The Implications Of Raising Retirement Age Seco

The upcoming generation of seniors can expect to experience a considerably different retirement from that of their parents. With life expectancy rising the average worker should not expect to retire in their 60s but later at age 70 or later. They will have to work longer and save more money before they can retire and enjoy their retirement years.

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Government officials say it was inevitable that the retirement age would rise as healthcare improved. We are forced to extend the working age for the average citizen to match the increase in life expectancy. Improvements in modern medicine and lifestyle improvements have one in four British males born today expected to reach the age of 100. This increases in life expectancy lead the government to raise the retirement age for economic purposes. Government officials claim raising the retirement age will save the British tax payer around 13 billion GBP a year.
Some employers are reluctant about the increase in retirement age and fear a decline in the quality of their workforces. Employers have noted that the performance of older workers decline with age. Older workers exhibit a reduced capacity to work and have health or safety concerns younger workers do not. Not only do older workers experience increased sickness but they exhibit a lessened interest in their jobs. These workers begin to coast as they near retirement age and their performance on the job decreases. Having these workers on the job longer could have a negative affect on other workers. These employers fear the quality of their workforce might decline as a result of the increasing the retirement age.
Some also contend that raising the retirement age will make it difficult for young people entering the workforce and eventually raise their unemployment rates. Retirement has been used as a way to phase out older workers and make way for new workers. Raising the retirement age will create a shortage of jobs in an already difficult economy. The shortage of jobs among young workers could cause resentment toward older workers if they are unable to find work.
The increase in the retirement age is also seen as a disadvantage to seniors who are working class or manual laborers. Because of the strenuous nature of their jobs they may have difficulty reaching a higher retirement age. Corporate types, who make more money, can afford to retire early before they receive their pensions and enjoy an early retirement on their savings. But, the working class will have to work longer at strenuous jobs to reach their retirement age and live off their pension.
Advocates of the working class say raising the retirement age is actually an attack on the poor and will send Britain back to the days of Charles Dickens. It was a time when the wealthy could retire from working but the poorer classes were forced to work until the day they died. Wealthy people have access to better health care and can work longer to enjoy a later retirement age. Whereas the poor who are unable to afford the best in healthcare can develop ailments that may prevent them from reaching the proposed retirement age to enjoy their pensions.
The increase in retirement age is seen as a reaction to current social changes. This response by the government could have a negative effect on workforce performance and quality of life for the poor. To counter some of the backlash over the new retirement age the government should create more jobs to ease unemployment among the young and help businesses utilize the experience of seniors with more funding for apprentice programs.

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Frank is a keen cyclist and writes for investment consultancy Aon Hewitt among other businesses on a wide variety of subjects.

The Freelancer Guide to Pensions

Pension PlanWith the recent government reforms on pensions it’s never been more relevant to think about funding for later life. The introduction of a new flat-rate pension worth an estimated£144 per week in today’s money,will provide the UK’s elderly with “the minimum” they will need and no more.

New laws are being passed in favour of UK workers, to ensure that they’re being offered adequate support from their employers in the form of compulsory workplace pensions.

But what can the humble freelancer do to ensure they have sufficient provisions for retirement?

Keep Tabs

You’re self-employed now, but the likelihood is that you’ll have accumulated pension plan(s) over the years from previous companies (as well as maybe from doing your own thing).

The best thing to do with these before you decide how to proceed is to take stock of what you have. It’s probably been some time since you looked at how your funders are performing and how these will to help towards your retirement fund.

Set Up a Personal Pension Plan

When you invest funds into a pension (which you can do tax free), your provider will spread this money across different stocks and shares (investment portfolio). There are two main routes that you can go down to determine what happens with your money next:

Stakeholder Pensions: an investment portfolio where the decision about which stocks and shares are selected is made by the pension provider, with little or no input from you.

The obvious benefit to taking this route is that the provider will have a vast amount of expertise to be able to make the most astute choices for your age and circumstance.However, there will be a charge for this service.  Usually, the provider will chargea percentage of the value of your investment annually.

