Posts Tagged ‘Pensions’

5 numbers that tell the story of why everyone’s getting a pension from Monday

Pensions. I know, dull, dull and more dull right? Correct. Unfortunately, pensions are about to become like unwashed dishes in the sink – visually unavoidable, uncomfortable smelling and constantly in your face as you walk past them, nagging you to deal with them. Monday is the start of the much heralded and overly written about auto-enrolment. Starting a pension will no longer become a case of “yes please” if you want one but rather “no thanks” if you don’t.

I’ve already written about the challenge of selling this to 7m people, but it’s just worth considering why the Government is doing this. To round out the week, here’s a few numbers which hopefully tell the story behind auto-enrolment. Alternatively, you can watch the new promo adverts for auto-enrolment on YouTube:

8.2 million – that’s the number of people who have a workplace pension. That’s less than one in three adults

£20,000 – that’s what people want to live off each year in retirement

£11,000 – that’s what people think they’ll actually have each year in retirement. That’s a £9,000 gap

82.3 years – that’s the average life expectancy of a girl born today in the UK. It’s rising by nearly 3 years every decade

£400,000 – that’s how much money a woman needs to buy £20,000 a year of income in retirement

Just to reiterate that last one – £400,000. Or to put it another way, that’s the cost of this mansion in Northern Ireland.

How do you PR pensions to 8m people?

This little conundrum is the question facing the National Employment Savings Trust (NEST) over the next few months. On 1st October, a new era of retirement saving will begin as workers are automatically enrolled into company pension plans without fail. You can opt out if you wish, but the hope from the Government is that two thirds of people won’t.

Now let’s get to the crux of the issue shall we? “Pensions”, “Saving” and “Retirement Planning” are all very dull, very unsexy words that most people the young side of 50 have little interest in discussing or thinking about.

The number of reports, press releases and speeches from companies and politicians on the yawning savings gap in the UK is enough to form a paper road to the moon. But it still makes little difference to savings rates, as was highlighted this week.

So, back to the question: how is NEST enticing 8m potential new pension savers to stay in their pension plans and not opt-out as soon as they can? Well, hats off to them. With restricted budget, they’re going hell for leather with an upbeat message, emphasising the joys of a later life spent in relative comfort. This is neatly summed up with the hashtag

#worthsavingfor

What’s pleasing to see is that they’ve avoided the old-school approach of just producing reports, surveys and general doom and gloom. We have the classic PR tactics like these in the mix, but they’re supported by a strong social media programme. Together, for me, it makes quite a package.

Will it work? It’s too early to say and we won’t really know for two or three years when most people will be auto-enrolled. Expect the papers to jump on any data showing high opt-out rates in big companies from December onwards. NEST and the Government are also clearly a little nervous, with rumours of an additional TV advertising campaign in the mix. Still, at this point, fair play to them.

FPS’ Friday Fiver

Here’s your five for the weekend everyone – short, sharp and to the point:

1. We’re 12 days away from this year’s Budget and the noise has started already. This week’s focus has been all about the question of taxation – in particular, the proposed mansion tax, child benefit levels and how much relief on tax people paying into pensions should qualify for. Next week kicks off with the British Chambers of Commerce submitting their Budget wishlist – expect the hard economic debate from Mr Balls etc to follow.

2. Meanwhile, the Institute for Fiscal Studies provided plenty of ammunition for Labour with its latest figures on household spending which claimed to show that households are set to lose £370 from tax and benefits changes already in place.

3. Over in media land, Robert Peston drew the wrath of the Financial Times by latching onto an exclusive from George Parker last month and repackaging it into one of the stories of the week – Vince Cable’s now very public critique of Coalition policy.

4. Wrapping up the week, today finally saw the disclosure of pay figures for Barclays’ senior figures, including Bob Diamond. Suffice to say, the reaction has been predictable, decrying the vast sums while others have questioned the payout based on the company’s declining performance. Perhaps not such a bad day for Lloyds and RBS to reveal their figures at the same time then…

5. Finally, tonight sees the inaugural Financial & Professional Services ‘Cheese & Wine night’ – expect plenty of sore heads and full stomachs tomorrow!

