Ways to Prepare for Retirement

Being financially secure in retirement just doesn’t happen magically. It takes lots of planning, time and savings.
Some scary facts about retirement:

• More than 50% of persons do not have enough finances for retirement.
• 25% do not participate in their company’s retirement plan.
  
• The average person spends 20 years in retirement.
  

Here are some tips to help you plan correctly:

1. Talk to a financial professional. Every few years, it’s a good idea to schedule a meeting with a financial planner to get a ‘check-up’. It’s just like a doctor’s visit, and you should really talk about your present situation and future goals.
2. Save, save, and keep on saving. Make it a habit to save as much as you can.
   
3. Learn your retirement needs. Retirement can be expensive. Learn from today how much you need to save for your retirement. Talk to a financial planner, or find an online retirement calculator.
   
4. Take part in your employer’s retirement plans. If your company offers one, it is usually the best tool you can use. Talk to a financial professional for all your options.
   
5. Learn about pension plans. If you have an employer or government pension plan, learn all the details.
   
6. Keep your retirement savings off-limits. Don’t make a withdrawal until you retire, you might incur penalties and it will be a setback for realizing your goals.
   
7. Get your employer to start a plan. If your present job doesn’t offer a retirement plan, ask for one to be started. Many times it isn’t a cost to your employer to start one, and it can help you tremendously.
   
8. Learn about your government’s retirement plans. Every country has different plans some with special tax incentives, so learn what your country offers and plan accordingly.
   
9. Do your own research. Use the Internet, read the newspapers and magazines, talk to your friends, to find out as much as you can about retirement. NB Culled from Smarter Lifestyles

Rising State Pension Age : Work to 70 0r 75 ? -Andrew Oxlade

Documents published by the Office of Budget Responsibility show estimated future state pension ages. What will yours be?

A worst case scenario would see today's 20-year-olds working to 75 Photo: HOWARD McWILLIAM

Teenagers and those in their twenties have been given a hint of their eventual state pension age in an analysis conducted by the Office for Budget Responsibility (OBR).

The OBR, the Government's economic forecaster, underlined how rapidly the age may need to increase, to cope with the cost of an ageing population.

The state pension age is already rising but the ages are yet to be set in stone. Some proposed changes over the next few decades are waiting approval and beyond that the age will be linked to average anticipated lifespan.

What many people don't realise is that this could also affect the "private pension age", currently 55.

Current plans
The state pension age is currently 65 for men and 62 for women. The latter will keep steadily rising every few months and equalise at 65 for men and women in 2018. It will then increase every few months, reaching 66 by 2020. The next planned increase, towards age 67, will start in 2026 and conclude in 2028.
So anyone aged 59 or under will face a retirement age of between 65 and 66. Those under 53 will have to wait until age 66 at least. Finally, those 52 and under will take a pension no earlier than age 67.
Beyond that, the Labour government set a date of 2046 for the rise to 68 but the Coalition has set out plans, yet to be approved, to do this 10 years sooner.
The move to 69 will also be accelerated, probably to 2049, the Chancellor, George Osborne, announced in the Autumn Statement in December 2013. Previous predictions, put together for The Telegraph by pensions consultants Towers Watson, suggest those aged 47 and under will be affected.
The exact pace of the rises is yet to be passed as law. The Chancellor has said the payout should last “a third of adult life” (beginning from age 20), which could hold back future increases. At least ten years’ notice will be provided and changes will be phased in over two years each time.
The rate at which British life expectancy is rising has slowed. While there were sharp improvements in mortality in 2011, there was a lag in 2012 and early 2013. This is important, as the Government has said it will monitor life expectancy and make adjustments to the state pension age accordingly.
The latest state pension age prediction
The OBR said: "State pension costs will increase from 5.5pc of GDP in 2018-19 to 7.9pc of GDP in 2063-64 as the population ages. Spending is lower by the end of the projection than last year. The projection has been pushed higher by the updated population projections, but reduced by the Government’s policy of linking the state pension age (SPA) to longevity. We assume that this brings forward the rise in the SPA to 68 and introduces rises to 69 and 70 within the projection horizon."
The OBR published in its analysis, which is only to calculate the impact on Government finances, a fresh estimate based on three scenarios of life expectancy, worse than current predictions, central and better. If Britons become dramatically healthier and live longer, the state pension age could be 75 by 2064.

