Andy Zanelli Head of Retirement Planning at AXA Wealth, looks at the state of pensions in the new year.
“Just three days into the New Year and the post-RDR world and the subject of pensions has again highlighted two key fundamental needs: better education and quality advice. According to the Government’s Pension Protection Fund the shortfall of final salary pension schemes has fallen from a mid-year record high of £312 billion to a year-end gap of £118 billion*. While the reduction in the deficit may be heralded by some as a sign that people about to retire are in a better position than they were, there remains a clear need for those who have a defined benefit pension to seek advice. These figures – and others calculated over recent years – highlight the incredibly volatile practice of valuing scheme assets and liabilities and a need for better consumer education and understanding. Those who believe they may get a higher pension than previously thought are likely to be mistaken and should seek sound professional advice before they rely on this as fact. While any improvement in a scheme’s financial situation is a welcome move, most members will see little or no change as a result.
“Recent research from the charity Anchor** found that almost one in three 45 to 54 year olds cite a lack of cash in their 70s and 80s as their top worry. These figures may not make happy reading and when considered alongside the £118 billion pension shortfall, mean it’s time to really think how we can capture the imagination of the younger generations and make them fully aware of the long-term consequences of not planning properly. An investment in a long-term financial plan may appear to be daunting and expensive today, however it may be the investment of a lifetime with the right advice. A new year, a new world of adviser charging, perhaps it’s time for a new approach to engaging the millions looking for a bright and secure future.”
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