pensions

Insuring Women’s Futures, the 6 Moments that Matter

16 December, 2019 By WiC

Insuring Women’s Futures is a voluntary, market-led programme established under the Chartered Insurance Institute to improve women’s financial resilience. It brings together a cross-section of business leaders, experts and influencers drawn from policy, regulation, academia and the third sector to support making lasting change. For the past three years, these contributors have shared their insights, experiences and expertise.

The result is a series of ambitious, practical Manifesto recommendations.

Insuring Women’s Futures has identified ten overarching recommendations where interventions can be made to improve financial resilience for women and wider society in the UK. The recommendations take into account how life in the UK is changing and the implications for all of our financial resilience, now and in the future. The interventions combine policy and practice and are centred on where the most impact can be made, targeting Moments that Matter across women’s financial life journeys.

Recommended interventions

Inspiring young women to own their financial future
Pensions equality in the workplace
Equal pension rights for those on low pay
Workplace flexibility and financial wellbeing to address the impact of part-time on pay and pensions
Financial engagement and wellbeing strategies that reflect women’s whole life journeys
Insurance and financial services’ role in supporting financial futures
Fair pensions outcomes for those in relationships and for break ups
Pensions for carers and a national conversation about caring
Gender-disaggregated data and use in policy and practice
Female Financial Resilience Forum

These Moments that Matter impact women across the life stages from girls to elderly women according to individual life journeys. For example, becoming a mother or caring for an elderly relative have different consequences depending on whether and how women are working, studying or are in good or poor health.

The 6 Moments that Matter

Growing up, studying and re-qualifying
Entering and re-entering the workplace
Relationships: making up and breaking up
Motherhood and becoming a carer
Later life, planning and entering retirement
Ill-health, infirmity and dying

12 Perils and Pitfalls

By analysing women’s life circumstances, the decisions women take and the life events women face, the research highlighted key differences in men’s and women’s risks in life. 12 Perils and Pitfalls have been identified as the top financial risks faced by women through the life course. In addition, the research identifies patterns in how the Perils and Pitfalls impact women’s financial resilience at different life stages on the Female Financial Life Journey, with the 6 Moments that Matter serving as key intervention points where meaningful change can be made.

Download the Manifesto

Visit our searchable Knowledge Bank for a range of reports and studies on gender diversity, leadership and related topics.

The great divide

19 October, 2016 By WiC

Britain’s intergenerational divide deepens as young adults look set to be worse off in retirement than their predecessors.

The vote to leave Europe perhaps captured the nation’s fractured mindset perfectly. Relatively few young adults voted for something that could ultimately deny them an automatic right to live and work in the EU. Moreover, their collective viewpoint stood in stark contrast to that of older generations, for whom issues of identity seemed to trump economic concerns.

Generational divides were once drawn along cultural and social lines. Baby boomers seemed to go against everything their parents had believed, in terms of music, fashion and philosophy. But nowadays the divide between old and young is just as likely to be denoted by expectations of wealth and prosperity.

Today’s 18–21-year-olds enter the workforce at a time of austerity, soaring house prices, student debt, and low wage growth. Even on optimistic scenarios it looks likely that they will make much slower progress on pay than their predecessors, challenging the notion that each generation will do better than the last.

Fair isles?

Recent research from the Resolution Foundation has found that a typical millennial1 earns £8,000 less during their twenties than those in the preceding generation – Generation X.2 Without real-term wage growth, a significant number of millennials have all but given up the idea of ever owning their own home. This is a particular source of discontent, especially as their own parents bought the family home relatively cheaply, and then locked in sizeable gains.

Meanwhile, older generations continue to see their retirement incomes rising. Prudential says that people planning to retire in 2016 expect to have an average income of £17,700 a year, the highest figure it has ever recorded.3

Indeed, perhaps nowhere is the generational divide more apparent than in the prospects for retirement. Younger workers are much less likely to have access to final salary schemes, and the starkly different contribution rates for those schemes compared with defined contribution pensions have obvious implications for the share of wealth across generations.

To compound the problem, ‘twentysomethings’ are starting their careers at a time when their pay is being supressed by firms plugging deficits in their final salary schemes that, in the main, protect benefits for older workers. This means less investment capital to help businesses grow, and less money available to invest in the pensions of younger workers.

Reality check

According to research from insurer Aegon, those aged 16 to 24 are hoping to retire with an average annual income of £64,000 a year, nearly six times the average income they are on track for. This aspiration comes despite the fact this would require a savings pot of nearly £1.9 million, a sum significantly greater than the pension lifetime allowance.4

Such expectations would be more realistic if more young savers were willing to take on investment risk, but in separate research from Scottish Widows, a staggering 51% of 18–29-year-olds believe cash savings will help support them, despite the experience of an ultra-low interest rate environment for much – if not all – of their adult lives.5 By saving their money rather than investing it, they could be missing out on potentially life-changing sums at retirement.