Self-Invested (SIPP):this is a private pension plan where you maintain control over which investments the fund makes on your behalf, and you have control over the investment portfolio from the first investment being made to the point of retirement. It is possible to make significant savings this way, but you must be confident in your ability to make astute decisions, as there will be no recovery if your investments don’t perform as expected. If you do decide to go down this route, always seek the advice of a financial professional to ensure that you’re aware of the risks involved from the outset.

Don’t Stay Stagnant

Just because you don’t have an annual pension review with work doesn’t mean you can let your payments stagnate and continue to pay the same in year on year.

Make sure you increase your investments in accordance with your salary by contributing a percentage of your earnings, rather than a set amount. As a general rule of thumb, this should be a percentage that is equal to half your age when you set up the fund. So, if you were to start saving at 24, this would be 12%.

You may also decide to review your input and gradually increase the percentage invested as you get older. As circumstances change, i.e. you might manage to pay off your student loan, credit card debt, or even better – your mortgage, a good idea is to start contributing at least some of the equivalent into your pension instead. You’re not used to the money, so you won’t miss it, and you may be thankful for that little bit extra when you’re no longer working.

Remember, it’s never too late to start saving. Whether you already have some funds tucked away, or you’re just about to start, it’s a great idea to consolidate your cash and take time to make sure you’re getting the most out of your money to prepare you for later life.

This article was contributed by Laura Moulden on behalf of Nixon Williams, a firm of contractor accountants offering comprehensive accountancy services to businesses throughout the UK

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It Really Can Be Simple To Buy A Property In Your Pension: Our A – Z Guide

Buy A PropertyOne of the main reasons people use a Self-Invested Personal Pension, or SIPP for short, is to buy a commercial property, either for their own business to use or to be let out to a third party.

It sounds complicated, but it doesn’t need to be, so we thought we’d take you through the basic A to Z of buying a commercial property in your SIPP.

1. Decide on your strategy. Are you buying a property which your business will occupy, in which case you will still have to pay rent but to your own pension, or will you  let it to a third party? Of course your business could occupy part of the property and sub-/let part, the choice is yours

2. Find a suitable property. This is the fun part! Viewing property and imaging the possibilities can be very exciting, but don’t get carried away, remember your strategy and budget. You should also remember that a SIPP cannot buy residential property or a holiday home; it’s a big ‘no no’ and can’t be done, despite what some people will try and tell you

3. Organise your borrowing. SIPPs can borrow money to help fund the purchase of the property, but there are rules. A SIPP can only borrow up to 50% of its assets, for example if your SIPP is valued at £100,000 it can borrow up to £50,000, giving a total budget of £150,000 to fund the purchase and cover any fees such as legal costs, stamp duty, surveys, and other professional fees

4. Find a suitable SIPP. Some SIPPs will not allow you to buy a property, whilst other SIPP providers are very experienced in such arrangements. If your existing SIPP provider will not allow properties to be bought then you will need to consider a transfer to an alternative provider. Even if your existing SIPP provider will allow property purchase you should compare the costs of alternatives

5. Make an offer. So you’ve found a property and chosen your SIPP provider, it’s now time to make an offer. This works in the normal way, there’s nothing really different just because you are buying the property in your SIPP

6. Find a solicitor. You will need a solicitor to carry out the legal work associated with the purchase. Some SIPP providers will work from a panel of lawyers and insist you choose from this list, others will allow you to use any solicitor of your choosing; just make sure the one you chose has experience of dealing with buying a property in a SIPP

7. Organise a survey. You’ll want to make sure that the property you are buying isn’t falling down or about to cost you and arm and a leg in repair bills

8. Sit back and let the professionals get on with it. Once you’ve followed the first seven steps you can probably breathe a sigh of relief, settle back and let the professionals get on with completing the purchase

9. Find a tenant, move in, and arrange a lease. If your business is renting the property then you will need to draw up a lease and start paying rent, if you intend to find a third party then you’ll need to market the property, either through a professional agent or yourself

Our quick A to Z guide will help you buy a property in your SIPP, and whilst it might look easy there will always be complications along with way which is where your IFA and other professional advisers will really earn their fees.

Phillip Bray writes for Investment Sense and looks at the SIPP rules when it comes to buying a commercial property in your pension.

