15 million people forced to work until they drop as they don't pay into a pension

A probe by the Financial Conduct Authority reveals a third of workers – roughly 15 million people – are not saving towards retirement

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Tricia Phillips

Millions of people don't pay into a pension (Image: Moment RF)

Millions of people face the prospect of working into their 70s or 80s to make ends meet amid a pensions timebomb.
A probe by the Financial Conduct Authority reveals a third of workers – roughly 15 million people – are not saving towards retirement.
Those who are depending on the state pension could be in for a rude awakening.
Writing in the Mirror today, FCA chief executive Andrew Bailey says: “Around 15 million adults who are not retired are not paying into a pension...
“While the state pension is a hugely important part of retirement provision... for many people it is not enough to maintain living standards.”
He adds the FCA’s largest ever survey into the nation’s personal finances, a poll of 13,000 people, shows “many are not saving enough for their retirement”.
The average amount being put away is 4.2% of earnings, experts recommend at least 12%.
The FCA’s report Financial Lives, due out today, comes as experts predict the pensions crisis will worsen.
With the population getting increasingly older, the state pension age keeps rising in a bid to reduce the escalating pensions bill.
The looming turmoil comes despite many people being automatically enrolled in workplace pension unless they have opted out.
Former pensions minister Sir Steve Webb said: “The good news is over eight million people have been enrolled into a workplace pension in the last five years.

“But many of these people are only putting a few pounds a week into a pension...
"Contribution rates now need to be steadily increased if people are going to be able to afford to retire.”
Pensions expert Tom McPhail, of brokers Hargreaves Lansdown, said: “For all the success of auto-enrolment..., it is worth remembering there are almost as many who have been left behind.”
Those with no pension pot may have to claim extra benefits, mean­ing more strain on public finances.

Saving for retirement is very important but it isn’t easy for people who have to make ends meet today.
Around half of 55 to 64-year-olds are expected to live to 90 but only 7% of them expect to live to this age. Many savers look forward to leisure early in retirement rather than worry about care costs later on.
Self-employed and unemployed people are, respectively, twice and three times as likely as those in jobs to have no savings.
It’s not all doom and gloom. There are early indications auto-enrolment by employers increases saving among those early in their careers.
And 97% of 18 to 34-year-olds contributing to a pension said it had been organised by their employer.
But 11% of those aged 18 to 24 and 13% of 25 to 34-year-olds missed paying bills or credit repayments in three of the last six months.

Auto Enrolment explained

This is what you need to know about automatic enrolment, who qualifies, how much you get and how to boost your pension further

• What is automatic enrolment? - A government initiative launched in 2012 to help more workers to save towards their retirement. Bosses have to automatically enrol staff into a workplace pension scheme and they both have to make minimum contributions.
• Who qualifies for AE? - Workers aged between 22 and state pension age, earning over £10,000. Some younger workers and those earning less may be entitled to join but will not be automatically enrolled.
• How much should I be saving? - For a comfortable retirement pension experts recommend you put away 12% to 15% of your salary.
• Can I save more than the legal minimum into my workplace pension? - It depends on the scheme your employer runs. Often firms let you save more and some generous bosses will match what you put in up to a certain percentage of your salary.
• What’s my state pension age? - Depends on when you were born. Currently it is age 65 for men and gradually increasing to 65 for women. From 2019 it will increase for men and women to reach 66 by October 2020. Then it will rise to age 67 by 2028. It continues to be kept under review so it may change.
• How much is the state pension worth? - Those who reached their state pension age before April 6, 2016, are on an old system that pays £122.30 per week. Those who reached it after April 6, 2016, come under the new version which is £159.55 per week for those with the full 35 qualifying years of National Insurance contributions.
• How can I save if I’m self-employed? - If you are under the age of 40 you can set up a Lifetime ISA. While you don’t get tax relief on contributions you will get a 25% bonus on savings from the Government.
  
