The Government has a problem reconciling the need for people to save for their retirement, whilst at the same time not being seen to sanction any accrued benefits which can be passed onto their heirs after death.

This stance has pretty much paralysed any rational thinking on the way forward with pensions, which have now potentially become a liability rather than an asset. Given a choice between an ISA and a pension most people today would opt for the former, whereas with proper policies in place pensions should actually be the route of choice.

Governments must also learn not to regard pension savings as a 'cash cow' to be milked at will to top up their spending shortfall. Furthermore, they are a long term contract between the Individual and the State and the rules should only be changed with sufficient notice in order not to disadvantage savers.

And for goodness sake treat pension savers as adults. After all they have built up a pension in the first place, so bullying them over drawdown & capped GAD rates is really rather insulting. Especially, as the 'reason given' is normally that the Government is looking after them for their own good to prevent them running out of money in their retirement. Well hang on! - these are people who have saved in the first place and not welfare recipients who rely on others and have made no provision for later life.

The facts are really very simple - if you wish people to save then make life easy for them to do so. Governments must stop constantly looking over their shoulder to appease those who believe that passing things onto ones children is a bad thing. They become so obsessed with this hang-up that it has a harmful undue influence in all resulting pension polices, which seems to over-ride common sense.

The acknowledged wisdom is that most of us need to save more into our pensions to have a comfortable retirement and the older one becomes before starting the process the greater the monthly amount needed.

However, the ridiculous thing is that is not necessarily the case and it is perfectly possible to accrue a substantial retirement fund, if only Governments would take their head out of the sand and start thinking constructively.

Personal pensions (SIPP's) are already permitted to invest in commercial property. A simple example of enlightened thinking would be to revise the SIPP borrowing rules and allow them to borrow 60%-70% to purchase commercial property, provided the pension had a deposit of 30%-40%; furthermore, this should apply on a property by property basis.

The figures are simple and the loan on the commercial property would be paid off within around 15 years - entirely from rents receivable. Once paid off the property would then yield between 5%-7.5% per annum in rent, as eithe retirement income or to help fund another purchase

Example: Taking a commercial property worth £100,000, a deposit of £30,000 and a mortgage of £70,000 (70%)

  • Current situation - In order to borrow £70,000 the SIPP must hold assets of £150,000
  • Proposed situation - In order to borrow £70,000 the SIPP would only have to put down a deposit of £30,000

However, it is all about fostering the right climate and encouraging people to save into pensions.

Saying that someone must save £500-£1,000 in order to have a decent pension will simply put people off and the net result will be no saving whatsoever, because they believe that the figures being bandied about are beyond their reach and therefore it is not worth even trying to start saving

The benefits of getting it right are immense - now it only requires political will!

Tags: | Categories: UK Government

Pension planning is a long term exercise and changes made within 10 years of retirement provide little leeway to those coming up for retirement to obtain the requisite qualifying years

The principle is a good one, but the execution may be considerably flawed. A great deal more thought needs to be given to implementation and transitional arrangements. Unfortunately the devil is in the detail and in this respect there is no clarity

Originally men & women needed 44/39 years of contributions to qualify for a full state pension. This was changed so that after April 2010 it dropped to 30 years contributions for everyone and now proposals are in place to raise it again to 35 years in order to be eligible for the new flat rate pension.

In the meantime anyone who already had 30 years contributions has probably stopped paying any more NI (on Government advice) if they were making voluntary contributions to top up their years.

Now only to be told that they need a further 5 years contributions to be eligible – but what happens if they have used up their ‘back years’ contributions their age doesn’t permit them to achieve the additional 5 years contributions necessary to qualify under the new proposals? Do they lose out in the pension lottery?

On the other hand to get bereavement benefits you need to pay 39 years of National Insurance contributions for women and 44 years for men – so it’s back to square one if you die; where is the consistency with this?

All very messy and in need of being urgently sorted out

Also, don’t forget that there is a category of women coming up for retirement, born within a certain date range, who have already been disproportionately disadvantaged under the last round of pension age shifting, which saw pension ages being deferred by a relatively huge amount for those within 4/5 years of retirement.

A very discriminatory process for women in this age group who in the worst case scenario probably lose up to £25,000 retirement benefits in total

Women falling into this category are now in danger of being disadvantaged once again in a ‘double-whammy’ by these recent proposals.

