Essential pension planning to secure quality of retirement

Future changes to the SPA will be driven by a guiding principle that people should expect to spend, on average, up to a third of their adult life in receipt of the state pension, due to increased life expectancy.

This implies that by the mid 2030’s the SPA could be moved forward to age 68 and could increase even further, to 69, by the late 2040s.

This raises a whole subject around personal pensions, or at least the subject of ensuring that we, (because yes I am included in this), will have a comfortable enough retirement with our current plan.

Pension charges could be capped 

The news regarding the potential changes in the SPA comes hand in hand with news from the Pensions Minister Steve Webb, who is in consultations now regarding ways to help people save for their retirement via personal pension schemes.

Management charges are an issue and it is estimated that 186,000 pension pots with £2.65 billion worth of assets are subject to an annual charge of more than 1%.

Source: Office of Fair Trading

How much of a difference could this make?

This could result in lost funds within a pension pot in excess of £170,000 for those with a 1% charge and £230,000 for those with a 1.5% charge, based on a taxpayer making £100 monthly contributions for a typical working life of 46 years.

Clearly any small variation to the fees can make a significant different to the value of the pension fund, for better or for worse. Conversations therefore are currently suggesting a cap on pension charges between 0.75% and 1% or even a complete ban on all charges over 0.75%.

Solely for auto enrollment schemes

However, with pension auto-enrollment continuing to be rolled out, this cap would only apply to funds held in an auto-enrollment scheme pension.

So it seems like the government are now seeing how there is an increasing need for people to gain value for money when paying into a personal pension scheme. This will hopefully encourage more saving for a better quality of retirement.

If you need pensions advice, we have excellent Independent Financial Advisers we can put you in contact with. Just let the team know on 020 7376 9333.