  Culled from Pension Mirror

Life assurers rake in billions from pension transfers-by Oliver Ralph and Josephine Cumbo in London

Standard Life Aberdeen and Royal London among biggest beneficiaries from £50bn flow

Life assurers rake in billions from pension transfers Standard Life Aberdeen and Royal London among biggest beneficiaries from £50bn flow Regulators fear the large number oif pension transfers could lead to a new mis-selling crisis © Chris Batson Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) 19 Print this page yesterday by Oliver Ralph and Josephine Cumbo in London Britain’s biggest life assurers have gained billions of pounds of new business as a result of contentious pensions reforms. In the past two years, about £50bn has been released from corporate pension schemes as tens of thousands of people swap their guaranteed retirement income for a lump sum, according to Mercer, the consultants. One pensions administrator, Broadstone, said that Standard Life Aberdeen, Royal London, Prudential and Aviva had been among the biggest beneficiaries of the pension transfers it has processed. Standard Life Aberdeen is one of the few companies to disclose details about the amount of money it is taking in from defined benefit transfers. In the first half of this year, Standard Life took in about £900m to its drawdown products from the transfers. Standard Life completed its merger with Aberdeen Asset Management in August. Aviva’s platform business, which allows customers to hold several financial products in the same place, took in about £750m from defined benefit transfers in the same period. £38,000 Charges over 20 years on a Standard Life Sipp from a £500,000 investment Other companies do not provide similar breakdowns, but their wider pensions businesses are clearly booming. Royal London’s overall sales of individual pensions and drawdown products jumped 64 per cent in the first half of the year. At Prudential, drawdown sales were up about 30 per cent, while LV’s overall pensions business grew by a similar amount. Earlier this week, St James’s Place reported £5bn of inflows into its pension business in the first nine months of the year. A combination of new freedoms on how people spend their pension savings and a sharp rise in transfer values for those in defined benefit plans has led to a boom in transfers, which regulators worry is creating the potential for a new financial mis-selling crisis. The Financial Conduct Authority is investigating whether independent financial advisers are giving suitable advice on transfers, where savers swap monthly payments guaranteed for life for a lump sum which they then invest in a personal pension plan. The parliamentary work and pensions committee is also planning an investigation. The transfers are a lucrative source of long-term income for assurers, which have suffered as sales of traditional pension products, such as annuities, have shrivelled in recent years. Putting £500,000 into a Standard Life Self-Invested Personal Pension (Sipp) for 20 years, for example, would generate £38,000 in accumulated charges. “If you get the money, you have 20 years of fees coming through,” said David Brooks at Broadstone. Over the last 30 years, the words life insurance and mis-selling have gone together like horse and carriage Ned Cazalet, Cazalet Consulting As a result, the assurers have not been shy in helping financial advisers who provide guidance to pension scheme members. Commission payments to advisers have been banned since 2013, but the insurers are doing what they can to assist them. Some companies, including Prudential and Standard Life, pay for valuation reports, called TVAS, which are a vital part of the transfer advice process. These reports can cost hundreds of pounds if bought independently. Other companies provide advisers with useful information. Scottish Widows, for example, has a dedicated pension transfer website, giving advisers guidance on how the transfers work. “I see a lot of providers commenting on transfers, providing articles and assistance,” said Mike Morrison, head of platform technical at AJ Bell. But Alistair Cunningham, financial planning director with Wingate Financial Planning, said the “increasing number of insurers offering training and marketing material is concerning, particularly as some is not as impartial as I would hope”. “Insurers seem in a unique position where they gain custodian fees for assets transferred on, but may well try to shrug off any responsibility where the advice fails subsequent suitability tests,” he added. Recommended UK retirees using ‘pension freedoms’ for alcohol and gambling FCA urged to launch full probe into pension transfer advice Regulator warns on poor advice over cashing in pension pot However, assurers say the guidance they provide gives them comfort that advisers are giving good advice. “We provide a lot of ammunition to help advisers reach the right decision, so we don’t have the same concerns that we might do otherwise,” said Vince Smith-Hughes, head of pensions business development at Prudential. Ned Cazalet, head of Cazalet Consulting, said assurers were aware of the risks associated with transfers. “Over the last 30 years, the words life insurance and mis-selling have gone together like horse and carriage,” he said. “The memories of mis-selling have not gone away and the industry has had to pay millions in redress. This is an area where people are treading gingerly.”
Culled from Financial Times