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Further Damage To US Pension Funds

Further Damage To US Pension Funds

While relatively few countries’ pension funds have escaped unscathed from the current financial crisis the US seems to have taken the biggest hit over the last couple of years.

It’s not a huge surprise, given that pension plans in the US make up more than 60% of global pension assets. The ongoing financial crisis has left corporate pension funds hugely underfunded and many workers are seriously reconsidering their retirement plans, some more drastically than others. A number of people have already stopped paying in to their IRS pension plans, while a not insignificant minority have completely shelved their retirement plans and are exploring other options. Those who have opted out entirely have had to rethink not only their lifestyle after retirement but their retirement age as well.

Making matters worse is the job market, with high unemployment levels plunging thousands of people in to deeper financial difficulty and slowly eroding any security they might have built up over the years.

Many private companies have attempted to offset some of the financial strain by reducing their contributions to pension funds, with some of the most severely affected completely abolishing schemes. Sadly this looks like a trend which is set to continue for the foreseeable future.


California is a typical example of how states are being affected. The largest public pension fund in the country, the California Public Employees Retirement System (CalPERS), has reduced its forecast for investment returns for the first time in 10 years. They have also requested that local school districts and local government increase their contributions, a move that could have a significant impact on the standard of services offered to residents in a time where cost cutting is already a top priority.

This means that around 4% of the state’s annual budget is allocated to CalPERS, at a time when almost every department is looking to make budget cuts wherever they can. Public sector pensions have already come under fire due to the substantial benefits they offer over those provided to those in the private sector. Many taxpayers are starting to question the feasibility of the public pension fund given the current state of the economy.

The state budget deficit stands at around $9.2bn and reductions to public sector pension benefits have already been proposed by Governor Jerry Brown, alongside increased contributions from workers and an increase in the state retirement age. The proposals, which have yet to be implemented, also support a plan for new employees to participate in a hybrid plan in which a 401(k) style system would be used to make the pension schemes more comparable to those in the private sector.

It highlights the significant steps governments have to take to deal with this huge issue, which will have an impact on millions over the next couple of decades.

Stuart produces content on behalf of and contributes to a number of financial blogs

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5 Benefits of Contributing Early to your Pension

5 Benefits of Contributing Early to your Pension

Contributing to a pension early offers many benefits that will certainly pay off in the long run. Retirement might seem a long way off, but it’s never too early to start contributing to your pension. The sooner you start putting away some of your money for your older years, the better the benefits you will reap. Just look at these five benefits that early contribution to a pension can give you and you’ll soon see why you should start making a contribution.

1) The sooner you begin contributing, the less you will have to put in each month.

Taking into account the state pension and employers contributions, if you want to retire with a pension equivalent to £25,000 today, you would need to contribute £430 every month from the age of 30 to the age of 68. By contrast, if you started paying in at the age of 25, you would only need to contribute £345 a month for the same reward.

2) Your money has more time to grow

The more time your money has to generate a return on investment the more it will be worth. According to the pensions minister, every £1 that you invest at 20 could be worth 40% more on your retirement than the £1 that you invest at 40. It stands to reason that the earlier you start saving, the better your return on investment

3) Neglecting Pension contributions could be turning down salary.

Many employers offer to contribute to your pension as long as you do so also. By not contributing to a pension when young, you are basically turning down extra money from your employer. A worker on the average wage is generally given £1,400 a year in employer pension contributions if they take advantage of the schemes that are offered. You would have to be crazy to turn down free money from your employer.

4) Starting early gets you used to contributing to a pension.

By leaving pension contributions to later in life, you are in some ways setting yourself up for failure – after all, you have grown accustomed to living your life on your full salary. By contributing a percentage of your salary from the day you start work, you get used to the idea that your take-home salary is less than you would expect otherwise. It can be hard to adjust your spending habits to take account of these new pension deductions, so the earlier you get used to it, the more successful you will be.

5) A pensions scheme helps you to succeed at saving

You might decide to simply save money yourself rather than contribute to a pension scheme. However it can be tempting to dip into those savings from time to time for emergencies, bargains and treats. With a pensions scheme your savings are tucked away until you are in your 50s, meaning that you can’t succumb to temptation and take money out before then, undoing all your hard work and stopping your savings from growing.

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