner, who headed the Financial Services Authority, will argue at a Government pensions review that the age should be raised to cut costs.
He wants the official state pension age to be increased to 70 by 2030. This would force millions of people in their 50s to wait up to three years longer to draw their pensions.
The state pension age is already set to rise to 66 by 2020 and 68 by 2046.
However, Lord Turner, who served as head of the Pensions Commission, said those affected should be given more than the current £155.65 a week.
Neil Duncan Jordan, of the National Pensioners Convention, says: ‘Most people are struggling to keep their job in their 60s — their lives are nothing like privileged peers in the House of Lords.’

Assured Retirement Budget Guide

Assured Retirement – guide to the Budget 2016

The Chancellor of the Exchequer, George Osborne, delivered his eighth Budget speech on Wednesday 16 March, his third in 12 months. In our Budget 2016 summary, we have provided information on the changes and key facts, and how they could have a bearing on your client’s finances today and in future years to come.

Tax and savings were central to Mr Osborne’s 62-minute speech. He had already scrapped proposals to shake up pension tax relief and instead unveiled a retirement savings vehicle for millennials called the Lifetime Individual Savings Account (LISA). Ultimately, this is a testing ground for the Pensions ISA proposed before Budget 2016, and it gives the Government the option to see how consumers react to the ISA option.

Mr Osborne added that people under 40, many of whom haven’t had a good deal from the pensions system, would gain government bonuses for saving into their LISAs, receiving £1 from the Government for every £4 saved, at a maximum of £4,000 a year.

For investors, there was good news with the higher rate of Capital Gains Tax (CGT) being cut from 28% to 20%, which comes into effect from April this year. Now it is even more attractive to create wealth through capital gains rather than earnings for higher-rate taxpayers on all gains apart from on residential property or ‘carried interests’. The details are to follow, but this will enable investors to benefit by realising the profit on the sale of shares and other assets at the reduced rate of tax.

Please find attached our complimentary copy which I hope will be of interest.

MoneyMarketing.co.uk

Taxes generated by the pension freedoms are almost 30 per cent higher than forecast, according to figures from the Office for Budget Responsibility.

In the OBR’s economic and fiscal outlook, released yesterday alongside the Budget, the economists said Treasury coffers were boosted by £900m as a result of the reforms.

The sum is a dramatic 28 per cent increase on the OBR’s original forecast of £700m for 2015/16.

It comes after HM Revenue & Customs revealed it had repaid over £24m to people who were overtaxed after withdrawing money from their pension savings in the last three months of 2015.

A total of £24.1m was repaid following 10,973 claims from taxpayers between October and December last year who had overpaid tax on pension withdrawals because the money taken out was taxed using an emergency tax code.

At the same time, the OBR said spending on state pensions as a proportion of GDP had reduced by 0.2 per cent, which it attributed to increases in the retirement age.

The OBR added: “In contrast to working-age benefits, the basic state pension award is expected to rise mainly in line with earnings due to the triple lock on uprating, so average awards have little effect on state pension spending as a share of GDP.

“Indeed, with awards rising by 2.5 per cent in 2017/18 – higher than CPI inflation or average earnings – average awards push spending up slightly as a share of GDP.”

Telegraph.co.uk

Former pensions minister Steve Webb has warned of the end of the tax-free lump sum that can be taken from pensions. The comments have sent pension savers into a frenzy as they deliberate whether to grab their 25pc tax free lump sums now.

One newspaper reported that a “leading figure in the pensions industry” would take his tax-free lump sum before the Budget on March 16. The current perk allows people to access 25pc of their pension pots tax-free in a single lump sum when they reach 55. This benefit could be “heading for extinction”, Mr Webb wrote at the weekend.

However, Mr Webb has now clarified that the death of the tax-free 25pc – a “tax bombshell” – most likely relates to future saving under a new system rather than pension money already accrued. Here, we explain all.

Will any change affect pensions I’ve already built up?

It is possible, but Mr Webb believes it is highly unlikely. He said such a manoeuvre would be “political suicide” for George Osborne, the Chancellor. This is because millions of people are relying on their tax-free lump sums as an integral part of their financial planning. Some, for example, have earmarked the money to pay off mortgages or other debts. If you’ve already got pension savings from which a tax-free lump can be taken (if, say, you’ve saved for 20 years in a final salary pension), it seems very unlikely that this will be taken away. There should be no need to rush to grab your lump sum now – especially if you weren’t planning to take it any time soon.

What are the disadvantages of taking my lump sum today?