State pension age	Legislated	Best case	Central forecast	Worst case
66	2020	2020	2020	2020
67	2028	2028	2028	2028
68	2046*		2036	2031
69			2049	2034
70			2063	2037
71				2040
72				2045
73				2051
74				2057
75				2064

In January, The Telegraph asked pension consultants Tower Watson to estimate what the rises would be, based on a link with life expectancy (see table below). These estimates have not been proved correct by the OBR, and displaying it this way, with date of birth, makes it easier to look up your age.

Source: Towers Watson

When will today's children retire?
The state pension age should hit 70 by 2063 under current estimates, affecting those under 20. But then the age would keep rising. Pensions analysts at Hargreaves Lansdown have said children born in 2063 can expect a pension age of 74.
What will be your "private pension age"?
Private pensions and money in company schemes can be accessed from age 55. The biggest perk is that 25pc can be taken tax-free. Sweeping changes to the system were announced in the 2014 Budget, giving far better access to pension money. From next April, you will be able to withdraw all your money, although you will need to pay tax on it, as if it was income.
The plans also included a provision to increase the age of access from 55 to 57 in 2028. The exact date was not announced but it is likely to affect anyone aged 40 or younger.
What was less widely reported was that the Government also said it "was keen to hear views from respondents about whether the minimum pension age should rise further to allow more time for people to accumulate pension wealth before they reach retirement."
Guidance for this later retirement was even stated, suggesting the pension access age should be "five years below the state pension age instead of ten years".
For those aged 40 and under, facing a state pension age of 68, it would mean access to your pension pot is delayed until 63. The Telegraph understands the industry will tell the Treasury that such a plan would undermine the incentive to save but it could still plough ahead with the proposal anyway.

Culled from The Telegraph

Annuities are dead – this is how we will replace them -CAMPBELL FLEMING

Fund chief describes the new investment products that he will introduce to give retired people a better income

Retired people are about to have more choice about how to handle their pensions 

From next April there will be no need to buy an annuity when you retire. Instead, savers will be able to withdraw the money in their pension fund and use it as they please.

Many will keep the money invested and use it to pay an income – but without buying an annuity.

We don't know how many people will turn their backs on annuities but the evidence from my home country, Australia, where annuity purchase is voluntary, suggests that only 5pc of pensioners actually buy one. It's a similar story in the US. Annuities were designed at a time of high inflation and high interest rates, conditions that no longer apply.

So what could replace them?

The reforms present an opportunity for the fund management industry to innovate and create investment products that meet the needs of this new generation of retired people. Clearly, it's imperative that we help that ensure investors understand their options, as more freedom for investors means more responsibility for fund managers.

Fundamentally, the new freedoms will allow everyone with pension savings to remain in investments that are able to generate a decent return at a time when their pension pot is at its largest and is still in a good position to achieve some growth. Those with the largest pots will be most attracted to the idea of continuing to invest in shares or bonds in order to maintain growth of their assets. Individuals with pots of up to around £40,000 are likely to use a combination of cash (with the first 25pc taken out tax free) and annuities.
Where people choose not to buy an annuity, their pension savings will need to generate a significant investment return in order to see them through retirement. Companies such as mine will be entrusted with ensuring that elderly investors' assets are appropriately preserved and growth in excess of inflation is achieved, while also ensuring that enough income is available to live on.
This is a responsibility we take extremely seriously. Personally, I am a strong believer in diversifying your investment pot, seeking returns and income sources from an appropriately balanced range of assets. While it's important that investors take on some risk in order to grow their assets, the result of too much risk can be painful at times of market volatility.
I expect to see the market for multi-asset funds flourish, with products designed to provide various combinations of capital preservation, inflation-beating real returns and income generation. Competition among asset managers will increase, which can only be a good thing for the customer.
Individuals and the industry are still coming to terms with the long-term implications of the Government's pension reforms. I support change where it increases people's financial freedom, but asset managers will need to raise their game if we are going to make this work.
As an industry, we have a duty to participate in this debate to ensure people understand and have access to the investment solutions they need in the latter phase of their life. It's a journey, not a destination – investing does not stop at retirement any more.

Culled from The Telegraph