Article by Phil
Latest facts and figures from your pension financial advisor
HMRC have now published their analysis of pension financial advisor facts and figures from 2023. They found the following (albeit a year out of date already):
- 88% of workers were paying into a pension as a result of the success of the auto enrolment scheme introduced back in 2012.
- However, this figure falls to just over 50% for those working for small micro employers.
- £12.8 billion was paid in to pensions by employees.
- Only 34% of people think that they are adequately prepared for retirement.
- 38% of people are definitely not on track for an adequate or moderate retirement income.
- 6 million pensioners made an early withdrawal from their pension.
- The average withdrawal is £15,000.
- Over £83 billion has been withdrawn from pensions since the introduction of pension freedom back in 2015.
Pensions overtaxing
Of the £82 billion that has been withdrawn, over £1.5 billion was over charged in tax by HMRC. Meaning that people had to reclaim the money at the end of the tax year. Sometimes reclaims have taken much longer where people haven’t had the benefit of a pension financial advisor. The average overtaxed is £3,500. This is still happening with over £200 million overtaxed in the last 12 months. The problem arises when people take a lump sum from their pensions and HMRC apply an emergency tax code.
Research by Legal & General found that 80% of people who could have qualified for an enhanced annuity haven’t got one. 50% of those surveyed didn’t even know that they existed. This is a pretty good reason to use a financial advisor when choosing an annuity. After all this is an income for life and if you qualify for an enhancement, you should certainly apply for one.
Dormant Assets
Away from pensions, the Financial Conduct Authority (FCA) has announced an expansion to its successful Dormant Assets Scheme (DAS). Under the scheme financial institutions are able to transfer money which has laid dormant in bank and building society accounts for many years into the DAS fund. From there the money is distributed to good causes. So far, over £890 million has been paid into the fund since 2011. Now the FCA have extended the scope of the scheme to include money held in investments. That could add up to £800 million more into the fund.
Don’t worry though, if you re-discover any money held in dormant accounts which you had forgotten about, you will still get the money back. The scheme does make every effort to trace the owner of the money before its transferred. Including e mail, Royal Mail address searched, credit reference agency searches and using tracing services.
There are many reasons why assets may become dormant. One of those might be divorce where one party loses track of jointly held funds. Women tend to lose sight of funds through divorce more than men. Women also tend to become more aware of their finances after a divorce, especially wealthier women. A recent survey by Irwin Mitchell of divorced women with over £100,000 in investment found that:
- 10% said that were unlikely to talk to their new partner about their finances, but
- 50% would talk to their children about their money.
- 55% said they had taken the time to find out about Wills, and
- 50% had done the same to learn more about pensions.
- But only 20% said they understood much about tax planning.
A pension financial advisor would be able to help.
Dog Funds update
As your pension financial advisor we once again take a look at the Best Invest Dog Funds list. Published every six months, Best Invest list the worst performing funds on the market. To qualify the fund has to have underperformed the market for three years. The good news this time around is that the value of funds on the list has fallen from £95 billion to £53 billion. A 45% fall. Fidelity has fared badly on the latest list with eight of its funds on the list representing £8.4 billion in investments. Our old friend St James Place has improved, however. It now only has three funds on the list worth £12.6 billion! Down from £18.5 billion six months ago.
It’s worth looking at fund performance online especially if you are a DIY investor working without the help of a pension financial advisor. It could help you to decide how much risk you might be taking. According to research by Charles Stanley 10% of DIY investors are going to make a very high-risk investment in the next here months and 23% will take a high level of risk. 43% will take a moderate amount of risk and only 19% were going to make low risk investments.
