Article by Phil
The latest facts and figures around pension help and retirement planning have recently been published by Canada Life as part of their 100+ Report.
The report found that:
- 70% of UK adults do not think that they will be able to retire at 60.
- Nearly half of people questioned said they would like to live to 100.
- Most said they’d like to live to 85 or 90.
- Over 50% of younger people expected to get an inheritance from their parents and over 60% of parents said they wanted to leave an inheritance. So hopefully that balances itself out!
- 10% of people expected to pass on over £750,000.
- 75% of people using an Independent Financial Adviser said that they felt in control of their retirement.
- Finally, being a grandparent produced the most satisfaction – in almost 75% of people. I’d agree with that.
In terms of the high rollers, Titan Wealth Planning found that there are 2,000 pensioners in the UK who draw over £200,000 a year from their pensions and 8,000 who take over £100,000 a year. The average is £15,168.
Annuities more popular
On the retirement trends front more retirees seem to be turning to annuities as rates have increased. The number of annuities is up by 38% between 2023 and 2024.
More importantly over 50% of people buying an annuity have chosen to change providers away from their original pension provider. This suggests that more people are shopping around for advice on the best annuity rates. Rather than just accepting the offer their pension provider makes. This is what the Financial Conduct Authority (FCA) wants to see.
It’s also reported by Legal & General that people who have retired with an annuity are happier in their retirement. That’s because they report that they have less stress (51%) in comparison to those retirees who have a draw down pension, which means they still need to manage their finances. They also reported feeling more financially secure. Maybe because they felt that they could budget more easily.
That’s not to say an annuity is right for everyone. Neither is draw down, the best advice is to get pension help from your local financial advisor.
Worryingly, almost 40% of pensions moving into draw down are doing so without the benefit of pension advice.
Check your pensions.
As always with National Pension Tracing Day, which was on 27th October this year, you must make sure that you have details of all your workplace and private pensions. Don’t forget that over 30% of workers think that they’ve have lost track of at least one of their workplace pensions. The Pensions Policy Institute estimates that there are an estimated 3.3 million “lost” pension pots, worth over £31 billion in the UK. The average lost pot is worth £9,500 rising to £13,500 for the over 55’s.
Make sure one of them isn’t yours.
You can get pension help from the Pension Tracing Service who have taken over 250,000 calls since they were set up in 2019.
More help will be on the way eventually when the Pension Dashboard is launched. New Pensions Minister Emma Reynolds has confirmed that the new government is committed to the project. However, there is no launch date yet. It is still in the testing phase.
But this may not be the answer people are expecting. Research by Peoples Pension has found that although 40% of people have said that they would use a dashboard to transfer and consolidate their pensions. It seems that many people are moving their pensions to more expensive solutions, because they are not advised transfers. It is estimated that this could cost retires up to £2 billion in higher pension charges.
Peoples Pension found that 75% of the customers who transferred their pensions didn’t know what their charges were and whether they were higher or lower than their existing provider.
There could be trouble brewing.
Financial Priorities and retirement worries
Monument Bank has published a survey on people’s financial priorities by age demographic. Those surveyed were the so called “mass affluent” that’s people with the ability to save after paying their bills. The results are probably not that surprising.
- The under 35’s prioritised both savings (45%) and insurance needs (43%)
- 35- to 55-year-olds were focussed on their pensions (32%)
- Whilst over 55’s are most focussed on inheritance tax (30%) and other taxes, including capital gains tax (21%)
All age groups were interested in saving (48%) across the board expressed an interest in how much they could save and what returns they could achieve.
Meanwhile, Nucleus found that people were still feeling uncertain about their retirement futures. Their survey found that:
- Only 34% of people were confident that they would have enough money to live comfortable in retirement. That means that 66% feel insecure about their future.
- Most people thought that £30,000 a year would give them a comfortable retirement. The current estimate from the Lifetime Savings Association is £43,100.
- 70% of over 55’s wished they had started saving for retirement in their 20’s.
These figures show more people are worried than the same time last year.
Pensions and Inheritance Tax
The government have now released a consultation paper setting out how they intend to implement the changes announced in the budget. Namely taxing pensions which are passed down as part of an estate.
The first thing to say is that pensions won’t be taxed to dependent spouses, so that’s a relief. Although co-habiting couples won’t benefit from this tax relief.
The details in the consultation will have a direct impact on many peoples Inheritance Tax Planning (IHT) plans. It would be worthwhile getting some updated pension help from a financial advisor to make sure your plans are still the most tax efficient possible.