Happy weekend all!

FPS’ Friday Fiver

Hello All, and apologies for a late night Fiver – it’s been one of those weeks in financial and professional services. Still, below we have a trip through the week’s news highlights (sadly not including Tom Watson’s intern) as you head into the weekend. Thanks to Ed, Jonathan, Ross and our latest contributor, Josh Glendinning. Have a great weekend all.

UK VS THE WORLD…..While UK GDP figures dominated the headlines on Wednesday, members of the FPS team were given an insight into what lies ahead for global growth in 2012. At an event put on by British American Business we heard from, Alexis Karklins-Marchay of Ernst & Young that despite the woes of the Eurozone, the global economy can still expect growth of over 5% this year.

Much of this output will come from what Ernst & Young term Rapid-growth markets (RGMs), a set of 25 countries they expect will account for nearly half of global growth in the next ten years. Their report on RGMs and its micro-site are an excellent resource for anyone looking for facts and figures on the future shape of the world’s economy.

As an aside, one of the panellists, Stephen Castle of the International Herald Tribune, offered an anecdote from his time in the Brussels press corps. An unnamed member of the German press, brought up in the same region of the former East Germany as Angela Merkel offered Stephen an insight on Merkel’s approach to the Eurozone crisis. In the GDR, cars and appliances were never reliable, and the parts required to fix them were never available. As a result, citizens took to patching things up and making do until they broke again. The German journalist had decided Merkel was taking the same approach to the crisis…

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FPS’ Friday Fiver

We’re back, providing another round-up of some of the big stories from the world of financial services, the economy and Westminster this week. Contributors this week include Clare, Linzi, Jo and Ed, who bring us an overview of banking, pensions, retailers, and our new feature – Good Week/Bad Week.

Banking – fundamental flaws and failed customers…On Tuesday, Vince Cable held court at the Which? Banking Reform – An Agenda for Competition and Growth discussion at the Commonwealth Club, where he re-iterated his opinion that “banking is a structurally flawed industry that has fundamentally failed customers”.

Vince Cable - on the attack on banking once again (Image: Which.co.uk)

That the current system of banking is flawed is a no-brainer, but the harder question to answer is where exactly do the flaws lie? The conversation on Tuesday spanned the topics of increased competition, universal banking, ring-fencing, culture and behaviour along with new entrants into the banking market, but it seems that, nearly three years since the start of the global financial crisis, more questions continue to be posed than answered.

Is universal banking really the root of all banking evil? Do customers really feel their banks have failed them given so few of us have switched? With the array of initiatives, commissions, inquiries, and comite des sages taking place at the national, European and international levels, one has to hope that between them they will be able to identify and remedy the flaws that exist. However, there is the potential for all of these to come up with different flaws and different answers which complicate and confuse structures and customers alike!

Paying more for retirement…The spotlight returned to public sector pensions this week as figures leaked to The Daily Telegraph revealed exactly how much workers in the public sector will pay extra each month for their pensions.

Danny Alexander was asked how much more he personally would have to pay towards his pension this week (Image: Thesun.co.uk)

As expected, higher earners will take the brunt of the increases and the lowest paid workers, earning less than £15,000, will escape any increases at all.

Here are some of the figures from the proposals:

  • Those earning over £100,000 will pay £284 a month (£3,400 a year) more
  • Public sector workers in the £50,000 bracket will pay between £684 – £768  more
  • Those on a £35,000 salary face paying an extra £516 a year more

Despite the backlash, which was always going to happen, you can’t escape the welcome news that low paid public sector workers, some 750,000 people, will be exempt from any increase in contributions and those earning £21,000 will be out of pocket £108 a year, or just £9 a month. The fact remains that even with these increases, public sector pensions are still a valuable benefit.

We still aren’t buying much on the high street…Another worrying week for retailers as figures on Thursday showed that sales fell at their fastest pace for a year as consumers become increasingly reluctant to spend. This is brutal news for the already struggling retailers and may be a sign of further deterioration and shop closures to come.

