Category Archives: Pensions


An article by Geraldine Kaye on FT Adviser


People still unsure about auto enrolment scheme

According to a survey carried out by Corporate Benefits at Friends Life, 26% of people would choose to opt out of a workplace pension scheme. The survey also found that 35% of those who did enrol would be unwilling to contribute any more than 5% of their monthly salary. This is despite only 14% of recipients thinking that saving 8% (the total level auto enrolment will reach) would provide for a comfortable retirement.

20% of those questioned said that they would not persuaded as even a 1% deduction could mean that they would struggle to make ends meet.  However, 41% said increased tax relief would encourage them to save more for retirement.

“Unfortunately, as people are struggling financially in the tough economic climate, they are understandably focusing on paying the bills today rather than providing for the future,” comments Dr Geraldine Kaye of GAAPS Actuarial.

Survey looks at UK life and pension choices for new generation of customers.

Research by Cable&Wireless Worldwide has found that 90% of consumers express some dissatisfaction with the methods of communications from UK financial services providers.

Almost half would like more comprehensive websites which include video explanations and calculators, and17% of those asked wanted an instant message service whilst using the site. With younger consumers looking for more interactivity from providers, insurance providers need to respond to accommodate these needs or risk alienating future customers.

Nicola Dicks, director, General Insurance, Life & Pensions at Cable & Wireless Worldwide comments “Running multiple communication channels is simply not good enough if the customer experience is poor and disjointed, that’s why it’s vital for insurance providers to improve existing communication channels before rushing to invest in new ones. To engage with and retain their customers, insurers should be providing the right information and advice at first point of contact, whatever method that is.”

“Whilst at the moment technology leadership is strongest amongst younger customers, communications requirements will continue to shift as generations move through different life stages. Insurers therefore need to make sure they get their communication channels right–or they could find themselves restricted to a diminishing segment. Improving communications infrastructure will have a fundamental role to play in delivering the transformation required.”

Jane Curtis, Immediate Past President of the Institute and Faculty of Actuaries comments on the introduction of auto-enrolment in the UK

After the recent introduction of auto enrolment a system which could see up to 11 million workers automatically enrolled into a workplace pension, Jane Curtis President of the Institute and Faculty of Actuaries  comments on the  ‘positive step’ to encourage people to save for their retirement

“Auto-enrolment is a positive step forward in the battle to encourage individuals to save for their retirement. However by effectively helping individuals to save without realising it there is the danger that they may sleepwalk into retirement without enough money in their pension pot to fund the lifestyles that they want to maintain when they leave work.

“To illustrate this; the minimum contribution for NEST will be 8% per year by 2018.  For an individual earning £20,000 a year and assuming a 5% employee and 3% employer contribution for 20 years the NEST calculator assumes that the pension pot will be worth £47,000 in today’s money, which equates to a tax free lump sum on retirement of £11,700 and an annual income for the rest of life of £1,600. Adding this to the present basic state pension of just under £6,000 a year and someone earning £20,000 a year would experience a significant 65% drop in annual income.

“Of course there are many factors that will affect the value of an individual’s pension pot over time, but what these figures illustrate is that it is as important for each individual to be engaged in saving for their future as it is to automatically enrol them into doing so. This is a communication and education challenge for both the Government and employers and one where the expertise of the architects of pension products, such as actuaries, will have a key role to play.”

45% have never reviewed their pension

45% of the working population have never reviewed their pension plans and 41% were unsure if they had selected the ‘default’ option.

The survey by Baring Asset Management, also found that more people were likely to choose friends and family for pensions advice than in previous years. 23% named this as their most likely source of advice, compared with 15% in 2011.  However, 34% selected professional advice from financial advisers or accountants as their preferred option.

Marino Valensise, Barings’ chief investment officer said: “Millions of people may be exposed to poor asset allocation and inappropriate levels of risk due to a refusal to review their pension investments regularly and with the correct levels of advice. This is more important than ever given the current volatile economic environment.”

Research highlights poor pension knowledge – and advice is more important than ever

The 2012 Workplace Pensions Report has revealed that 52% of all employees have no knowledge of the new auto enrolment legislation which will affect 19 million workers.

The new reform will be implemented in October 2012 and will then be rolled out over the next five years in order to raise awareness.  The Department for Work and Pension will be putting out a national campaign later this month. The new legislation will see all qualifying workers enrolled in a workplace pension saving scheme – unless they opt-out.

The report found that 74% of respondents believed that their employer should provide information about retirement planning. Scottish Widows said the services of an expert adviser “would help increase education and understanding of savings, and help employees plan better for their retirement.”

The consequences of living longer – the 2011 Census

We all know that people are living longer, which impacts on many areas of welfare, society  and finance.  Fraser Smart, Managing Director of Buck Consultants, discusses the data from the 2011 census:

“Much of what this data reveals should come as no surprise to those of us in the pensions industry, people in England and Wales are living longer than they did 100 years ago. There is a decreasing proportion of the population that is aged under 15 and an increasing proportion that is aged 65 and over. The percentage of residents aged 65 and over was the highest seen in any census at 16.4 per cent, which means that one in six people in the population was 65 and over in 2011. In 1911, the figure was one in twenty.

“Very worryingly the number of active members of occupational pension schemes is at the lowest level since the 1950s. Employee membership of employer-sponsored pensions in the private sector fell from 46% in 1997 to 32% in 2011. In 2010 the average worker in a private sector defined benefit pension scheme contributed 5.1% of salary to their pension, compared with 2.7% for employees in defined contribution occupational pension arrangements.

“Great news we are all living longer, as no doubt we all wished for. However, this has now come to the attention of those in authority and, with an ever increasing percentage of the population relying on pension income. We are awaiting with interest the Government’s proposals on defined ambition pensions which are expected later this year. Radical reform of pensions arrangements are needed to meet the needs of a growing population of pensioners in the wake of the disappearance of final salary pension schemes.

“I would love final salary schemes to make a comeback, but the reality are that most are in their endgame paying out benefits rather than accruing new liabilities. Will the Government be brave enough to remove the shackles which led to a large extent to the disappearance of final salary schemes? We will have to wait and see.”