An imposed workplace scheme is not the only option for retirement, as more low-cost Sipps come on to the market.
The financial pages have been full of advice on pensions with the launch of auto-enrollment last week. It has thrown a desperately needed spotlight on how and why we should be saving for later life.
But not everyone is happy that the state is stepping in. If you want to take control for your own retirement saving, a self-invested personal pension or Sipp, could prove a compelling alternative.
Sipps are essentially do-it-yourself pensions, offer more flexibility and a wider range of investment choices than most personal pensions. As well as cash, government bonds and funds, you can choose to invest your money in more complicated investments such as individual shares, open-ended investment companies (Oeics), commercial property and commodities.
They still benefit from all the features of a more traditional pension, including up to 50 per cent tax relief on pension contributions, but instead of trusting the provider to pick funds, you decide how to invest your contributions typically with a much wider range of funds to choose from and the opportunity to invest in direct equities by buying and selling shares.
It's true that when they first emerged, Sipps were targeted at experienced investors with substantial pension pots, but as costs have come down they have proven to be an increasingly popular choice among the general population.
"The Sipp market has been revolutionised in recent years with the emergence of low-cost plans, which have made them accessible to the mass market. Sipps are now becoming ISA-like in their appeal," says Jason Hollands of independent financial adviser (IFA) Bestinvest.
Follow the link for further information on SIPPs - LINK
To read the article in full follow the link - LINK
MILLIONS of new pensioners were warned this week that they face a retirement of poverty after weeks of slashed annual payouts.
Pension companies have cut rates offered on their guaranteed annuity incomes 24 times since the start of summer.
Standard Life is the latest to do so, lopping five per cent off the rate offered to the newly-retired and those approaching retirement.
And male pensioners will suffer an extra blow later this year with the introduction of the EU’s new “gender directive” which will further force down annuities for men.
Craig Palfrey, founding partner of independent financial advisers Penguin Wealth, said: “Annuities are in meltdown. We’re way beyond red alert. They have been coming down relentlessly and Standard Life’s decision to take a sword to rates is just the latest example.
Twenty years ago a £100,000 pension fund would have guaranteed an income of £15,640 a year for life for a 65-year-old man. Now it is just £5,140 a year.
And the crisis decimating pensions is set to continue for months, perhaps even years, piling on the agony for the newly-retired.
Experts warn that the situation is likely to worsen as annuity providers struggle with volatility in the stock market and the Bank of England’s quantitative easing (QE) strategy to tackle the recession.
The money-printing policy has been attacked for triggering “a death spiral” in pensions, which some experts say has led to the worst retirement payouts in history.
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Millions will see pensions slashed by up to 20% as new EU rules are set to send annuities plummeting
MORE bad news on pension's!! TIME TO ACT!
Millions of people could see the value of their pensions slashed by up to 20 per cent because of new EU rules.
Those with a £100,000 pension fund could be more than £1,100 per year worse off in retirement because of the reforms, research has shown.
The Solvency II rules, which are due to come into effect in January 2014, will force pension funds to hold a higher proportion of 'safe' Government bonds.
As the bonds - called gilts - have such low rates of return it will drive down the returns on retirement fund annuities, which are used to pension income.
The reforms are designed to make pension funds safer and reduce the risk of them going bust.
Annuities, which set retirement income for life, have already fallen to historic lows because of the impact of quantitative easing.
At present, a pension annuity fund may invest 20 per cent in low-yield gilts and the rest in riskier corporate bonds which have a higher rate of return.
But under the new EU rules, annuity funds will be forced to hold a higher percentage of gilts.
New research by Deloitte suggests annuity rates will plunge by between five and 20 per cent when the directive comes into force in January 2014.
A £100,000 pension pot currently gives an income of £5,837, but once the regulations come into effect they will be between £292 and £1,167 a year worse off.
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Savers approaching retirement are being advised to put off buying a lifetime annuity – or even to consider deferring retirement – as the euro crisis further reduces the income offered to UK pensioners.
Pension experts issued the advice after the FTSE 100 index suffered its largest one-day fall since November, as investors fled equities on fears of a Greek exit from the single currency – and bought into “haven” assets, such as government
This shift is significant for those planning their retirement as both the annuity income they can buy with their pension funds, and the income they can draw directly from their funds are determined by the yields on government bonds, or gilts. Heavy buying has pushed gilt prices up, reducing yields to record lows.
“It’s such an awful and difficult situation for anyone approaching retirement,” said Dr Ros Altmann, director-general of the Saga Group, the financial services group for over-50s. “If you can delay, it is worth considering because at some point there should be a correction in rates.”
Joanne Segars, chief executive of the National Association of Pension Funds, said: “People who are nearing their retirement need to think carefully about whether this is the right time to lock into the current low rates of interest.”
Advisers suggested taking pension cash in stages. “It’s possible to phase into retirement by taking tax-free cash only,” said Mike Morrison, head of pensions development with Axa Wealth. “In the short term, it may be possible to take income from elsewhere.”
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Top 10 property safe havens abroad
The spectacular Caribbean island of St Lucia, renowned worldwide for its idyllic
beaches, relaxed lifestyle and crystal-clear waters, has recently been named by the Telegraph as an overseas property safe haven. With an impressive 350,000 sun-seekers visiting the 238sqm island annually and five star tourism ever-popular, its little wonder that this jewel of the Caribbean continues to be considered a solid investment hotspot.
Telegraph journalist Graham Norwood explains, "This Caribbean Island has long been popular with Britons. There are rugged mountains, rainforests and coral reefs."
