Pensioners fail to count the cost of ill-health in retirement

Wed, 16 May 2012 00:00:00 GMT

Despite the on-going debate about the need to fund long-term care for the elderly, only one in five people planning to retire this year have made financial provision for ill-health in retirement, new research from Prudential shows.

Its ‘Class of 2012' study into the finances and expectations of those planning to retire this year shows that just 20 per cent have set money aside for any care needs. This drops to 16 per cent among those aged 65 plus.

Prudential's research also found that less than half (45 per cent) of this year's retirees have planned for the fact that they may need more income in retirement as they get older.

However, funding long-term care has never been more important. Although average life expectancy for men over the age of 65 is 17.6 years, and 20.2 years for women, healthy life expectancy is just 9.9 years for men and 11.5 years for women.

Vince Smith-Hughes, retirement expert at Prudential, said: "People retiring this year realise that living longer may mean they will need a higher income as they get older, but few of them have made the connection between the risk of ill-health, and needing money to pay for healthcare.

"Although life expectancy is increasing, healthy life expectancy is flat-lining. With the average person now working until they are aged 63.4, people are enjoying fewer healthy years in retirement.

"Spending the first few years of retirement trekking in the Andes and running around after grandchildren may be a reality for some, but it is important not to forget that health will worsen as pensioners get older.

"Making financial provision for the possibility of ill-health in retirement should be an integral part of the retirement planning process."

Across the country, those planning to retire this year in Wales are the most likely to have prepared for the risk of ill-health in retirement (32 per cent), while those in the East of England (7 per cent) are the least prepared.

The Government is currently considering recommendations from the Dilnot Commission on the Funding of Care and Support which, in July 2011, proposed that an individual's contribution to social care should be capped at £35,000, with any additional costs funded by the State.

Region	% making financial provision for ill-health
Wales	32%
South West	28%
North East	28%
East Midlands	27%
London	21%
South East	20%
West Midlands	18%
Yorks/Humberside	17%
North West	16%
Scotland	13%
Eastern	7%

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More than six million Brits over 50 look set to retire on less than minimum wage

Wed, 16 May 2012 00:00:00 GMT

28% of Britain's over-50 have no retirement savings in place
1.2 million pensioners currently rely on just the state pension for their retirement, receiving up to £5,890 a year less than the UK minimum wage
£8.31 billion "lost" in retirement savings in the last year as over-50s cut back on contributions

The LV= State of Retirement Report, now in its fifth year, reveals 6.25 million Britons aged over-50 (28%) have no pension plan in place and look set to rely on just the state pension in retirement, a huge increase on the 1.2 million people who live solely on the state pension today. The basic state pension equates to an annual income of up to £5,587 and averages at £9,672 a year when you take into account additional benefit income (e.g. additional state pension, pensions credit etc). This is up to 51% lower than the income someone in the UK working full time on the minimum wage would earn, which is £11,477 per year.

Even with Government plans to introduce a Universal State Pension at £140 per week, this will still provide an annual income significantly below the minimum wage.

When asked if they could live on the equivalent of the minimum wage in retirement, 43% said they couldn't live on that alone and over a quarter (27%) said they would really struggle.

For those who have private pension savings, the average income in retirement is currently £7,488 a year. When you combine this with the state pension many people are still only living on marginally more than the minimum wage.

Retirement savings shaved in run-up to retirement

The LV= report also reveals that 15% of those already retired, or within five years of retirement have cut back on contributions to their long term savings over the last 12 months, with an average decrease of £296 a month or £3,552 per year. This equates to a total of £8.31 billion "lost" in retirement savings in the last year. While these are significant cuts, a greater sum, £11 billion, was shaved off retirement savings by this group in 2011 (£343 per month). Savers into private pension plans have made the most significant cuts in 2012; an average of £523 per month over the last 12 months, compared to a £164 cut on average made by those with public sector pensions.

Ray Chinn, LV= Head of Pensions, said: "It is worrying that so many people are saving little or nothing for their retirement "wages", instead expecting to fall back on the state pension. While working hard up to their retirement to bring home a decent wage, I'm sure many will be disappointed to retire with an income equivalent of less than the minimum wage. If more people reflected on their pension as a "wage" that they will potentially be relying on for over two decades, they might feel more inclined to plan ahead."

Over half (58%) of those set to retire within five years have become more concerned over the last year about their financial situation and their level of savings for retirement. The biggest worry is the rising cost of food and utilities (76%), followed by the general poor state of the UK economy and national debt (63%). The effect of low interest rates impacting savings (61%), high inflation (61%) and the recent reforms to UK pensions (44%) are all major causes of concern pre-retirees.

Coalition Government pension reforms

The recent proposals from the Coalition Government around pension reforms have not been well received; the LV= report looks at over-50s views on which proposals and initiatives are fair bearing in mind the current economic backdrop:

Nearly a third (32%) believe the introduction of a flat-rate state pension for all, and abolition of pension credits is a fair introduction
Only 8% agree with the freeze in age-related allowances that will impact pensioners (dubbed the "Granny Tax")
A quarter (24%) believe the raising of the retirement age to 67 for men and women by 2028, and to 68 by 2046 is justified
Just 14% agree with the introduction of a new "defined ambition" pension scheme that would share the risk between the employer and individual
Just 17% agree with taxing the state pension at source, before it is paid to pensioners (currently taxed after payment) is fair
Over a third (34%) think changes to public sector pensions to make them more in line with private sector pensions is reasonable
A quarter (24%) agree with the new auto-enrolment workplace pensions
A third of all over-50s (30%), do not think that any of the above Government proposals are fair

Ray Chinn commented: "The Coalition Government has proposed a raft of changes in the run-up to, and in, the recent Budget, which will have a huge impact on retirees. Many feel it is this group who are taking the biggest hit as a means to help the economy to stabilise overall, which has come as a bitter pill to the older generations, especially as the current high inflation and low interest rate environment has already hit them hard. Unsurprisingly, very few are supportive of the Government's reforms or think they are fair - particularly when it comes to the freeze in age-related allowances and the rise in retirement age. Unfortunately many of these changes may be a ‘necessary evil' given the demographic challenges ahead. Ensuring clear communication around these issues is key, otherwise there is a risk that people will be further alienated from the critical need to plan for retirement."

What more could the Government do to encourage people to save for retirement?

The over-50s believe more can be done by the Government to help people save for their retirement, and to save more. The top five things the over-50s believe should be done are:

	Suggested Government initiatives	% of over-50s who agree and support
1.	Improve the tax breaks on pensions and savings	48%
2.	Simplify pensions	47%
3. (joint)	Ensure the pensions industry is fair and transparent when it comes to charges and fees on pensions	42%
3. (joint)	Raise interest rates to benefit savers	42%
4.	Reduce "red tape" and changes / uncertainty in pensions regulation which makes it difficult to plan effectively for retirement	34%
5.	Bring back final salary pension schemes or find a similar solution	27%

Managing retirement expectations

Financial pressure is lowering expectations of when the over-50s plan to retire; just over a quarter (29%) of over-50s not already retired have changed their expectations over the last 12 months and now expect to retire later in life. One in eight (12%) do not want to work past the age of 65 but know they may be forced to due to financial pressure. The pressure on this group to save enough money is heightened for over a third (36%) who have had family members relying on them for financial support over the last 12 months.

