There is mounting pressure for the Coalition to do a U-turn on its pension changes and timescale. This is part of a number of U’s that could do with changing; unfair, unequal, uncertain, unstable, understandable and unfunded, which merit more attention than the present cost cutting proposals.
Pensions are in a crisis which has a major impact on the whole of the UK population; they need long term solutions by the State and Financial Institutions, not a short term bodge up by cowboy builders. All in work contribute in basic NI and additional Public Sector and Private schemes; 75% of the working age population are in work and pay NI; some 66% of these also belong to occupational schemes.
Few get value for money or forward security; the goalposts are continually being moved, contributions increased and benefits reduced; we must all work longer and for less.
Anyone who has contributed to a private pension for over 20 years will have seen their projected pension benefits steadily and drastically reduced, with no time left to correct it. Contribution levels which promised an adequate income in retirement will now yield only top up to a poverty level State pension.
Politicians proceed at their peril if they do not address the current crisis correctly. Previous blogs have attempted to outline possible changes and press individuals to take action for change.
This blog will attempt to offer simple means in which you can monitor your individual outlook and pension prospects and concentrate on “understandable”.
If you are fortunate enough to be in a defined benefit scheme then you will be in a fairly secure position, but even that is increasingly uncertain and you will receive very little confirmatory information on your requirement prospects. There is a need to press for annual statements and reviews to monitor progress.
If you contribute to a private scheme, then you should receive annual statements which merit the same close examination and query you should give to bank and mortgage statements. Of course they are confusing , almost deliberately so, with little real information and lots of if, if and if projections.
The fund value and pension projections should increase steadily, and are made up of two parts; the accumulation of contributions and the annual growth of the fund, which should increase by the sum of contributions paid and the increase in unit values. Below age 50, growth should be high reflecting risks and values fluctuate, but above this funds should stabilise as retirement approaches. Charges should be clearly stated.
This is not necessarily so; Fund managers who made the original high promises suddenly have no responsibility and expect the clients or expensive advisors to tell them what to do. Even at retirement one finds that values are fluctuating wildly and if you take the popular annuity option, this can even change drastically during the final stages.
The iniquitous Bid – Offer differential of 5% makes change during the contribution stage costly if you try to change investment options or even providers, particularly in the latter years when this is required. The minimum Fund of say £100,000 will lose £5,000 in value overnight plus any investment variations.
If your fund is performing badly these changes may be necessary and worthwhile, they should be done automatically without cost, but this is rare. In this position, question you provider, visit his website where fund performance should be displayed and if you want changes, find out the cost and charges, another site to visit is www.Trustnet.com which gives all the pension funds and allows comparisons on performance.
Generally all pension funds give poor value for money and the State is the worst offender, none treat you as the valuable customer that you are, with the State treating you as a benefit claimant, in fact you are better off as such. The value and purpose of NI contributions and pensions need clear definition.
The next blog will continue to explain pension savings and their performance assessment.
Savings Annuities Public Sector NHS Teachers Police Local Government Hutton State
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