Only one in three retailers claimed their sales volumes were up on a year ago, with food retailers being particularly hard hit – either we’ve all been hit by the rise in food costs and are watching the pennies like hawks or the nation is on a collective pre-holiday diet.

However, one retailer that isn’t afraid of the UK high street (or shall we say Oxford Street) is cut-price U.S. brand Forever 21, which opened its doors for us on Wednesday. Some critics state that we are not ready for ‘cheap, fast, American’ fashion’ but with the way things are going on the high street we may not have a choice.

George Soros - the latest financial veteran to retire

Good week/Bad week – George Soros & George Osborne…A tale of two George’s this week. For the first (the man who ‘broke the Bank of England’), the effective end of a remarkable 40 year investment career. While the manner of his retirement was a little sour, blaming US regulations, you can’t argue with his success over the years. He will likely be missed.

On the flip side, it was a less than stellar week for the younger George, who, as yet more vanilla growth figures rolled in, suddenly found himself the victim of attacks from several fronts. How he must be wishing for the summer break to roll around quickly.

FPS’ Friday Fiver

Hello again all. It’s been a frantically busy week here in the Financial & Professional Services team, but as ever we bring you the Friday Fiver which rounds up this week’s events. Thanks to contributors Mel, Nick, Jo and Jonathan this week.

Freedommmmmm…Braveheart bonds, kilt edged bonds, Connery bonds and Jonathan’s own personal suggestion of shortbread bond are just some of the names being used to describe new powers that will allow Scotland’s government to issue debt.

Mel's adopted country is about to issue its' own bonds

The Scotland Bill makes provision for the country to raise up to £2.2bn from markets to fund infrastructure projects. There had been calls to permit up to £5bn of borrowing but this idea has been dismissed and Treasury ministers are at pains to emphasise that this does not amount to writing a blank cheque. It remains to be seen what ratings agencies will make of Scotland’s credit worthiness.

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FPS’ Friday Fiver

posted by Edward Jones

In case you missed it, President Obama was in the UK this week to talk essential relationships, cyber crime and have a barbeque in the Number 10 Rose Garden. In honour, of his visit this weeks’ fiver looks at the visit and the UK’s special essential relationship with the US.  Thanks to Dave, Clare, Rachel and Melanie for contributions.

Essentially …

Whilst Foreign Policy and the six point plan, were the main items on the agenda, surely the most interesting aspect of Obama’s visit was the upgrading of the UK’s ‘Special Relationship’ with America to an ‘Essential Relationship.’ Essential. Never mind our credit rating, we have an essential relationship with America! As Matthew D’Ancona pointed out earlier this week, it has a certain ring of indispensability to it. I’m less sure Obama’s deficit reduction plan can be described as Osbornian, as D’Ancona suggested, but you have to hand it to Cameron he pulled the rabbit out of the hat with that one.

Deficit indifference

Governments should “live within their means” but also sustain growth by investing in education, and the pace of deficit reduction “may end up being different”. Uncritical certainly from the President, but hardly the ringing endorsement David Cameron and George Osborne were hoping for with regards to their economic strategy.

They were probably also hoping for better revised Q1 GDP figures from the ONS than the ones that materialised this week at roughly the same time as the meat was cooking on the barbie. Traditionally, the revised figures show an increase in GDP for the quarter over the first, partial set of figures released. That didn’t happen this time, with growth remaining at 0.5%. More worryingly, household spending contracted 0.6% and business investment practically hid in the corner shivering, as it shrank 7.1%.

The Government remains committed to cutting hard and fast in order to shrink the deficit and get the country back on track without a large credit card bill hanging over it. Judging by the economic data and reaction to it, the jury is still out on whether this will work or not – which is perhaps why the President hedged his words to such effect.