Easily accessible from the United States, the UK and across Europe, St. Lucia enjoys a luxurious climate, friendly locals and a wonderful coastline which draws in increasing numbers of visitor’s year-on-year. When considering property investment on this beautiful island, the Telegraph recommends that you research the more popular locations on the island and select high end properties in this setting.
"The best tactic is still to purchase more expensive homes in prime locations. This
means you will see the best the country has to offer, and your investment stands
a better chance of securing good returns."
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Wedgwood Museum collection to be sold to pay for company pensions.
At the dawn of the industrial revolution in Britain one of the first global brands created was that of Wedgwood china. Founded in 1759 by potter Josiah Wedgwood, it set standards that others were unable to match. A set of Wedgwood china became the mark of distinction for any aristocratic home and, more importantly, any home of the rapidly emerging middle classes.
At the dawn of de-regulated capitalism, in the 1980's, Wedgwood was acquired by the Waterford crystal company. Not for the first time or the last in this era, the management cultures of the two companies were fatally mismatched, the company went bust in 2008.
At the dawn of the post-crash phase of bail-out capitalism Wedgwood was acquired by a New York private equity firm, KPS Capital Partners. Most of its remaining 1,500 workers were laid off and manufacturing moved to China.
Now, there are reports that to plug a hole in the Waterford Wedgwood pension fund, the Wedgwood Museum, which houses a collection of the company's best work, is to be closed and the china and other artifacts to be sold. This follows a legal ruling by Britain's High Court that the objects are assets of the company.
£129 million pounds is the shortfall ($203.5 million). The collection is thought to be worth around £18million, according to The Daily Telegraph, considerably less than what the average Russian oligarch spends on a mediocre painting at Sotheby's or Christie's auctions these days.
Martin Levy, a London art dealer told The Guardian, "A small gain for the pensioners will be a long-term loss for the country – no more than a pyrrhic victory."
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People about to retire this year expect their pensions to be lower than those who have retired in any of the previous four years.
A survey by the Prudential insurance company found that expected annual retirement income has dropped by £3,100 since 2008, to £15,500. That includes income from state, company and private pensions.
A fifth of retirees expect to live on less than £10,000 a year, with the highest incomes being those in London.
Vince Smith-Hughes of the Prudential said: "The impact of the credit crunch,banking crisis, recession, and concerns over the eurozone, has been reflected in the fact that expected retirement income levels have hit a five-year-low."
A key factor has been the continued fall in the value of the annual pension that can be bought by a lump sum saved in a private pension fund. Annuity rates, as they are known, dropped by 8% in 2011.
That was their fourth consecutive annual fall, according to the financial information service Moneyfacts.
It was due to continued increases in longevity, and further reductions in the return, or yield, available from buying the government and company bonds needed to provide a guaranteed income in retirement.
Richard Eagling of Moneyfacts, said: "Unfortunately, by increasing the demand for fixed income instruments such as UK government bonds, the ongoing eurozone crisis and the Bank of England's quantitative easing programme have driven gilt and corporate bond yields down over the last twelve months, both of which underpin annuities."
Billy Burrows, a leading annuity broker, said: "At the beginning of 2011 the yield on 15-year UK gilts was 4.02% but by the end of the year the yield had fallen to 2.46%."
"Over the same period, our benchmark annuity fell from £5,834 per annum to
£5,362," he explained.
The Prudential survey included 1,003 people who were due to retire this year.
Full article - http://www.bbc.co.uk/news/business-16491365
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Governor King’s Inflation Report press conference will provide a timely update on how the Bank of England is viewing current financial market developments. The Inflation Report itself will contain medium-term forecasts for the economy. Lloyds TSB have argued that the Bank’s growth forecasts appear too optimistic and its central case is likely to be revised down from just under 2% this year and 2½% next. This is particularly true with the apparent materialisation of downside risks from the Eurozone. Lloyds TSB would also expect to see an associated softening in next year’s inflation outlook (although for 2011 should remain broadly unchanged) despite a boost from lower market rates that the Bank uses to condition these projections. Yet these forecasts still look likely to suggest a set of economic conditions very different from those that led the Bank to ease monetary policy to its historic lows. Nevertheless, with global financial markets threatening to reverse developed economies recoveries, the MPC’s discussions will be dominated by assessments of how much damage the current financial turmoil will wreak on the real economy. This week’s trade release will gauge the ongoing pace of rebalancing in the economy. May saw the deficit widen with trade (including services) breaching the £4.0bn mark for the first time this year. Much of this reflected a jump in imports that Lloyds TSB expect to reverse in June. Accordingly Lloyds TSB forecast the deficit narrowing to £3.8bn. However, Q2 looks unlikely to provide further evidence of an export led recovery. Export volumes look likely to have fallen in Q2 and net trade should have detracted from growth. As with the wider economy, one-off factors affected Q2. But with global economic activity seemingly slowing, export prospects have weakened.
The final release of the quarter is always somewhat historical, with preliminary estimates inferred from the GDP release. Official estimates for manufacturing that recorded a 0.3% contraction in Q2, consistent with a 0.2% rise in June. However, Lloyds TSB suspect that oil production staged a bigger rebound in June than assumed, something that would lead to a 0.6% rise in the wider industrial measure and result in a 1.3% quarterly decline (1.4% estimated). This will have little impact on Q2 GDP, but would provide some support for the expected rebound in oil in Q3. Given market developments, focus has now shifted to the likely pace of Q3 expansion.
Written by Ashley Ingle - Excel Currencies
August 8, 2011 at 10:57 AM
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