The battle of the sexes

Worryingly over a third 37% of women aged over-50 do not have a private pension, compared to a fifth (20%) of men. Of the women that do have a pension, 16% in or nearing retirement have decreased the amount they have put into their long term savings, by an average of £196 per month, with 15% of men decreasing their savings, by an average of £391 a month. Women have significantly changed their retirement expectations in the last year, as 35% expect to now retire later, compared to 25% of men.

Ray Chinn concluded: "The long term impact of cutting pension contributions will be hugely detrimental to pensioners' buying power and quality of life in retirement. When approaching retirement people must consider all the options to make the most out of their pension pot, as there are many available - everything from drawing an income while your pension stays invested, taking an enhanced annuity that pays a greater income if you are not in perfect health, to releasing equity from your home. We urge those approaching retirement to seek specialist advice from a professional adviser."

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EU faces Armageddon as Greece return to Polls and Socialists take office in France

Wed, 16 May 2012 00:00:00 GMT

Last ditch attempts to form a coalition government in Greece have now officially failed as the Country now faces a re-run of elections next month. Meanwhile, as President Hollande takes office in France, Financial Markets are punishing the Euro, which is trading at four year lows against Sterling, EU Sovereign Bond Yields and European Equities. The reason is simple - both these events make the outright collapse of the already seriously compromised Euro ever more likely.

The fear in Greece is that the left wing Syriza Party will win an overall majority - they have pledged to reject the current austerity measures in favour of less onerous terms for the current Greek bailout. Simultaneously, President Hollande has demanded a renegotiation of bailout terms for troubled EU members to increase the emphasis on growth rather than cutbacks in spending.

It would appear that these two unlikely allies are on a collision course with Germany's Angela Merkel who maintains that the terms of the only recently negotiated European Fiscal Pact be respected and maintained.

The overwhelming concern is that we are now in a catch 22 situation - if the EU stands firm and Greece defaults, its ejection from the Euro will lead to a contagion risk with other members such as Portugal, Italy, Ireland and even Spain following in quick succession spelling an ugly end to European Monetary Union.

The other, equally unpalatable, outcome would be a relaxing of Greek terms leading to understandable demands from Ireland (who was bailed out in 2010) for similar concessions and significantly increase the likelihood that Spain would seek such external support. In this situation, the much publicised European Stability Mechanism which extends to some EUR500bln would not be either big enough or easy enough to raise in time to save the Euro.

The knife edge facing policymakers, the ECB and the IMF in this increasingly desperate situation looks ever more impossible to balance upon.

Jason Gaywood, director at currency specialist HiFX

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Pension funds and annuity buyers have a reprieve

Fri, 11 May 2012 00:00:00 GMT

It is a welcome relief that the Bank of England has ignored calls for a further round of QE gilt-buying. Indeed, it is important for the Bank to reconsider its academic assumptions that pushing down long-term interest rates is an expansionary policy. Especially once rates have reached such low levels, any benefits of forcing them down further are bound to be diluted. And the damage done to pension funds and annuity rates must not be ignored. So far, the Bank has also consistently ignored inflation overshooting and insisted the evidence suggests QE has ‘worked'. This blind faith in a massive monetary experiment is dangerous.

Where is the evidence that low gilt yields has provided economic stimulus? The economic reality is that UK is suffering from a double dip recession, weak bank lending, falling consumer confidence, credit card and overdraft interest rates at or above pre-crisis levels, rising mortgage rates and small companies unable to access credit on reasonable terms - or at all. Large corporates have plenty of cash, having raised money in the bond markets at great rates in recent times, but they are not spending it due to lack of confidence. Where is the stimulus from low gilt yields then?

QE has actually damaged many areas of the economy. Conversely, QE has created inflation (well above the Bank's target) which has damaged consumer confidence and reduced real incomes. It has also has decimated corporate pension funds, forcing some firms into bankruptcy while others have had to divert resources into supporting their pension schemes rather than business expansion. On top of this, QE has reduced over a million pensioners' incomes via annuity and drawdown income falls. These effects destroy jobs or growth.

QE benefits the banks, but this does not boost the economy. The big beneficiaries of QE are, of course, the banks (- and those borrowers on tracker mortgages). QE has certainly shored up bank balance sheets, but this does not help the economy when banks are failing to lend on reasonable terms and there are no realistic alternative sources of finance for job-creation in the SME sector.

The longer the wrong medicine is applied, the worse the damaging side-effects of QE become. It is time to revisit the rationale for QE and find better ways to operate monetary policy than relying on a transmission mechanism that is so clearly failing. It is important to quantify the damage to savers, pensioners and pension funds and how these negative effects on growth may be outweighing any positive effects of helping the banks.

Buying gilts is not the same as stimulating the economy. Particularly given the UK's demographics, QE could well damage growth and employment, rather than boosting it in an ageing population. Worsening income prospects and high inflation for older generations have caused them to retrench. QE has not even ensured rising bank lending as banks prioritise margins over lending.

Better ways to stimulate jobs and growth. It may well be that we need a new policy tool that can help boost the economy. Monetary policy - via both short and long-term interest rate changes - has run out of firepower. Fiscal policy is constrained by past deficits leaving additional public spending less of an option. But there is a mechanism for creating jobs and growth that could use the billions of pounds that is currently in UK pension funds to finance infrastructure spending and to underwrite small company lending. A far better use for newly created money would be to create a fund to help guarantee returns to pension investors, that would allow them to move away from their reliance on gilts, while also directly creating jobs.

QE could be aggravating a dangerous financial bubble in the gilt market. In reality, more QE might merely compound an unsustainable financial bubble in the supposedly 'risk-free' asset, with catastrophic consequences when the bubble bursts. At a time when gilts are already in desperately short supply as foreign investors are fleeing to gilts due to Eurozone fears, and pension funds and insurance companies are forced to hold gilts by regulatory constraints, further official buying should be avoided in the interests of financial stability. It is clear that gilt yields do not reflect the UK's economic fundamentals and all financial bubbles burst sooner or later.

Someone should be shouting from the rooftops about the dangers of all this, before further damage is done.

Dr Ros Altmann
Director-General
Saga Group Ltd

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Tackling record deficit has helped keep repossessions down

Fri, 11 May 2012 00:00:00 GMT

The Government's commitment to tackling the record deficit is keeping interest rates at a record low and a secure roof over the heads of millions of hard-working homeowners, Housing Minister Grant Shapps said today.