Inspiring relationships

Michelle Obama re-affirmed her own ‘essential relationship’ with old friends during the visit when she was re-acquainted with girls from Elizabeth Garrett Anderson School. The EGA girls were visiting Oxford University as part of a programme to encourage them to aim high. Mrs Obama, herself a graduate of Princeton and Harvard, encouraged them to not “be afraid to take risks, ask questions, ask stupid questions, don’t be afraid to trip, fall and don’t be afraid to get back up.”

Wise words indeed from the First Lady and something all of us can take heart from. Media coverage of the meeting praised her as an inspiring role model for these young girls. But do our young people need to wait for a visit from a foreign leader’s wife to feel inspired? It strikes me that inspiration comes in all sorts of guises from dignitaries to teachers, to a school system and society that encourages successes achieved on merit. I cannot help thinking that more of our young girls would be inspired if the education system were fairer and society willed them on.

However, today’s announcement that under radical changes to admissions, some secondary schools will be able to select pupils on the basis of family income fills me with dread. If we want to inspire our young people, there has to be a better way than judging them on their parents’ finances.

Right all along?

Photo: Jacob Whittaker

There was a time when being British was all about keeping a stiff upper lip through adversity.  We were a bit stuffy, grumpy, and proud of it (with the exception of Ken Dodd). But if this week’s stats from the OECD are to be believed the old stereotype has been blown out of the water – we’re actually much happier than most of our European neighbours, including those where the weather is supposedly much nicer.

Of course our BFFs across the pond are way ahead, with the ‘pursuit of happiness’ in their constitution, but recent events have given them a run for their money (Will & Kate, less than a year to go to the Olympics, plus some cracking Aviva (client) sponsored ITV dramas on the telly).  Even Obama seemed to be using his visit to the UK to give a PR boost to the start of his election campaign, after all the yanks did seem to love the Royal Wedding more than we did.

Cheeriness is starting to look like part of a new national character, even a driver of government policy with the government launch of a new way of measuring it earlier this year.  Yet whilst the OECD’s figures do seem to suggest that money doesn’t necessarily make you happy, it will be interesting to see whether the next GDP figures show it can work the other way around.

Obama and the ostrich generation

When all the fanfare and noise from the military 41 gun salute to welcome Obama’s visit abates, we hope that the two leading western premiers might spare a thought for the lot of their respective domestic pensioners. They don’t need to look hard or delve deeply to find incontrovertible evidence of the pensions malaise and bleak future that faces many prospective pensioners in the UK and US and indeed across most Western economies.

The worrying statistics roll in on an almost daily basis. According to an international survey released by HSBC this week six in ten Britons have no financial plan for their retirement – due to a “cycle of dependency” and suffer from an equally self-deluded belief that they will enjoy a comfortable retirement.

Across the Atlantic, prospects are equally stark in the US. New findings from the American Association of Retired Persons (AARP) latest public policy institute report reveals that many older Americans, employed and unemployed, may never recover financially from this latest recession, although here, half of them do actually realise that they won’t have enough money to live on in retirement.

This dearth of planning contrasts with upcoming economies in the East, where a class of “prosperous pensioners” is merging. The respective expectations on annual growth showing  further downward revision for the UK economy (now a paltry 1.4%, with the US at only 2.6), is in stark contrast to buoyant growth rates in Asia’s flagship economies – China 9.2%, India 8.5%.

Worrying indeed.

FPS’ Friday Fiver

Hello All and welcome to a very sunny Friday afternoon. Before you all rush out of the door to enjoy a much earned drink, here’s our recap of five of the top financial and political stories of the week. Thanks to Jonathan, Ed, Daisy and Ross for their contributions this week.

National destiny…Two weeks ago, Portugal’s outgoing prime minister ruled out the possibility of asking the European Union for financial assistance. On Wednesday, under mounting pressure, a bailout of €80 billion was however requested. What is telling about the run of events is that to a large extent it is not governments that have the ultimate say over their financial destiny but international debt markets, a feeling reflected by Portuguese media, with the newspaper Jornal de Noticias declaring “Yesterday our country succumbed not only to the pressure of the hated markets but to itself”.

Europe's tangled web - a snapshot by the NY Times

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