A week in the news
- One in seven businesses is failing to auto-enrol its employees in a workplace pension before the new deadline, new figures from Aviva reveal.
- An index fund that tracks companies in the FTSE 250 but excludes investment trusts has been launched by Legal & General Investment Management.
- Coventry for intermediaries has launched new offset mortgages and reduced the rates on some of its buy-to-let products.
- Scots Widows has scrapped exit fees on all personal pension products.
Thousands of over 55’s lose out from pension freedoms
Hundreds of thousands of vulnerable over-55’s could be left worse off this year if they take advantage of pension freedoms to access cash lump sums, Just has warned. Just Retirement and Partnership said that 2017 would see the highest ever number of people reaching 55, the age at which pension freedoms kick in.
Interest-only ‘prison’ to spur equity release
A flood of interest-only mortgage maturities in 2017 is set to ‘turbo-charge’ the equity release market, with one provider predicting demand will more than double over the year. The FCA has highlighted 2017 to 2018 as the first year in which a large number of interest-only mortgages sold would reach maturity and it estimates that almost half those with such a mortgage will be unable to pay the loan.
Scammers Pose as FSCS
The FSCS has warned consumers to “be on their guard” against an email scam promising a high-value payment. The compensation body said scammers were posing as the FSCS and attempting to entice consumers to provide personal information with the promise of a $5.7m (£4.5m) payment.
Scottish Widows unveils £30m workplace pension investment
Scottish Widows will invest £30m in its workplace pensions business to expand the range of products and services available to its workplace customers.
Cost of cyber crime to rise 40%
Financial services firms will be forced to spend millions more to guard against digital crime this year, as some industry professionals warn more needs to be done to educate businesses of the dangers.
For Financial planners the big risk is that you, or your staff, make an error that leads to a client falling victim to fraud.
What is your State Pension age
Key points from an Age UK document entitled “Later Life in the UK” published in 2016 serve to illustrate just how things have changed and are still changing. With a UK population of 65.3 million:-
- 6 million people are aged 65 or over
- Over 1.5 million are aged 85 or over
- The number of centenarians living in the UK has risen by 72% over the last decade to 14,450 in 2014
- UK life expectancies at age 65 are 85.9 years for women and 83.4 years for men
- By 2040, nearly 1 in 4 people will be aged 65 or over
- The proportion of the population aged over 75 is projected to double in the next 30 years
- Nearly 1 in 5 people will live to 100, including 29% of people born in 2011.
Pension Contributions by age per £10,000 per annum of retirement income
|Current Age||State Pension Age||Approximate monthly contribution required per £10,000 of income*|
* Contribution assumptions – Level before 20% basic tax relief
* Growth assumptions – Capital growth of 6% net of charges
* Income assumptions – At-retirement gross income before tax: adjusted for 2% inflation; 6% annuity rate; no tax free lump sum taken.
Increasing life expectancy means the State Pension Age goalposts could move even further away in the future, with people working into their 70’s and 80’s to make ends meet.
Conditions re Pension Advice Allowance
Can be used a total of three times, only once in a tax year, allowing people to access retirement advice at different stages of their lives, for example when first choosing a pension or just prior to retirement.
- Will be available at any age, allowing people of all ages to engage with retirement planning.
- Can be redeemed against the cost of regulated financial advice, including robo-advice as well as the traditional face-to-face advice.
- Will be available to holders of defined contribution pensions and hybrid pensions with a defined contribution element, but not defined benefit or final salary type schemes.
Auto enrolment – Review by Department for Work and Pensions
The DWP is conducting a review of auto-enrolment considering three themes, coverage, engagement and contributions.
Coverage – Consideration is being given to changes in the current earnings trigger of £10,000, age criteria and self-employed.
Engagement – Informing individuals that state pensions will not be sufficient in their retirement, employers matching contributions, people have a responsibility to fund their retirement.
Contributions – Rates need to rise above the 8% minimum planned for 2019, learn from the US experience of timing contribution increases with wage rises.