The Minister spoke as latest figures from the Council of Mortgage Lenders showed the number of repossessions unchanged from the same quarter last year. Today's figures show there were 9,600 repossessions during the first three months of 2012 - unchanged from the same quarter of 2011.

Mr Shapps said today's figures underlined how Government action was helping to head off the threat of far higher rates of home repossessions predicted by a leading academic three years ago.

In his report Professor John Muellbauer of Nuffield College, Oxford warned that at the extreme, repossessions could hit levels last seen in the 1990s - and even in more likely scenarios could hit as many as 60,000 a year.

But the Minister also stressed that while today's figures from the Council of Mortgage Lenders were below these earlier predictions, there was no room for complacency and that the Government is determined to do all it can to prevent the trauma of repossession for hard-pressed households.

Housing Minister Grant Shapps said:

"No family that has worked hard to buy their own home should be left feeling like repossession is the only option - not when there is help and support on offer to ensure that it is only ever the last resort.

"Thanks to our work to tackle the deficit, we've managed to keep interest rates at record lows, keeping pressure off hardworking homeowners, and meaning we're nowhere near the levels predicted only three years ago.

"Even though figures today show that repossession levels are stable, now is not the time to rest on our laurels. Just as the Government is tackling the problem head on I would urge struggling homeowners to do the same - I would urge them to take action and take charge, get advice early and use the support on offer."

Help for homeowners

Mr Shapps said that, just as he is committed to helping people onto the property ladder, he is also determined that for those who already own their own homes, real help and advice is on hand to keep people in their hard earned homes and ensure repossession remains a last resort.

This help includes:

A £20 million Preventing Repossession fund giving every council the opportunity to offer small interest free loans to struggling homeowners and ensure that court desks can offer on the day advice for those facing the prospect of repossession.
The Directgov website - www.direct.gov.uk/mortgagehelp (external link) - which has lots of free advice and information. Helpful advice is also on hand from organisations including Citizens Advice and the National Debtline; and
The Mortgage Rescue Scheme, which has been refocused to deliver better value for money, with a reduction in the grant rate paid to housing associations and tighter caps on property prices and repair costs, to ensure as many people as possible can benefit from it. More than £200 million has been invested into the scheme, and is now available through councils and housing associations to ensure help is targeted at homeowners most likely to benefit from it.

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Impressive 8% rise in assets in the UK advised platform market

Fri, 11 May 2012 00:00:00 GMT

Independent investment platform specialists, The Platforum today announced an impressive 8% rise in assets in the UK advised platform market as at the end of Q1 2012.

Significant gains from those platforms with more than £1bn AUA came from AXA Elevate, Nucleus and Ascentric, registering an increase in AUA of 15%, 14% and 13% respectively whilst the FTSE 100 posted a modest 3.5% increase.

Skandia broke the £40bn mark for the second time, having experienced a dip in the second half of 2011 and remain the largest player in the market. Cofunds and FundsNetwork are now hot on their heels, registering gains of close to 10% to bring themselves within touching distance of the £40bn mark and gross sales figures that currently out-perform the market leader. Cofunds was also the top performer in absolute terms once again recording a £3.5bn growth.

The advised platform market now stands on the verge of £200bn having been at £155bn this time last year (an increase of 25%), and 14 players now have an AUA greater than £1bn compared to 12 this time last year.

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Family matters a thing of the past as financial concerns take over

Fri, 11 May 2012 00:00:00 GMT

Four in 10 couples have shelved plans to start a family - because they can't afford it, according to new research.

A study of 2,412 childless couples shows that 901 have been delaying having children for two years and three months so far. And many fear that realistically they will have to wait for another two years before they feel they have achieved sufficient financial stability.

Of these people, two thirds are devastated that their plans have been ruined by the fact they don't have enough money.

But 47 per cent are still saving up to buy a house in which to raise their children, while 22 per cent are looking for job security before going ahead. The rising costs of utilities, petrol prices and food have also been quoted as key reasons why couples are postponing plans to start a family.

A spokeswoman for Skipton Building Society, which carried out the study, said: "The credit crunch has had a devastating effect on traditional family structures, as people can no longer have children as and when they want them.

"The past four years have seen a rise in the cost of living, and in contrast people are earning less than ever before, compounded with fears over job security.

"This is compared to previous generations who enjoyed fantastic pensions, better benefits and jobs for life.

"It is now more difficult than ever to deliver on traditional social expectations such as the 2.4 children family."

Other reasons which best describe why couples aren't starting a family immediately include the desire to get married first (22 per cent) and the need to feel more self-sufficient (14 per cent). A fifth of respondents say they would like to have a certain amount of money in the bank before they commit to raising children - with many believing they need at least £4,867.

Understandably, 47 per cent of those people polled are worried about being an ‘older parent' - key concerns being that it might not be easy to conceive, and they might not be able to keep up with their children. A further 22 per cent are worried that other people might judge them for leaving parenthood so late, while 27 per cent foresee working long into retirement so that they can support the children as they grow up.

Tracy continued: "The knock-on effect of having children later in life is that people aren't able to relax and enjoy the retirement years because they are still committed to raising their children.

"The likelihood is that this is an added reason why many people of this generation won't be able to retire as early as they'd like because they'll still be forking out hundreds of pounds on child care, education, house deposits and other handouts.

"The impacts of the global financial crisis over the past four years really are far-reaching and it appears to be affecting traditional family structures as well as people's personal financial aspirations.

"However, it's not all doom and gloom and careful forward planning and budgeting, as well as a dose of well chosen expert advice can make life goals such as starting a family more attainable in the shorter term. This is something we're more than happy to help with at Skipton, with our friendly, customer-focused teams."

In addition, Skipton Building Society also polled 1,758 parents, and found a whopping 70 per cent had planned to expand their existing brood, but have changed their plans for financial reasons. Indeed, the average parent surveyed already had two children, and would have liked two more.

But 32 per cent simply wouldn't be able to afford childcare for another child, while 30 per cent don't have enough money to go on maternity leave.

Six in 10 parents are currently saving in the hope they can one day try for another baby, but the same percentage fear the credit crunch has completely ruined their chances of having any more children.

REASONS WHY COUPLES ARE POSTPONING PARENTHOOD:

1. Want to buy a house first

2. Can't afford to go on maternity leave

3. Want more savings in the bank

4. The cost of utilities has gone up

5. Petrol prices have risen

6. Can't afford childcare

7. Job insecurity

8. Want to get married first

9. Soaring food prices

10. Mortgage payments have gone up

11. The need to feel more self sufficient

12. Want to have a more established career

13. Haven't yet moved out of parents' house

14. Don't have a car

15. Don't have a job

16. Recently made redundant

17. Still relying on parents for handouts

18. Need to pay off debts first

19. Need bigger accommodation

20. Currently retraining / still in education

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41% of over 45s would use property to fund care

Fri, 4 May 2012 00:00:00 GMT

The largest care annuity provider in the UK, has revealed the results of its first Partnership Care Index, where almost 41% of consumers aged 45-85 say that they would need to fund long-term residential care by renting or selling their property.

