When I’m 64+ ….1m people in work are aged over 65

The number of people aged over 65 in work has reached a new record.

There are now over one million people in work aged 65 or over according to the latest statistics from the ONS. That represents nearly one in ten of the 65 and older population – more than double the proportion at the start of 2001. As the graph shows, there has been a steadily rising trend, seemingly immune to the vagaries of the UK economy since the turn of the millennium.

ONS attributes the breaching of the one million threshold to more people staying on in work and also more people of this age group in the population (the first tranche of the post-war baby boomers is now 65+). The abolition of 65 as a statutory retirement age, which took full effect in October 2011, has probably also helped boost the in-work numbers.

ONS does not define the proportion of the 65+ workers whose financial situation means that they have no alternative to continued employment, even if it is generally part time. The generation now retiring is often thought of as the lucky ones because their working life coincided with the era of final salary pensions, but that is something of an oversimplification. Final salary schemes were not the province of small employers, nor were those in self-employment able to benefit.

If the idea of working beyond 65 does not appeal to you, make sure your retirement provision is adequate. Otherwise, B&Q may beckon…

It is often difficult to envisage the idea of retiring when you are in your thirties or forties, but it is worth giving serious consideration to the fact that the longer you are able to save for retirement, the lower the amount you will need to set aside.

We are living longer, yet the contribution the government makes to its senior citizens is decreasing, and the age at which we are entitled to receive a state pension is increasing.

With over 40 years experience, we will provide tax advice to help you make the right choices. Of course, personal and professional circumstances will greatly influence your decision and you may need assistance regarding the many pension or other investment options that are available.

If you would like to know more about this service we offer, please do get in contact with one of our partners on 0208 861 7575

 

Is this You? Survey highlights UK’s reluctance to save for retirement

One of the major clearing banks recently undertook a retirement planning survey across 15 countries in which it operates. Among its findings for the UK were:

 

• One third of people were not making any preparation for retirement, while a virtually identical proportion thought they were not doing enough.
•  The average expected time spent in retirement was 19 years, which was 12 years longer than the average time retirement savings were expected to last.
•  In terms of retirement income, the average amount thought appropriate was 73% of pre-retirement income.
•  Just 38% of people are regular savers, leaving the UK only above Egypt in terms of thrift. 
• The UK came top in one unfortunate category: prioritising saving for a holiday over saving for retirement. Given the choice of only one savings goal for the year, 58% of the UK respondents chose a holiday, while 32% opted for retirement.

One interesting point the survey threw up was that, for those on average incomes, there was a strong relationship between financial planning and greater saving. People who had carried out some type of financial planning had at least four times the retirement savings of those who had failed to plan. Where professional advice is used, savings were two and a half times more than those of people who have not taken expert advice. 

Everyone hopes to maintain the same standard of living in retirement as they presently enjoy whilst working, but to achieve this requires considerable forward planning.

Please contact us on 0208 861 7575 or visit our website for more information, or book a FREE initial consultation so that you can come in and see us and talk over your requirments.

New era for the state pension as single-tier system unveiled

The Government has set out its plans for a new flat-rate state pension system, which is expected to take effect from April 2017.

Under the existing system, many poorer pensioners are entitled to top up their basic state pension payments of £107.45 a week, via the means-tested Pension Credit and the second state pension.

However, figures suggest that around 1.5 million people are failing to claim Pension Credit.

The new single-tier pension of around £144 a week (plus inflationary increases) will replace the state second pension, contracting out and out-dated additions. It is expected to be paid to all qualifying pensioners who reach the state pension age from 6 April 2017.

In addition, the Government has increased the number of years of national insurance contributions (NICs) required to qualify for the full state pension from 30 to 35. Under the new system, taking a career break to raise a family will also count towards the 35 years of NICs required to receive a full pension.

Currently, an individual begins to build up their entitlement to the state pension after one year of NICs. However, from April 2017 taxpayers will require a minimum of somewhere between seven and 10 years of NICs.

The changes are expected to benefit the self-employed and many women. However, the system would not distinguish between poorer and wealthier individuals, prompting some experts to warn that there could be long-term losers when the changes come into effect.

The Government will also need to determine how to deal with people who have contracted out of the state second pension.

Announcing the proposals, the Pensions Minister Steve Webb, said: ‘The current state pension system is too complicated and leaves millions of people needing means-tested top-ups.

‘Our simple, single-tier pension will provide a decent, solid foundation for new pensioners in an otherwise less certain world, ensuring it pays to save.’

The proposals have been welcomed by the British Chambers of Commerce (BCC). ‘[This] announcement will bring welcome simplification for pension savers and parity for the self-employed, who were previously ineligible to top-up state pensions,’ commented Dr Adam Marshall, BCC Director of Policy and External Affairs.

‘These reforms support the rollout of automatic enrolment, providing certainty about the size of the state pension and creating a much-needed incentive for individuals to save privately.’

The state pension age is set to rise to 66 by 2020, and to 67 by 2028.

How will this affect you? Are you about to reach state pension age of 60?

How do you solve the puzzle of higher rate taxes? (Part Four)

Pensions – not just about retirement

At retirement

The first decision at retirement is whether to draw a lump sum and an income, or just an income. At first sight, drawing the maximum cash (usually 25% of your fund or benefit value) looks the right choice because the lump sum is tax-free, whereas any income is fully taxable.
However, if you are a member of a final salary pension scheme and have to commute pension for cash, the taxable income might be a better deal. The decision depends upon a variety of factors, including the pension/lump sum commutation rate, your need for capital and your state of health.

If your pension arrangement is money purchase rather than final salary, then maximising the lump sum will normally be the right move, although that does not necessarily mean drawing all the lump sum at once.  How you deal with the remainder of your fund is a more complex issue:

From a pure tax planning viewpoint, income drawdown – drawing payments directly from your fund – will often be attractive as it gives you some flexibility to tailor your pension income to your requirements and tax position.
It can also help in your estate planning, as any residual fund on death can usually be passed to your chosen beneficiaries as a lump sum, subject to a single 55% tax charge.

From an income security viewpoint, buying a traditional annuity removes the investment risk and potential unwanted reductions in income that are a consequence of choosing income drawdown.  However, annuity death benefits are generally less attractive and there will be no scope to vary income each year for tax purposes.

The right structure for retirement benefits is best chosen in the run up to retirement, but the flexibility now available underlines the fact that a retirement income is now about much more than just a fixed annuity.

We understand that there’s quite a lot to take in here, so if you want to explore your pension options with us – your very friendly tax advisors – then why not give us a call on +44 (0)20 8861 7575 and we’ll take you through it ‘step by step’.