If you have a big pension and are in danger of paying higher-rate (40pc) tax as a pensioner, financial planners usually advise against taking your tax-free lump sum upfront. Instead you can take part of your lump sum every year in order to keep your other withdrawals from the pension below the £42,385 threshold for 40pc tax. It could also be better for basic-rate taxpayers to hold off on withdrawing their lump sum.

Take three different scenarios for a basic-rate taxpayer who draws £6,000 a year from a £100,000 pension pot. The examples, with calculations provided by Fidelity, assume the money that remains invested earns 4pc a year.

1. You take £25,000 tax-free cash out of the pension upfront and crystallise 100pc of your pension. From the £25,000, which goes into a taxable bank account, for instance, you draw the £6,000 a year until it runs out. You then draw taxable income from the balance of the pension. The fund will last almost 23 years with £6,120 remaining after the end of 22 years.

2. You crystallise £24,000 of your pension per year and take 25pc (£6,000) as income. The rest remains invested. This is effectively the same as the first scenario except that you are earning tax-free returns at all times as the money is only ever taken out of the pension when it is needed to be spent. The impact of getting gross returns on more of the fund means that it lasts longer. At the end of 22 years there is £7,580 left, £1,460 more than in the first example.

3. If you decide to forgo the upfront cash lump sum and instead take 25pc of your pension tax free with every withdrawal, you could withdraw £7,059 each year from the pension. Of this, 25pc would be tax free and 75pc taxed at 20pc, giving a net £6,000 a year. The fund runs out after 23 years with just £5 left, so over an expected lifetime of withdrawal you end up in the same place as under option two. However, there is more money left over in option two each year up to this point because option two takes smaller withdrawals upfront (£6,000 versus £7,059).

What might happen with future pension savings?

The Treasury last year floated the idea of changing from today’s system of pensions tax relief to “Isa-style” pensions, where you get no tax relief on money when it is paid in but withdrawals are tax-free. Naturally, the tax-free 25pc element would not exist in the new system, and so for future savings there would be no entirely tax free-element (tax relief on the way in combined with tax-free withdrawal on the way out).

Young people will have to work and save non-stop from age 22 until they hit 77 to get a pension of the kind earlier generations enjoyed, a new study shows.

Dailymail.co.uk

Start saving later or take a break for any reason, and you would have to work until even later in your 70s or into your early 80s to get a decent pension.
This could signal the ‘death of retirement’ for many people, who might end up working well beyond the traditional age to stop even if they try to do all the right things, according to pension firm Royal London, which compiled the report.

It looked at how long an average earner who saved at the 8 per cent contribution level – the minimum auto-enrolment requirement from spring 2019 – and built up a full state pension would have to work to get the same pension as their parents.

The study assumed that someone was in the most common defined contribution scheme, rather than a more generous final salary scheme, and would buy an annuity at retirement.

It also assumed someone was on the national average wage of £27,600 a year, and their target was a ‘gold standard’ pension of two thirds of pre-retirement income, with inflation protection and provision for a spouse after death.

Royal London found that someone would have to work without a break until age 77 to achieve this goal, and even if they aimed for the ‘silver standard’ of half their pre-retirement income they would need to work until they were just over age 71.

Although a start date of 22 for pension saving will become the norm for future generations under auto-enrolment, people are still likely to have gaps in contributions due to unemployment, sickness or family responsibilities.

Former Pensions Minister Steve Webb, now policy director at Royal London, said: ‘Getting millions more people saving through automatic enrolment is a huge step forward, but many face a cruel disappointment if they think that current minimum contribution levels will deliver them the sort of retirement they are looking for.

‘Without significant increases in contributions, we could be witnessing the death of retirement. This report shows that today’s workers are unlikely to be able to secure the quality of pension provision enjoyed by many in previous generations without either working well beyond pension age or contributing substantially more.’

I’m worried the market crash will harm my pension. How much do big stock market falls affect individual pension pots – and is there anything I can do except watch and wait, and hope for the best?

Dailymail.co.uk

If your pension is invested at least partly in stocks, it is bound to have taken a hit during this time of market turmoil.
But just how much damage this is doing depends on your pension scheme. If all or most of your savings are in a traditional final salary pension fund, where your income is guaranteed in retirement, you are unlikely to be affected.

The only danger is that the scheme runs up such a deficit that it goes bust, but even then the Pension Protection Fund will come to your aid.

Your pension is under much greater threat from financial market turbulence if it’s a defined benefit scheme, where your money is put into stocks and other investments like company and government bonds.

The pot you end up with at retirement, and will rely on to provide you with an income, therefore depends on how well those investments perform.

But if your retirement is still some way off, bear in mind that your regular pension contributions now are buying up stocks while they are much cheaper, and this should benefit you in the longer run.