Property was the 3rd highest payment method among the respondents, behind the State funding their care and pension income.

Only 4% would use an insurance policy for long term care.

The Partnership Care Index conducted 1023 online interviews with consumers aged over 45, including 100 interviews with those aged 75 and over, to measure attitudes towards long-term care across the UK.

If you went into residential care at some point in the future how do you think you might pay for it?:

Payment Method	Total Percentage of respondents
The State	52%
Pension income	45%
Your Savings	35%
Selling your home	31%
Income from savings & investments	24%
Renting home out	10%
An insurance policy for long-term care	4%

The majority of the consumers questioned (52%), said that they expect the State to fund residential care at least in part, and 45% would use pension income to help with the funding. 31% would sell property outright to fund any long-term care and a further 10% would rent their property to give an on-going income.

Chris Horlick, Managing Director of Care, Partnership, said: "Despite the downturn in the property market, the realisation that property is likely to be a key source of funding for any care costs is becoming more widespread. Estimates suggest that over 65s have unmortgaged equity of nearly one trillion pounds.

As costs of long-term care increase more retirees are struggling to find methods to fund care aside from utilising assets such as property. We believe that greater awareness of the benefits of Equity Release to fund care, will provide another vital source of income for those people who wish to use property to do so.

We also believe that Immediate Needs Annuities, which provide insurance to meet the costs of care will play a far larger role in due course. At present few people are aware of these products, which guarantee an income for life to meet the costs of care in return for a one off premium. The residue can be left as a gift to friends and family. They provide peace of mind for the policyholder and family. If the Government's imminent Social Care White Paper provides a greater focus on information and advice for people seeking to fund the costs of care - this will inevitably stimulate greater awareness of these important financial products."

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Co-op pulls the plug on interest-only mortgages for new customers

Thu, 3 May 2012 00:00:00 GMT

Mortgage customers have been dealt a blow today as the Co-operative Bank announced it would be pulling the plug on interest-only mortgages for new customers.

Michael Ossei, personal finance expert at uSwitch.com, says: "While responsible banking is to be applauded, interest-only mortgages should not be demonised. The fact is that they still have a role to play in the market, providing a vital step up for those trying to get on the property ladder and a short-term reprieve for those who suddenly suffer a drop in income. First-time buyers, particularly young professionals with every expectation of seeing their careers take off and their salaries soar, will be hit by a blanket policy against interest-only mortgages. It could mean that for some the dream of owning their own home remains just that.

"The biggest concern is that in these days of economic uncertainty, when existing customers need some flexibility from their mortgage provider, they might not be able to get it. Losing the ability to move between a repayment and interest-only mortgage when times are tough could be a real deal breaker for some. We would urge all providers to consider these needs carefully.

"Worryingly, this move could set a precedent and we could see interest-only mortgages pulled from the market altogether. While it's important for all lenders to lend responsibly, it's just as vital that providers continue to offer flexibility for consumers - hopefully this move from the Co-op isn't a sign of things to come."

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Tax credit calamity hammers 200,000 families and harms the economy

Thu, 3 May 2012 00:00:00 GMT

New figures published by HMRC, show that over 200,000 families have lost their entire working tax credit support, worth £3,870, from 6 April 2012.

The Chief Executive of Child Poverty Action Group, Alison Garnham, said:

"This is an absolute calamity that plunges nearly half a million children deep below the poverty line. Many of these parents will now have less money in work than if they just claimed benefits. It runs directly against the consensus on the importance of making work pay and the government's duties on child poverty.

"The Chancellor should have announced at the Budget he would keep these working families afloat and in work, but they were cut loose whilst taxes for corporations and the super-rich were cut instead.

"The policy was designed in 2010 when the economy was predicted to be in strong growth by now. But with an economy returning to recession, Ministers should have taken responsible action and put the policy on hold until employers could provide the additional hours of work these families need.

"There will be appalling economic consequences too, with the retail and service sectors taking a big hit from the loss of £500 million pounds of spending by the families affected. This could put further jobs and businesses at risk.

"The economy is not where we had hoped it would be and that requires Minsters to make hard decisions on today's realities. Even now, this change could be postponed and David Cameron's government should act swiftly and decisively before the damage is done to families and the economy."

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Double dip causes Brits to fear the worst for their finances

Thu, 3 May 2012 00:00:00 GMT

37 per cent more concerned about their financial situation as UK plunges into double dip recession
14 per cent plan to cut back on non-essential spending
One in five will look to make their money go further

With news of the UK economy falling into a double dip recession last week, the UK's number one comparison site MoneySupermarket.com asked its users how the news would affect their outlook on their finances.

A hefty 37 per cent of people said they were more concerned about their financial situation as a result of the recession, while a further 14 per cent said it will make them cut back on non-essential spending. Nearly a fifth (18 per cent) say they will look for ways to make their money to go further. Just a sixth (16 per cent) said the news of a recession won't impact them at all.

Kevin Mountford, head of Banking at MoneySupermarket.com said: "It comes as no surprise that many Brits are nervous following the news that Britain has edged back into recession, the first double dip since 1970. This combined with the surprise rise in inflation in March will have also impacted UK households struggling to cope with rising costs of living and lack of pay increases.

"The nation will no doubt be looking for ways to make every penny count and now is the time for households to use the opportunity to review all their finances and find ways to boost their income. UK savers have experienced real problems from high inflation and low interest rates and those looking to save need to make sure they are on the best deals possible to maximise any returns. The top paying savings accounts currently offer rates over six times that of base rate so by choosing these, you can reduce the impact inflation has on your pot. Even putting aside £10 a week could make all the difference to your emergency saving funds - vitally important should your circumstances change, for example, if you lose your job."

Consumers have had a tough few years and the news of a double dip recession may be the icing on the cake for many. A report from MoneySupermarket at the start of 2012 asked consumers which areas of their finances they were most concerned about this year. The report revealed that consumers are ten times more concerned about the cost of utility bills this year than they are about meeting their monthly mortgage payments. More than four in ten adults (43 per cent) said this was their biggest financial worry, whilst four per cent said their mortgage was their biggest financial stress. The rising cost of food (34 per cent) and petrol (33 per cent) also ranked in the top three concerns, over double that of concerns around being made unemployed or finding a new job (16 per cent) or not being able to save money (16 per cent).

Kevin Mountford continued: "Sometimes, sorting out your finances can feel overwhelming, but there are some very simple steps you can take to claw back some much-needed cash. Cutting back on non-essential spending can make a difference, and by reviewing all of your household bills and not paying over the odds for things like energy, car insurance and day-to-day expenses can save more than you expect."

