Posts Tagged ‘Retirement’

Alan Collins

Open market option for all?

I read with interest the guidance to individuals with money purchase benefits published on 2 November by the Pensions Regulator (tPR) and echo comments from Pensions Minister Steve Webb that “choices we make at retirement are amongst the most important of our lives” and “shopping around can provide better value for money and significantly boost retirement income”, and those from tPR’s acting Chief Executive Bill Galvin who has stated that “members could miss out on a higher retirement income because they are not well-supported in making good choices”.

The engagement of the Pensions Regulator in the education process within occupational defined contribution schemes is welcome, and emphasis has rightly been given to the potential benefits to members of obtaining independent financial advice. In particular, the guidance should act as a reminder to Trustees of schemes which provide both defined benefits and money purchase benefits that the members with money purchase benefits deserve due care and attention.

However, the guidance appears to be in stark contrast to the regulatory approach and pending legislation governing defined benefit arrangements, particularly those containing contracted-out rights. The “presumption of guilt” surrounding transferring benefits out of a defined benefit arrangement, and the potential end to the ability to transfer contracted out rights from defined benefit to money purchase arrangements in 2012, would seem to be at odds with the ethos of encouraging members to make choices which best suit their own circumstances.

For example, the value contained in some defined benefits (such as a prescribed level of pension increases or spouse’s pensions where the member is single or where the spouse already has a substantial pension), could be used to provide alternative benefits which are more suited to the needs of the individual concerned. Also the value of a money purchase pension pot can be retained on the death of the member, whereas this event may cause the value of a defined benefit to be significantly eroded .

I would therefore ask that members of defined benefit arrangements continue to be afforded the same opportunities to exercise their “Open Market Option” in the future.

Neil Copeland

The first time I saw Def Leppard the drummer still had both his arms.

Not many bands visited remote outposts like Belfast back in the early 80’s and we were mightily supportive and indeed grateful to those who did, like Def Leppard. The band had already released a couple of albums but this was the start of the tour to support Pyromania, the album that was to push them into stadia around the world and was a precursor to their absolutely mega-album Hysteria. They put on a great show that night and, indeed, as an ageing rocker, I can attest that they still do.

But, as with many bands, global success will alienate that small sub-group who only ever like a band if no one else has ever heard of them. You know what I mean – the guy or girl who goes “Yeah I saw them in a pub in 1980 when they couldn’t play their instruments and it was only me and my dog in the audience, and they were sohhh cool, but now, like, they’ve just totally sold out and are rubbish. I’m really into Ethel the Frog now”. Luckily for fickle fans everywhere Ethel the Frog were never a success. Not so lucky for Ethel the Frog.

The Governments proposals on the abolition of compulsory annuity purchase seems to be subject to some equally fickle fans, if a recent article in the FT is to be believed.
Read more »

Valerie Hartley

I recently came across some bizarre yet interesting reading from a study carried out at end of last year which looked at geographical differences in mortality. The study looked at how mortality varied by postcode.

The study highlights the worst, or “shortest lived”, towns, and the best or “longest lived” towns. The differences are such that some of the shortest lived towns should probably carry a Government health warning!

The study, carried out by Towers Watson ranked localities across the UK. A score of ten, the UK average, means that actuaries expect ten in every thousand males aged 65 to die in the next 12 months. The higher the score, the more deaths expected. The study showed that the ten ‘shortest-lived’ towns are as follows:-

Town Mortality Rating
Kilbirnie, Ayrshire 15.4
Bootle, Merseyside 15.3
Lochgelly, Fife 15.3
Kyle, Ross-shire 15.1
Queenborough, Kent 15.1
Arisaig, Inverness-shire 14.8
Castlederg, Co Tyrone 14.8
Cumnock, Ayrshire 14.8
Mayport, Cumbria 14.8
Sanquar, Dumfriesshire 14.8

Kilbirnie, the least healthy place in the UK to live, has a mortality rating of 15.4%. Its population of approximately 8,000 people are served by no fewer than 3 firms of Funeral Directors!! This means that there are more firms of Funeral Directors than Banks or Grocery Stores in the town. Sorry to break this news to you, Kilbirnie residents!

What this means is that a 65 year old Kilbirnie male will live on average a further 17 years – 3 years fewer than the national average and 8 years fewer than people in postcode areas identified as the longest-lived postcodes; or to put it another way a male aged 65 living in Kilbirnie is more than twice as likely to die within the next 12 months than a person living in one of the healthier towns. Grim?

At the other end of the spectrum, the ten ‘longest-lived’ towns are as follows:-

Town Mortality Rating
Montacute, Somerset 6.4
Brockenhurst, Hampshire 6.7
Aldeburgh, Suffolk 6.8
Church Stretton, Shropshire 6.8
Colyton, Devon 6.9
Lyme Regis, Dorset 6.9
Lymington, Hampshire 6.9
Budleigh Salterton, Devon 7
Hinton St George, Somerset 7
Verwood, Dorset 7

If you take Montactute as an example, a male aged 65 can expect to live 25 more years! As unbelievable as it may seem, residents have been known to live in the town to a grand old age of 106! Whether this is a good thing or not, is a question for the residents of Montacute.

Obviously Kilbirnie, the place itself, is not the cause of these excess deaths. It’s clear that there are other factors which such as the populations general health & wellbeing, lifestyle, diet, perhaps education, occupation (stress) and wealth/poverty but to name a few.

Equally, there is nothing magical about a certain postcode that ensures longer life. However, the Mortality Map, does show a clear North-South split with people in Scotland and the industrial North East and North West of England tending to be shorter-lived, whereas people in East Anglia, the South East and South West, with exception of Cornwall, generally living longer.

Research suggests that mortality is linked to socio-economic factors rather than geography – the old industrial heartlands having a higher proportion of the population in “lower” socio-economic groups.

However the significance to individuals is that many pension providers, notably L&G, Aviva and Prudential, take into account postcode location when pricing annuities.

Therefore if you are a resident of Montacute looking to purchase an annuity you are going to get a much poorer deal than the average because of your postcode. Perhaps it’s time to check out a move to Kilbirnie in search of a better annuity rate!

Neil Copeland

Some of you may be familiar with Schrodinger’s Cat  . In feline terms it’s probably not as famous as McCavity, or even Mrs Slocombe’s pussy, but a couple of recent pension articles put me in mind of it.

I can’t pretend to understand the philosophical basis behind Schrodinger’s thought experiment – Descartes lost me at  “I think therefore I am”, but a tabloid summary would be as follows:-

Page 3 lovely,  Angie, 19,  from Ilfracombe,  says “A cat, along with a flask containing a poison, is placed in a sealed box shielded against environmentally induced quantum decoherence. If an internal Geiger counter detects radiation, the flask is shattered, releasing the poison that kills the cat. The Copenhagen interpretation of quantum mechanics implies that after a while, the cat is simultaneously dead and alive. Yet, when we look in the box, we see the cat either alive or dead, not a mixture of alive and dead. Poor little kitty.”

I don’t know what you make of that, but what it says to me is that Read more »

Laura Cumming

The Press has recently been full of reports about the working population having the freedom to work past 65 with a removal of compulsory retirement ages in the workplace. Strangely, everyone I speak to in their 40s and 50s is afraid that such a move will see them coerced into continuing to work “just for a few years more” Read more »

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