And if you are very close to retirement, it is likely your scheme will have ‘lifestyled’ your investments, which means most of them will have been switched into safer government and corporate bonds or even cash. This will protect you from the worst of the market meltdown.

However, if you are near retirement age it’s worth checking with your pension provider to find out what it’s doing on this front, especially if you are in the ‘default’ fund which means it takes all the investing decisions for you.

It’s lifestyling strategy might have changed following pension freedom reforms launched last April which mean people can now access their whole pension pot at age 55 and spend, save or invest the money as they wish.

Pension providers are changing default funds in recognition that choices have widened and you can be a lot more more creative about how you fund retirement. Yours may be anticipating that in future most people in its default fund will shun annuities and opt for investment drawdown schemes instead.

Dailymail.co.uk

Millions of savers are about to get walloped by pension tax changes that could slash their retirement savings by tens of thousands of pounds.
High earners in particular are being warned to overhaul their arrangements and bung as much into their pensions as possible up to current tax limits, to avoid losing valuable benefits before the Budget on 16 March. The big threat is that Chancellor George Osborne will introduce a ‘flat rate’ system, under which all taxpayers receive the same level of pension tax relief regardless of how much they earn – ditching the principle that everyone saves for retirement from untaxed income.

Meanwhile, previously announced measures also mean dramatic cuts in how much the better off can save, both annually and over their lifetime, without having to stump up tax.
Although the system is designed to affect the wealthiest households, experts have warned that it will punish the most prudent, including some middle managers, senior nurses and small business owners. Analysis for the Daily Mail earlier this week suggested that as many as 1.5million savers – some on modest salaries – could be caught out by the lifetime cap alone.
There are nearly 4million people in the UK who pay income tax at the 40 per cent or 45 per cent rates and nearly 26million who pay the basic rate of 20 per cent, according to data from the Office for National Statistics in January 2015.
We explain below what is happening to pensions, who will be hit, and what can you do to mitigate the damage. But deciding the best course of action will often be a matter of fine judgement, depending heavily on your personal circumstances.
Most well-off people tend to get financial advice, but if you don’t and these pension changes affect you, it would be sensible to get professional help ahead of the Budget.

Dailymail.co.uk

Savers who retire this month face receiving pension income that is up to 13 per cent lower than what they could have obtained a year ago.
Payouts on annuities have crashed to an all-time low over the past year, according to figures from data firm Moneyfacts.
In January 2015, a 65-year-old saver would have received £2,727 a year in exchange for their £50,000 nest-egg. But this month the figure has plunged to £2,573 — a 5.6 per cent fall.
In a further blow, those hardest hit will be savers looking for pensions that account for their health conditions.
So-called enhanced annuities typically give a higher income, but payouts have plunged by between 5 per cent and 13 per cent over the past year, the analysis showed.
Experts say the fall is down to a combination of factors, including new European rules that force firms to hold more cash on their books rather than doling it out.
This means pension companies must claw back extra costs from customers.

Yahoo finance
New FCA data shows just 13pc of savers are choosing to turn their pot into a guaranteed income via an annuity
Nearly nine in ten savers accessing their retirement pots under the pension freedoms are using new flexible arrangements, new data has revealed.
Financial Conduct Authority (FCA) shows just 13pc of savers are now buying annuities to turn their fund into an income in retirement.
• Pension freedoms: 2.2m face charges to access money
• £17m a day withdrawn under new pension freedoms
A total of 178,990 pensions were accessed during the three-month period, and 68pc of these, amounting to 120,969 pensions, were fully encashed.
The remaining 32pc of pensions that were accessed were taken to provide an income.
Most (88pc) of the pensions where the money was fully taken out were worth less than £30,000, the FCA said. Another worrying trend is for the majority of consumers continue not to shop around for the best deals, despite the clear benefits of doing so.
Concerns were raised about the number of people not taking financial advice, or using the Government’s Pension Wise service.

Retired savers waiting to re-sell their their annuities face prohibitive costs ahead of Government plans to introduce an ‘annuity marketplace’.
Under the proposals, pensioners who have already used their pension funds to buy an “annuity”, which pays an income for life, will be able to sell their deals in return for a cash lump sum. The “second-hand” pensions market will be made available in 2017.
The Government is understood to favour a free market in which savers put their annuity contract up for sale and insurance companies bid against each other.
The customer then receives a lump sum from the highest bidder. In exchange, the insurer collects the income stream attached to the saver’s annuity. However, experts have warned that the cash offers may be lower than customers hope. The income stream stops when the customer dies – as a result, people whose health has deteriorated may receive only a paltry offer.
The cost of advice is likely to exceed £1,000 for most people, experts said.

Telegraph.co.uk