Quite frankly this Government cannot keep penalising women & those nearing retirement in this overtly discriminatory manner – start introducing some fairness into the proceedings

Especially when all this is stacked up against those on benefits with pension credits, automatically eligible for everything despite possibly never having done a day’s work in their life.

Otherwise this whole thing really does send out the wrong message

If the Government really wants to concentrate on something, then how about totally unsustainable Public Sector Pensions which need to be placed on the same footing as the Private Sector for all new entrants, with immediate effect

Tags: | Categories: UK Government

The latest bandwagon for everyone to jump on is removing benefits (such as winter fuel allowance) paid to ‘richer pensioners’ (undefined). 

Now the Times Leader has joined the debate with a dysfunctional article which only portrays one side of the equation and ignores the reality of the existing state pension system. Backing up their argument with crass statements such as:

‘.. And while inflation and low interest rates have undoubtedly eaten into their savings since 2008, the elderly have been largely insulated from the financial pain of the young ..’

How is underwriting the banks and those in negative equity with artificially low interest rates paid for by savers being '..largely insulated..'? Muddled thinking from those who should know better - or perhaps they have their own agenda?

Pensioners benefits have only come about because the UK state pension is one of the ‘meanest’ in the developed world. Not only is it lower than all but three of the developed nations but also Britons face having to wait longer than people in any other industrialised country before they can retire

Furthermore, comparisons show that pensioners in the UK only get state payments worth 41.5% of average after-tax earnings. Whereas in Spain and Italy, the state pension is worth 84.9 and 75.3% of average earnings respectively and in the US, which has one of the least generous welfare systems, the state pension there is worth 50% of average earnings. In France it is 60.4% and in Germany 57.9%.

A study by the Organisation for Economic Co-operation and Development, which represents 34 industrialised nations, found only Mexico (32.2% of average earnings), Ireland (35.8%) and Japan (39.7%) have lower state pensions than the UK

By all means remove, additional pension benefits but replace/reallocate them to providing a basic state pension more in line with the rest of the developed world – to do otherwise would be yet another ill-advised approach and never forget that 'extra' benefits exist to supplement an woefully inadequate state pension

So before everyone starts complaining about UK pension top ups perhaps they should do their homework, or even consider introducing a basic state pension which is at least 50% of average after-tax earnings. Better still, introduce a state pension which is an average of all EU countries pensions (including Greece which is 111.2%)

Once again, if it is all about a united Europe why are member countries allowed to be wildly out of synchronisation in this areas as well as state benefits etc. – one currency should also mean one set of financial rules throughout the Union

However, if cuts really are the order of the day (and they should be) then why is everyone avoiding the ‘elephant in the room’ – PUBLIC SECTOR PENSIONS

Stop Unsustainable Public Sector Pensions Immediately For New Employees



Britains Mean State Pension vs Other Countries

Times Newspaper - Welfare in a State

Tags: | Categories: UK Government

Sunday 04 November 2012

The Treasury told Financial Mail:

‘The changes to income drawdown policies have given individuals more choice over the use of their pension savings to provide a retirement income.

‘Before the Government made these changes, those over 75 were effectively compelled to use their pension fund to buy an annuity. Since the risk of funds being depleted increases significantly at higher ages, we have had to strike a balance between generosity on capped drawdown and ensuring that people do not exhaust their pension funds prematurely.

‘The Government recognises gilt yields are currently low, and we have sought to provide some protection to individuals receiving drawdown pensions who are facing their drawdown pension review.

‘If the 15-year UK gilt yield should drop below two per cent, the scheme administrator will calculate the basic amount for drawdown purposes using the gilt yield figure of two per cent.’

Hang on - '.. The Government recognises gilt yields are currently low ..'

Of course they should, after all they were instrumental in the 'lowering' process and Gilt yields are a direct result of Government/BOE monetary policy, so between these two bodies they have engineered the situation of artificially low interest rates in the first place.

Futhermore the BOE is actually profiting on their own account from this misery they have inflicted on others

Unfortunately the Governments 'holier than thou' attitude is simply dishonest - although, goodness knows why are we surprised?

