Pensions just got personal!
According to Datamonitor those over 50 make up a third of the UKís population, which is a fair bit. Not only that, but over half a million of them have liquid financial assets over £200,000 hanging around. It is also estimated that the over-50s include over 70% of the UKís high-net-worth population and that the over-50s own 68% of the £215 Billion of high-net-worth assets.
As a group, the over-50s are the most likely to buy financial products and investments and, as I said just now, theyíre bound to have at least one eye on retirement.
In my opinion, though, theyíre also the people most likely to be costing their employers a fortune if they are members of final-salary occupational pension schemes and must therefore be in the frame for losing out the most if pension schemes restructure. The number of schemes changing from final-salary to money-purchase gets larger every day and it is beginning to look inevitable that these irreversible changes will continue right across the market. But, as I said in my other BeeLine a few weeks ago, this doesnít have to spell doom and gloom for the UK pensions markets. I think it will bring with it changes in savings behaviour, with people taking more personal control over their pensions - probably with personal pensions supplementing reduced occupational pensions.
The pension changes coming in after A-Day were meant to be simple, but theyíre not. They look highly complex to me. But that in itself isnít necessarily a bad thing, particularly as the baffling array of pension options on offer in the future will clearly only be understood by those with access to proper financial advice. There is no question in my mind on this; the pension future of the UK will be advice-intensive. I think thatís good and that it will enable ordinary people to use their pension savings in what we would today regard as extraordinary ways.
Iíve already written a lot about this aspect of our pension future in recent BeeLines, such as the tax-free cash opportunities (click†here and†here if you missed them); the investment opportunities for SIPPs, particularly residential property (click here); and the breaking of the link between taking tax-free cash and the requirement to take an income at the same time (here) - and I plan to write many more over the coming weeks and months. Itís almost a never-ending story!
These different individual aspects of the new tax environment after A-Day will all add up to an enormously interesting, but highly complex, story that will interest millions of people in the UK in the very near future. As the message gets out, primarily through the adviser community and the personal finance pages of the national press, I am sure that it will generate an unprecedented level of interest in pensions. In particular, I think people will be very interested in learning how they will be able to take advantage of these new relaxations in our erstwhile straightjacket-like pension laws and take more control over their own affairs. We will see, Iím sure, people reconfiguring their accumulated retirement savings to best suit their own individual circumstances as they move into their fifties and sixties. As I said in the title of this BeeLine, pensions just got personal.
By the way, I donít know whether you ever go to the home page of the BeeHive or not when you come in here to read the BeeLines, but in case you donít perhaps you wonít mind me reminding you that weíve got a new vote there that you can add your twopence worth to if you want to. Basically Iíd like to know if people agree with me that the new tax laws will lead to increased interest in personal pensions after A-Day from people already in occupational pension schemes. If youíd like to register your vote on that subject you can do so by clicking here†if you want, itís a free country (or at least it was the last time I looked).
Also, thanks to all of you who have written in to encourage me to keep up with my New Yearís Resolution to kick caffeine into touch. Most reassuring, but I have to say Iím still getting the headaches...
21 January 2005
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