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Wednesday, 18 February 2015

Everyone wants to go to Heaven, but ……….

Whilst it is good news that the UK population is living longer, the dark underbelly is that increasing numbers of the elderly are in poor health. This puts a strain on their retirement income as the costs of care mount. So whilst Auto-Enrolment means that more people are saving in a workplace pension than ever, the demands on income in retirement are also increasing.


With this in mind, it is difficult to argue with Phil Loney, CEO of Royal London Group, when he said:
“The Turner Commission took a long term view of pension reform and created a political consensus over what should be done to get the UK population saving for retirement. Those changes are being successfully implemented. However the revolution brought about by
the “freedoms” announced in the Budget means that a similar long term approach must be taken over the ways people can access that pension and convert it into an income. At present, policy around retirement planning is becoming too short-term and “political”. There is nothing to stop a future Government from reversing some of the recent policy decisions on which we are building. This kind of uncertainty can only act as a disincentive for people to save for the future. That is why we are calling for a Commission to look at all aspects of later-life financial provision, and to provide a basis for a lasting political consensus.


The Government has recognized that the retirement income options that people will face are now very complex. That is why they guaranteed a “Guidance” session for all approaching retirement. But we know that’s not enough. The complexities of tax, means testing and
inheritance planning mean many people will need regulated financial advice to get the best from these reforms. For most people this advice is unavailable or unaffordable. There needs to be a fresh look at how we can make financial advice more affordable and available for the wider general public. Access to financial advice should not be a privilege that is only affordable for the well off.


Increasingly the ageing population will need long term or residential care. We have yet to crack the problem of how this care is funded. With increasing age people become vulnerable and cannot take their own financial decisions safely. The number of people suffering from
Alzheimer’s is set to increase from 850,000 today to 2 million by 2051. Regulators are alert to the issue of vulnerable consumers but so far with little action.


The Commission we are calling for could look at these issues perhaps recommending that whenever someone makes a Will they must not only appoint Executors but also appoint someone with Power of Attorney over their affairs in the case of mental incapacity. The only way we can resolve issues such as advice and long-term care is to consider them away from day to day politics. These issues are long term and many of the required solutions may be considered politically unpopular.


We are aware that others have been calling for a pension commission for similar reasons but we believe it’s essential that all the issues impacting the financing of later life are considered together, not just pensions. Only then can a coherent, sustainable strategy be developed which policymakers and industry can deliver together and that will enable the British public to save
with confidence for their long term futures.”


Increasingly, it will become the case that assets built up over a lifetime, such as the home and other investments, will be required to fund people’s later years, rather than being viewed as an inheritance for future generations. However, good forward planning can alleviate some of the problems.


PIP can help. Phone Bernard Macken on 0113 202 9529, or e-mail him on bfm@pipllp.co.uk
Also, please visit our website at www.pipllp.co.uk ‪#‎BeyondBetter‬

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