Perhaps someone in Government could explain how a sensible retirement income can be achieved when '.. The changes to income drawdown policies have given individuals more choice over the use of their pension savings to provide a retirement income ..' means pensioners drawdown income has been slashed (up to 40% down) by badly thought out GAD process & BOE artificial interest rates

Come on Mr Osborne / Mr Cameron and


You have made serious errors in this matter. Therefore you need to sort out the situation urgently and not just ignore the hardship you have imposed on those who do not have the power to stand up to you

All you are doing is behaving like privileged thugs and mugging old age pensioners

Tags: | Categories: UK Government

We are now witnessing yet another complete howler from a totally disfunctional Conservative Government hell bent on daft policies of 'form over substance'

This subject was originally mentioned in May 2012 - SIPP Pension Income Scandal and is now finally gaining momentum once eveyone realised what a crass approach the UK Government has taken over the matter

Not content with mutualising everyone elses problems over the entire UK population (i.e. flooding, negative equity, interest rate cuts, quantative easing ... and so on the list is endless) they now propose to finacially cripple pensioners and those who have saved by making their own pension provisions and saying they cannot have access to their own savings

The fact that the Government is being lobbied by Sage, AJ Bell, members of the public and others over their wholely inequitable seems to fall on deaf ears and so far the Conservative Government has refused to budge on the issue

As we have said before this is completely unfair treatment of those who have made their own pension provisions and coming from a collection of politicians who do 'very nicely' themselves on the pension front is an absolute disgrace


'.. A combination of drawdown rules introduced from April 2011 and continued reliance of 15 year gilt yields as a means of calculating maximum drawdown income has created an imbalance ...'

and let us not forget that 15 year gilt yields have been artificially fixed by the Government anyway

Frankly Mr Cameron needs to stop playing telephone footsie with Rebecca Brooks and start engaging with the real issues - a career of PR and spin just will not pass muster any longer

Could we suggest that all politicans take and immediate cut in their own salaries equivalent to that imposed on pensionser by artificial interest rates, QE and a reduction in GAD rates. Hitting these politicians in the same manner as they have targeted pensioners would drive home the message, especially if it had an impact on their pockets


Time to save those hit by unfair pensions drawdown rules

Fury over another pension scandal

Slashed our income by HALF': Drawdown limits cause misery for thousands AND forcing pensioners to sell their homes

Tags: | Categories: UK Government

No wonder saving for retirement has hit an all time low - down from 51% to 46% over the past year alone

What incentives are being given to save into a pension, other than the 'tax breaks' which are arguably worthless for anyone on basic rate tax. The tax benefit is more than outweighed by the restrictions on access to the funds, withdrawing money and the inevitable interference by sucessive Governments (witness GB raid on tax credits) who see savings in whatever form as a 'cash cow' to be milked for their benefit

The present scandal revolves around 'drawdown income' in retirement and the existing Government's contribution to the mess

Successive Governments are obsessed with two over-riding ideas

  • Firstly - underlying pension funds are going to be used as a vehicle by a few to avoid death duties & IHT - so the majority are penalised by the very same ministers whos families have off-shore interests
  • Secondly - if you are allowed access to your pension fund then you will spend it recklessly and fall back on the state when the money has all gone

In order to ensure that you are prudent with taking income from your own pension fund the Government has implemented a number of artificial measures to restrict pension income:

  • Artificially low interest rates - which in turn affects medium-term Gilt yields; currently 'floored' around 2.25%-2.50%
  • Annuity and pension drawdown rates (GAD) are largely based on medium-term Gilt yields and have been forced down by engineered interest rates to the lowest they have ever been
  • Just to add insult to injury the GAD maximum annual income limit has been reduced from 120% to 100%

The net affect of all the above is that pension income has been severely reduced and those who anticipated having a realistic lifestyle in retirement have had rather a shock

However, if the pension fund investment return if greater that the permitted drawdown income then inevitably the value of the fund grows; which on death means a greater 'tax take' for the Government with a tax rate of 55% despite the fact that the pensioner has been forced to have a reduced income during their lifetime

The question has to be:

Why should anyone bother to save for their retirement into a pension fund when clearly they are not going to benefit in line with their expectations? These funds are built up over a lifetime and yet Governments can change matters at the drop of hat with no accountability

Now to put this in context:

If you owe a lot of money then interest rates are the key and the classic way of wiping out some of the debt is to increase inflation whilst at the same time lowering interest rates

This means that anyone with debt (i.e. mortgages etc.) potentially becomes better off, although savers are penalised and are worse off, being hit with a 'double whammy' - loss of 4% interest on savings and reduction in their capital of 3%-4% via inflation; making them 6%-8% worse off

So once again the prudent are penalised in favour of the feckless, which seems to be the way of things in the UK at the present time

GAD = Government Actuarial Department

Tags: | Categories: UK Government