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72% of over 55s unaware certain medical conditions could entitle them to a higher pension income

Mon, 30 Apr 2012 00:00:00 GMT

40% of the over 55s have suffered or currently have high blood pressure
33% of the over 55s have or have had high cholesterol with a further 12% requiring treatment for diabetes

All of these conditions could qualify for a better retirement income through an enhanced annuity, with as many as 70% of retirees potentially qualifying
A smoker with high blood pressure would receive £1,000 extra income every year by choosing an enhanced annuity

According to MGM Advantage, the retirement income specialist, 60% of people aged 55 and over have received medical treatment for conditions which would qualify them for an enhanced annuity, and yet 72% said they were unaware that certain lifestyle or medical conditions could qualify them for a better retirement income.

Andrew Tully, Pensions Technical Director, MGM Advantage said: "With such a high proportion of our retirement nation experiencing medical problems, it is of deep concern that many people remain unaware of enhanced annuities. Despite as many as 70% of retirees potentially qualifying, recent industry data showed that only 2% bought an enhanced annuity in the non-advised market in 2011, which is shocking.

"When you look at the difference in rates, a man, aged 65 with average impairment could receive an extra £8,684 income for the first five years of retirement simply by making the right choice. Which is why, as an industry, we need to work hard to ensure people are made aware of all of their options."

Over 60% of the over 55s admitted to some form of illness (such as high blood pressure and high cholesterol), which may qualify for a better income, according to MGM's Retirement Nation report. The following table highlights medical conditions experienced by the over 55s, all of which could qualify for a better annuity rate through an enhanced quote.

For further details on the Retirement Nation report, please go to: www.mgmadvantage.co.uk/category/retirement-nation

Enhanced annuities factor in medical and lifestyle conditions when calculating the rate of income available and the difference between standard and enhanced rates can be significant. For example, a healthy man, aged 65, with a £100,000 pension fund could receive £6,106 a year income. If this man was a smoker with high blood pressure, the annual income would increase to £7,115. If the same man had diabetes with high blood pressure and high cholesterol, the annual income would increase to £7,843.

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Half of investors are only vaguely aware of the risk they are taking

Mon, 30 Apr 2012 00:00:00 GMT

Half of people who have an investment product are only vaguely aware of the level of risk they are taking within that investment according to new research by investment firm Skandia.

A further 8% say they have no understanding of the level of risk they are taking at all, with only 42% saying they understand the level of risk they are taking in detail.

The survey of over 2,000 people* shows a clear lack of understanding by investors of how much risk they are exposing their money to, despite six out of ten people saying that when considering an investment the amount of money they might lose is a more important consideration than the amount of money they might gain.

With the fear of loss being a bigger consideration than the joy of gain for most investors, it is crucial that they make sure they understand the level of risk they are taking with their investments.

The research shows that most people have a relatively low tolerance for risk with over two thirds of investors (69%) assessing their own level of risk as five or less out of ten, with one being lowest risk. Only 5% of investors put themselves in the highest risk levels of eight, nine or ten out of ten.

When asked to assess the maximum potential investment loss they would be prepared to accept in relation to a potential gain, people were even more risk averse with 79% falling into a risk level of five or less out of ten. This means they are prepared to accept a maximum potential loss of 14.91% for a potential gain of 27.37% according to Skandia's risk profiling methodology.

To help improve people's awareness of risk when investing, the UK asset management industry has been rapidly developing risk targeted funds which by the end of 2011 had already reached around £6bn under management.

These risk targeted funds are designed to deliver maximum investment returns within set volatility parameters. So, they make it clear to investors how much risk they are taking and what the maximum level of gains and losses they can expect to receive within their investment in 95 years out of 100. This is very different from the funds people are normally invested in which mainly focus just on delivering investment returns but will often take risks the individual investor would not take themselves in order to chase investment returns.

Ryan Hughes, one of the portfolio managers involved with Skandia's Spectrum range of risk targeted funds, comments:

"It is crucial that people decide how much risk they are prepared to take before they invest. This means understanding how they would feel about a certain level of loss and deciding whether they are prepared to accept that in order to achieve a potential level of investment gain. They can then feel reassured that their investment experience will be one that matches their expectations, from both a return and risk perspective.

"A very specific way to match an investment to a personal risk level is to choose a risk targeted fund which will have a specific risk score that investors can align with their own. The fund will be managed to ensure it stays within the risk / return parameters associated with that risk level, ensuring that the investment experience is aligned with the expectations at outset."

*Conducted by YouGov

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FSA publishes new rules to ensure pension transfers are suitable for scheme members

Fri, 27 Apr 2012 00:00:00 GMT

The Financial Services Authority (FSA) has published new rules and guidance, following consultation, to strengthen the protection for members of defined benefit pension schemes who are considering moving their money into personal pensions.

The changes are designed to deal with the FSA's concern that in most cases a pension transfer is not in the best interest of pension scheme members.

The FSA is raising the standards on the assumptions used when a pension transfer value analysis (TVA) is made. This will make it less likely that an adviser will be able to recommend a transfer from a defined benefit pension scheme to a personal pension.

Respondents to the consultation welcomed the changes and there was broad support for updating and clarifying the assumptions.

Sheila Nicoll, director of conduct policy at the FSA, said:

"In the vast majority of cases someone in a defined benefit pension scheme will not be better off transferring to a personal pension. The new assumptions will make it tougher for advisers to make the case for a transfer. As a result of these new rules, we would expect the number of pension transfers to decrease, leaving pension scheme members better off."

The policy statement can be found on the FSA's website.

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UK back in recession, but I don't believe the numbers

Thu, 26 Apr 2012 00:00:00 GMT

The UK is reported to have shrunk by 0.2% in the first quarter, pushing the UK into a recession, technically speaking. However, the GDP report is not consistent with most of the other data that has been released, which suggests the UK grew modestly at the start of this year. The UK's GDP reports are subject to significant revision, often a long time after the fact. When there is a difference between the early GDP reports and the business surveys, the business surveys usually turn out to be more accurate.

Service sector activity was reported to have grown by only 0.1% in the first quarter, far weaker than the growth implied by other data. In addition, construction was reported to have fallen by 3%, despite the construction business confidence index rising to a fairly high level and the sector presumably boosted by the unseasonably warm weather in February and March.

That the data is likely to be revised higher will not provide much comfort to the government since by the time it does few will care. Indeed, for the government the Q2 GDP is also likely to be weak, artificially deflated by about 0.5% because of the additional bank holiday to celebrate the Queen's Diamond Jubilee. However, Q3 is likely to be artificially inflated by a similar amount, suggesting a strong Q3 report, which will be released in late October. While most of us will hopefully enjoy a warm summer, the Chancellor may have to wait until the autumn.

