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May 2017 - Newsletter

Defined Benefit pension schemes rise to £246bn

…Total assets were £1.5trn and total liabilities were £1.7trn, with 391 schemes in deficit and 1,403 schemes in surplus.

A spokesperson from Actuarial firm, Mercer, commented: “The deterioration in funding levels over April was a reminder that pension scheme trustees and sponsors face significant uncertainties.”

“Even though some markets showed some weakness, other areas are strong to the point of being at significant risk of suffering a set-back in the near future.”

On the positive side for pension funds, Charles Cowling, Director at JLT Employee Benefits, said: “The latest mortality tables from the CMI (Continuous Mortality Investigation) suggest that life expectancy is perhaps not increasing as much as had been expected and this will reduce deficits.”

“But with many pension schemes now embarking on their triennial actuarial valuations and deficits likely to be much bigger than three years ago, there are going to be some difficult discussions between companies and pension scheme trustees, as trustees could be looking to negotiate significant increases in deficit funding.”

See more below:
https://www.ftadviser.com/pensions/2017/05/09/db-pension-scheme-deficits-rise-to-246bn/

 

Government breaks legal deadline to reveal increases

…The Government was legally obliged to review the state pension age – currently 65 for both men and women – by 7th May, as stipulated in the 2014 Pensions Act.

Two days after the deadline, the Government has not yet announced its plans, leaving millions of voters in limbo regarding the future of their pension pots.

“Very convenient but unfortunately not very surprising,” was the view tweeted by the sitting SNP MP Mhairi Black.

“This kind of thing is the exact reason we need MPs who will fight the Tories.”

Financial journalist Paul Lewis found in his twitter poll that 95% of 8511 respondents thought that the Government should “obey the law and publish the state pension age plans now”, rather than wait until after 8th June.

“There are clear pre-election period rules that restrict the making of new, long-term decisions,” a spokesman for the Department for Work and Pensions said.

“Future state pension age policy will be a matter for the new Government to decide.”

He also added that the two independent reports provided a “significant contribution” to the Government’s work and would most likely be drawn upon after the election.

Yet they advocate for several different measures that are contrary to the Conservatives’ manifesto.

The Cridland review recommended scratching the triple-lock pension, which guarantees a minimum annual state pension increase of 2.5%.

It also recommended enhancing the state pension age from 67 to 68 between 2037 and 2039, which would affect around 5.8 million people.

For those that are younger than 30, they may find themselves working until the age of 70.

The Government’s passing of the 7th May deadline comes soon after Theresa May faced up to several heated questions in Parliament as to whether she will guarantee triple-lock pensions, as suggested in the Conservatives’ manifesto.

“I am clear under a Conservative Government incomes would continue to increase.” was May’s response.

See more below:
http://www.independent.co.uk/money/pensions/uk-government-state-pension-age-increase-legal-deadline-john-cridland-cbi-theresa-may-confederation-a7726381.html

 

Divorcees face £3k less per year from pensions

…The latest survey was conducted between 8th-22nd November 2016 among 10,605 non-retired UK adults, including 1,000 looking to retire in 2017.

For the Class of 2017, forecast annual retirement income is £16,300 for those who have previously divorced compared with £19,400 for those who have never suffered a marital break-up.

Furthermore, around one in three people who have been divorced expect to retire with debts (32%), compared with just one in five (21%) of those who have not been divorced.

There is a greater chance that those who have been divorced are also more likely to have retirement incomes below the annual minimum income standard for single pensioners set by the Joseph Rowntree Foundation (JRF).

Around one in five who have been divorced (21%) expect to have incomes lower than the JRF’s benchmark of £186.76 a week, or £9,712 a year, compared with 13% of those who have never been divorced.

Around one in five who have been divorced (21%) expect to have incomes lower than the JRF’s benchmark of £186.76 a week, or £9,712 a year, compared with 13% of those who have never been divorced.

Clare Moffat, pensions specialist at Prudential, said: “The financial impact of divorce can be devastating both in the short and longer-term, lasting well into retirement as divorcees experience expected retirement incomes of as much as 16% lower than those who’ve never divorced.

“Deciding on living costs and childcare at the point of divorce is difficult enough, but a pension fund is likely to be one of the most complicated assets a couple will have to split in the event of a divorce.”

Richard Collins, divorce lawyer and partner at Charles Russell Speechlys, commented: “Next to the family home, the pension is often the biggest asset in a divorce case. If pension savings have been built during the marriage, they are commonly split equally.

“Given recent pension changes and the increased flexibility of some pensions, there is a rising trend for divorcing wives to seek a pension rather than taking other assets in place of pensions, which used to be the typical position. Additionally, new pension rules allow some pensions to be passed down one or two generations in a tax-efficient manner. These advantages appear to be attractive to increasing numbers of divorcing wives who are keen to trade other types of assets in a financial settlement to secure pension provision.”

Prudential’s evaluation of the most recent divorce statistics from the Office of National Statistics (ONS) indicates that, while the overall divorce rate is falling, the only age group seeing an increase in divorce rates is women aged 55-plus – a large proportion of whom will be planning their own retirement or have already retired.

She continued: “The rise in divorce rates among women is particularly worrying as women, unfortunately, tend to have lower retirement incomes than men.”

See more below:
https://www.ftadviser.com/retirement-income/2017/05/11/divorcees-face-3k-less-per-year-from-pensions/

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