Rupert Watson, Head of Asset Allocation, Skandia Investment Group

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Half of older people will have to work for up to 11 extra years to maintain standard of living

Wed, 25 Apr 2012 00:00:00 GMT

New report shows that up to half of older people will have to work for years after their state pension age if they want to maintain their standard of living.

New figures from a report by the Pension Policy Institute (PPI), "Retirement Income and Assets: the implications for retirement income of Government policies to extend working lives" show that half the workers aged between 50 and the State Pension Age (SPA) will have to work at least six years past their SPA - and most at least 11 years - if they want to maintain a reasonable standard of living.

The report shows that 45 percent will have to work 11 years or more to maintain a target replacement rate of living (defined by PPI as 50-80% of gross working life income depending on income level) while a further 5 per cent will have to work for at least six years.

The findings come in the wake of the latest unemployment statistics from the ONS which show older people are among the biggest victims of the UK's economic crisis. The latest figures show that the number of unemployed women aged 50-64 is up 27 percent on this time last year - a significantly bigger increase than any other age group.

The ONS figures also show that there are now 118,000 people aged 50 plus in the UK who have been unemployed for two years or more - a 45 per cent increase (37,000) on this time last year.

Commenting on the PPI's report, Michelle Mitchell, Charity Director General of Age UK said:

"These figures show that the traditional pattern of retiring and living comfortably on a pension earned over many years of working has broken down.

"Lower annuity returns and other factors mean that more and more people will have to work past their state pension age - and often for many years - if they are to have enough money to live comfortably.

"The government must work to encourage employers to hire and retain older workers, and to provide training for those who need it if we are to avoid creating future generations of people in later life struggling to make ends meet."

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Three out of four families are left unprotected and at risk of financial hardship

Wed, 25 Apr 2012 00:00:00 GMT

Awareness of ‘protection' products is high but a worrying number of people are failing to take action, leaving their families vulnerable to change

New research from Scottish Widows shows that nearly three quarters (74 percent) of people are putting their families' financial security at risk, by failing to protect their future through life insurance, critical illness or income protection.

The fourth Scottish Widows Protection Report, based on research amongst more than 5,000 UK adults, shows a marked annual decline in the number of people taking out life insurance (38 percent, down 6 percentage points from 2011), income protection (five percent, down two percentage points) and critical illness cover (11 percent, down one percentage point), leaving themselves and their families vulnerable should the unexpected happen and their circumstances change.

Against this backdrop of decreased protection, the report indicates that families are even more vulnerable to change in their economic circumstances in 2012.

Over half of respondents (52 percent) now rely on just one income, echoing recent concerns from the Institute of Fiscal Studies, who stated average UK household incomes have dropped by 6.4% in real terms over the last two years.

More people are saving (up 5 percentage points from 2011) and nearly 40 percent of people are paying attention to paying off their household debts. However, even though the number of people saving has increased, respondents have little confidence that their savings will cover them in the event of a change of circumstances, with 60 percent believing they would only survive financially for a short period of up to six months.

Almost one in three households (28 percent), report that they would have used up their savings within a month if they lost their income, a fifth of people would struggle to pay their mortgage and a third would find it difficult to cover their household bills within a year of losing their income.

In the event of losing a partner, 29 percent of people say they would need to rely on their savings to cope financially, with 16 percent saying they would turn to state benefits, even as worries over spending cuts prevail. 14 percent admit that they just don't know how they would cope should something happen to their partner.

Richard Jones, Director of Protection and Annuities at Scottish Widows said: ""While it is encouraging to see a gradual improvement in people's attitudes towards saving, the worry is that people are not protecting themselves in the event of unforeseen events. Many do not have the provisions in place to support their families for any substantial period and even after just a month could be left with no buffer. It is at times like this that families need to do all they can to protect themselves in the event the unexpected happens. "

Essentials vs. luxury

The findings demonstrate that more people consider tangible items like having broadband (74 percent), a car (75 percent), a phone (57 percent) and home ownership (57 percent) as essential compared with protecting their family against critical illness (29 percent) and loss of income (23 percent).

More than a third of people view protecting their family in the event of illness a luxury and almost four in ten see protecting their income in the same light. A night out once a week (70 percent), shopping trips (74 percent), gym memberships (60 percent) and family outings (50 percent) are considered luxuries by many.

Who's protected?

The report finds that buying a home remains the primary trigger for taking out protection cover. This was given as the main reason for one in three critical illness and 27 percent income protection policies.

The biggest barrier to protection, especially when it comes to critical illness cover, is cost. Of those without a policy, 22 percent say that they cannot afford cover, and 15 percent consider it to be a waste of money.

Richard Jones added: "We can see from the findings that for many, protecting their family is considered a luxury. We often find that people wait for a trigger, like buying a home, to get protected and instead will spend any disposable income left at the end of the month on more tangible items you can see and use immediately. However, we would firmly advise families put some shock absorbers in place to deal with the unexpected and avoid any hardship which could be caused as a result."

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FSA contacts more than 75,000 people to warn them they are being targeted by financial conmen

Tue, 24 Apr 2012 00:00:00 GMT

The Financial Services Authority (FSA) is contacting 76,732 people to let them know they are targets for fraudsters trying to con them out of their money.

Their names appeared on a number of lists recovered from companies that the FSA believes were fraudulently selling investments in land or worthless, sometimes non-existent, shares. Combined into one list, this is the largest number of target victims that the FSA has ever contacted in one go.

Letters from the regulator will be arriving on people's doormats from today. Most of the list contains the names and addresses of the targets, but in 19,101 cases only email addresses are listed, therefore the FSA will be sending those people an email warning.

The letter, which can be found online, provides tips on how to spot a scam, avoid becoming a victim and what to do if you have already invested. Recipients should be aware that the FSA will not call them for further information and will never ask for money, bank account or personal details.

Jonathan Phelan, the FSA's head of unauthorised business, said:

"If you get a letter or email from the FSA over the next five or six weeks, please read it - it could you save you tens of thousands of pounds. If you have already been contacted by a firm offering you a ‘once in lifetime' investment opportunity or have already invested, then tell us. The information you have could help us catch criminals and shut down their scams."

The FSA has a team ready to answer questions about the letter and investment scams generally who can be contacted on 0845 155 6355. Several high street banks have also provided phone numbers for their customers (callers should quote ‘Operation Bexley'):

Adam & Company - 020 7770 0015
Bank of Scotland - 0845 606 2196
Barclays Bank - 0800 051 6195
The Co-Operative Bank - 0845 602 9402
Coutts & Co - 020 7770 0011
Halifax - 0845 601 6954
HSBC - 0845 600 9961
Lloyds TSB - 0845 600 1928
NatWest - 0845 605 0789 (overseas +44 870 243 0464)
Royal Bank of Scotland - 0845 600 8212 (overseas +44 131 317 4597)

People that have invested are encouraged to contact the FSA directly by phone or make a report via the online reporting forms on the Operation Bexley webpage.

Given the large number of names on the list and the high volume of expected incoming calls to its contact centre, the FSA will be sending the letters and emails out in waves. The first 10,000 letters will arrive today and a further 10,000 letters will be sent each week. The first 5,000 emails will be sent on 30th April, with a further 5,000 each week.

The largest list was recovered from the premises of a firm which the FSA believes was operating an unauthorised business, but cannot be named due to ongoing legal action. All of the lists are believed to be current and were being used to either sell fake or worthless shares, or plots of land with the promise of great investment returns once developed - even though this was unlikely to ever happen.

Jonathan Phelan added:

"These lists are nothing more than fraudsters' phone books and the people that use them are ruthless, calculated and will stop at nothing to steal your money. A call out of the blue is one of the hallmarks of investment scams, so if you ever get an unexpected call with promises of fantastic returns - you should be extremely sceptical.

"We would like to extend our thanks to all of the banks that have created dedicated help lines for their own customers. Contacting over 75,000 people is an enormous task but the assistance they have provided means we are able to contact and offer help to a vast number of people as quickly as possible."

The FSA recommends the following steps for people that have been contacted by a firm offering to buy or sell investments:

be especially wary if you are contacted out of the blue;
check the firm or individual's status on the FSA Register;
call the firm back on the switchboard number provided on the FSA Register to make sure that the call came from the legitimate authorised firm;
check the FSA's ‘warning list' to see if the FSA has published a warning about the firm;
consider getting independent financial or professional advice;
remember that if it sounds to good to be true - it probably is; and
if in doubt - contact the FSA.

A suite of videos that explain how to spot and avoid being scammed by unauthorised businesses are available on the FSA's website. The videos cover three types of scam: land banking, share fraud, and get-rich-quick schemes.

Boiler rooms usually contact people by telephone and use high pressure sales tactics to con investors into buying non-tradable, overpriced or even non-existent shares. They are unauthorised, overseas-based companies with bogus UK addresses and phone lines routed abroad.

Land banking companies divide land into smaller plots to sell to investors on the basis that once it is available for development the plot will soar in value, but the land often has little chance of being built on. Land banks also use cold calls and pressure selling to convince people to invest. The FSA does not regulate the sale of land, but land banking may amount to a collective investment - something that does require FSA authorisation.

Unauthorised firms are not covered by the Financial Services Compensation Scheme therefore should somebody invest through an unauthorised business, it is highly likely they will lose their money if the firm goes bust or disappears.

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As pensions fail to fulfil expectations, retirement ages rise and more older people keep working

Wed, 18 Apr 2012 00:00:00 GMT

The CIPD analysis showing more over 50s in work does not tell the full story of what is happening to older generations in today's Britain.

Firstly, the numbers of people aged over 50 are increasing sharply, as the baby boomers reach age 65. That swells the actual numbers of people in the age range 50-64 relative to 2008. As the smaller generations of wartime babies are now over age 65 and have moved into the 65+ category, it is important not to lose sight of the demographic impacts on employment figures. Just because more people aged 50-64 are working, does not mean they have had a much better time during the recession!

In fact, the figures produced by the ONS and analysed in the CIPD Work Audit actually show some important factors which should not be overlooked.

The reasons why there are more people working in the age range 50-64 are as follows, most of which are not properly reflected in the CIPD conclusions:

1. There are more of them as the demographics have shifted and small wartime baby generations reach older ages and the large numbers of baby boomers swell the over 50s' numbers.

2. People coming up to retirement are increasingly finding their private pensions are not as good as they had hoped - with women particularly having very little private pension. This means they have to stay at work if they want a reasonable income.

Between 2004 and 2010, ONS figures show that the average retirement age for men rose from 63.8 to 64.6 years. Over the same period average retirement age for women rose from 61.2 years to 62.3 years. So women are already retiring, on average, after state pension age and I am sure that the figure has risen even further since 2010!!

3. Many women are going back to work in later life, or have to keep working for a variety of reasons, most particularly because they have little or no private pension (many of them were banned from joining private pension schemes when they were younger) and also have much lower state pensions than men, and partly because they are increasingly single due to rising divorce rates among older people. More women are now single in their 50s and 60s than before and cannot rely on a husband's pension, so with much lower state pensions than men, many keep working

4. Many older people are increasingly choosing to stay at work but try to work part-time so that they ease more gently into retirement. If they feel fit and healthy and want more money, and are able to work, they are choosing to do so. They are, therefore, embracing the 'bonus years' that I described in my article for the Times last week!

5. A greater proportion of men than women opt for early retirement, according to ONS pension trends, so again it is not surprising that employment trends for older women are rising, as the numbers in this age group also rise relative to the number of men.

6. The rise in long-term unemployment for over 50s is very worrying, but is hardly remarked on at all in the CIPD report. Of those unemployed in their 50s or 60s, a significant proportion have been out of work for over one year, much higher than other groups (46.8% of the men and 36.6% of the women). This is worrying, and may indicate ongoing age discrimination among employers who are reluctant to take on older workers. Many older unemployed people have commented to us how they are struggling to find jobs, with employers preferring younger people and finding ways to indirectly discriminate, since age discrimination itself is not allowed of course.

7. It is important not to draw misleading conclusions from these statistics and not to conflate demographic effects with economic effects. For example, suggesting that the age group 35-49 year olds 'lose out' in terms of employment is not necessarily accurate, since this is partly due to fewer of them in that group! The report does actually admit this on page 2, but fails to properly account for this impact across all the age groups. Notwithstanding this, however, I think there are actually some very interesting pointers here.

8. The trend to embracing 'bonus years' seems to be borne out by these types of figures. More people are working part-time in later life, as they try to retire gradually, rather than suddenly. This is much healthier and helps keep people in the labour market longer, which will be increasingly important for the long-term health of our economy.

Dr Ros Altmann, Director-General at Saga comments on the latest CIPD Work Audit report:

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Financially squeezed middle ages need extra �600 per month

Wed, 18 Apr 2012 00:00:00 GMT

But Brits vote 35 as the best age to be.

Weighed down with responsibility, fearful about financial pressures and job security - it's no wonder today's middle age groups of 35-54 year olds are the least optimistic about their future. But asked about the best time of their life and overall Brits voted for 35 as the age they would most like to be.

Aviva's Times of our Lives report, launched today, charts the goals, worries and wealth

of UK adults from the age of 18 to 65+. It reveals that while net ‘wealth' is steadily accumulated through life, rising to an average of £308,317 from the age of 65 for homeowners, gross household income peaks by the age of 35 at £36,890, as does debt at £136,296.

Unsurprisingly this is the same age when financial concerns come to the fore, with nearly half (46%) of those in their late 30s and 40s most worried about the cost of running their home and also more worried - than all other age groups - about unexpected expenses such as car repairs or a boiler breakdown (33%), and being made redundant (23%).

It's no wonder then that these ‘squeezed middle ages' say they need an additional £600 net income per month to feel financially secure, equating to an annual gross increase in income of £10,762 for 35-44 year olds.

The Times of our Lives report also reveals:

The value of home contents and personal possessions peaks at £37,893 between the ages of 55 and 64.
Cars and home insurance are the last thing Brits over 35 would cut back on while for the 18 to 34s it's their mobile phones.
Screens rule - with laptops, computers and televisions among the most important possessions across all ages.

The U-shaped optimism curve and the paradox of being 35

In terms of optimism, life is a U-shaped curve, with the youngest and oldest people the most optimistic about achieving their goals and people in mid-life the least. Twenty-nine per cent of 18-24 year olds say they think they will achieve all of their five-year goals and only 8% none, an overall optimism score of 21%. In contrast, the ‘squeezed middle age' groups of 35-44s and 45-54s are the most pessimistic. They are most likely to say they won't achieve any of their goals and least likely to say they will achieve them all and have overall optimism scores of 14% and 12% respectively.

But in later life optimism rises again, with 29% of over 65s optimistic about achieving their five-year goals and only 10% thinking they will achieve none.

However, contrasting with this picture of mid-life worry is the fact that the age of contentment is identified as 35. Most people want to be older when they are younger and younger when they are older. The age perceived as the ‘best age to be' increases the older people get to a maximum of just 44 years among those aged 65+.

The age we think it's best to be

Age right now	18-24	25-34	35-44	45-54	55-64	65+	All
Think the best age is	27	30	33	35	39	44	35

Simon Warsop, Business Development Director at Aviva, comments: "At a time of significant economic upheaval and financial pressure, this research provides an insight into the effect this is having on Britons as they journey through the ages of life.

"The findings show that overall, family and health are the greatest lifetime priorities, but after health comes wealth, with financial pressures coming to the fore. And while 35 is the age most Brits say they want to be, increasingly the ‘squeezed middle ages' are feeling the pinch - weighed down with responsibility and making ends meet - it's no wonder these age groups feel the most pessimistic.

"Either side of middle age it's pleasing to see today's twenty-somethings are still striving and ambitious, while the baby boomers and those over 65 say they are most satisfied and content with their lot and currently the average homeowner's net wealth peaks at 65 plus."

Ideal milestones

Brits believe they should achieve all of their key goals in just twenty years, getting their first job at 18 and reaching the peak of their career by 39. They also believe that 25 is the ideal age to buy a first home - something that is likely to be difficult to achieve in the current climate. The national average first time buyer is aged 29.

And while a quarter of those already on the housing ladder would like to move home in the next 12 months, ambitions are thwarted by money issues with one in ten of those aged between 25 and 54 years saying they are unable to afford it.

The Ideal Age to Achieve Key Goals

18 - Get first job
20 - Buy first car
20 - Start investing or saving
21 - Move out of parents' home
21 - Start saving for a pension
25 - Buy first house
27 - Get married or settle with partner
29 - Have first child
39 - Be at peak of career

Hearth, health and then wealth

Reflecting traditional values, family is voted the most important thing in people's lives throughout adult life (from 72% when we are 18-24 to over 80% when 45-54), with health second and rising in importance as people get older. In contrast career is of far less importance and declines rapidly from a peak when people are 18-24 (important to 38%). However financial stability is valued highly throughout people's lives and is rated as important by 36% of 18-24 year olds and 45% of 35-54 year olds.

Simon Warsop added: "As people journey through adulthood, it will be interesting to see if what they value, including their goals and aspirations, changes in the current economic climate - certainly making ends meet comes out as a real concern for people today and as a result, many expectations may remain unfulfilled.

"This research also highlights the value people place on their assets, whether it's their home, car, belongings or finances. It's important, therefore, that people understand that those assets need to be properly protected throughout their lives so that if the unexpected happens, they're covered."

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Parents are forgoing their own pension savings to pay for grown up children

Tue, 17 Apr 2012 00:00:00 GMT

Research reveals one in three parents (30%) in the UK are currently making financial sacrifices for the sake of supporting their adult children

Parents are forfeiting up to £38,500 per adult child from their potential pension pot[1]
High unemployment among younger people means this trend is likely to continue

The average parent is forgoing a pension pot of £38,500 in order to financially support each child who is 18 and over, according to research from Standard Life. The research finds that parents are supporting their children post 18 for expenses such as university costs, debts, weddings, house deposits and other general finances.

On average, parents estimate they will invest around £15,490 in each adult child. If this sum was invested into a pension instead, it could provide a pension pot of £38,500 in 20 years year's time for a basic rate tax payer. And for a higher rate tax payer, it could provide a pension pot of £51,380.

This means a higher rate tax payer with two children could be forgoing over £100,000 from their pension pot. One in three (30%) parents admits they are currently forfeiting long term financial planning for the sake of their children, while almost the same number (31%) have made sacrifices in the past.

Standard Life's John Lawson commented:

"A parent's desire to provide for their children even when they become young adults is increasingly coming at a huge cost to their own future financial security. Our research highlights the significant financial challenges facing parents, whether to secure their long term future or meet their family's immediate needs. The high level of unemployment among young people can only be exacerbating the problem. There's no doubt that many more adult children will be relying on their parents for support which must be a real worry for many parents. Some may even be returning to the nest as they are made redundant or fail to find work.

"Parents have no choice - they have to spend carefully and make sure that whatever money they are able to save for their future is working as hard as it can for them. That means being efficient with their savings and making the most of tax breaks offered by ISAs and pension contributions. To help we've created www.yourfuturemoney.co.uk which includes free guidance, hints and tips on tax efficient financial planning for everyone."

Top three tax tips

1. Grab whatever opportunities you can to make pension contributions. Remember, with pension plans, the government contributes whenever you do, by rebating the income tax on your contributions. And if you're in a workplace scheme, your employer is likely to be topping up your contributions too. So try to increase your regular pensions savings as and when you can; or pay in a lump sum after a windfall such as a bonus.

2. Use as much of your £10,680 ISA allowance as possible before the end of the tax year. ISAs are a great way to build up a cash lump sum prior to retirement, which can help to pay for your child's wedding or fund university fees. You can invest up to half of this in a Cash ISA which can be earmarked as an emergency fund to help you and your children with more immediate concerns. Then consider leaving the rest in equity funds so you have the chance of greater tax efficient growth over the longer term.

3. Check to see if you can save on tax by you and your spouse taking a team approach to your Personal Allowance. The amount you can earn tax-free each year is currently £7,475 a person. If you shift assets to the one of you with the lower income, you could pay income tax or capital gains at a lower rate. Think about the whole family and remember that children have tax-free allowances too and Junior ISAs are now available.

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