“I think younger generations understand that they could spend two to three decades in retirement, but they don’t necessarily understand the financial commitment required,” says Ian Price, Divisional Director at St. James’s Place.

Yet despite the gloomy prognosis, he believes there are reasons for optimism.

“Younger generations have very long-term investment horizons and greater opportunities to benefit from compound growth,” says Price. “Understandably it’s hard when you’re trying to get on the housing ladder, or pay off student debt, but investing into your pension early and often could make a huge difference by the time you reach retirement.”

The government hopes to plug the pensions gap through automatic enrolment – a scheme that places workers over the age of 22 and earning more than £10,000 into a workplace pension scheme by default. Although minimum contributions are currently a long way from being able to provide for a comfortable retirement, auto-enrolment should lead to better engagement with retirement planning.

Aside from the government’s efforts to tackle the issue of falling pension scheme membership, some families are starting to consider how to use their combined resources in the best, most tax-efficient way to benefit younger members. This may be to help them gain a foothold on the housing ladder, clear debts, or build a pension. But with the right advice and planning, transferring wealth to the next generation can be extremely rewarding in all these cases, offering simple ways reduce a future Inheritance Tax liability.

“We must ensure that younger generations are getting a fair share of the proceeds of economic growth so that we don’t end up with a society where the retiring population is poorer than the generation that went before,” adds Price.

To receive a complimentary guide to wealth management, retirement planning or Inheritance Tax planning contact Sophie-Jane Keelaghan on 07970 299980 or email sophie-jane.keelaghan@sjpp.co.uk

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested. The levels and bases of taxation and reliefs from taxation can change at any time and are generally dependent on individual circumstances.

Representing only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website www.sjp.co.uk/products.

1 There is no agreed standard on which years of birth fall into the ‘millenial’ category, but a 2016 report by Goldman Sachs defines millenials as those born between 1980 and 2000: http://www.goldmansachs.com/our-thinking/pages/millennials/

2 Stagnation Generation: the case for renewing the intergenerational contract, Resolution Foundation, July 2016

3 ‘Class of 2016’, Prudential, 15 January 2016

4 Aegon.co.uk, 5 August 2015

5 Retirement Report 2016, Scottish Widows, September 2016

Pension simplification – is retirement planning any easier?

3 May, 2016 By WiC

It’s been 10 years since pension simplification was introduced, but is retirement planning really any easier?

Dubbed ‘A-day’, pension simplification was a policy introduced on 6 April 2006 by the then Labour government to rationalise pension taxation rules. The aim was to reduce the complicated patchwork of legislation built up by successive administrations which was seen as a barrier to retirement planning.

“I remember I was very excited about the prospect of pension simplification,” says Ian Price, divisional director at St. James’s Place. “It promised clients a uniform set of rules to make retirement planning much more attractive.”

Unfortunately, the reality ended up being very different.

George meddles

As well as pension simplification, subsequent governments’ agendas included ambitions to raise revenue and tighten the public purse. As a result, a myriad of changes were introduced back into the system over successive years. In consequence, there has been no real simplification at all.

“The reality is that, despite the promise of a simple, uniform regime, I have seen more changes since A-day than at any point in my career,” says Price. “No government can seem to leave pensions alone and changes are still being made and proposed.”

George Osborne has presided over most of the latest reform package, enacting some of the largest changes to pensions of any Chancellor in living memory. Giving people total autonomy over how they access pension benefits may be an astute political move, but by gradually reducing the amount that can be saved into a pension, Osborne has restricted the availability of tax relief on contributions.

There have also been strong hints from Mr Osborne that upfront tax relief on pension contributions will be scrapped entirely at some point in the future, perhaps in favour of an ISA-style system.

It all adds up to a constantly shifting pension tax environment that certainly does not help people to plan for their retirement.

Back to basics

Price maintains that what hasn’t changed in the last 10 years is the importance of five crucial maxims for retirement planning:

Accept that almost everyone needs to save more for their retirement.
Understand the risk of outliving your savings.
Determine the size of the retirement fund you will need.
Recognise the cost of delaying action.
Commit to a plan and take action.

“Despite all the legislative twists and turns, these fundamentals still apply today – it’s just that the solution for some individuals may not be to fund retirement exclusively through a pension,” says Price.

Price singles out restrictions to the annual and lifetime allowances as examples of policies that are encouraging people to look at other savings vehicles.

“As pension allowances have become more restrictive, an increasing number of people have earmarked other assets for their retirement provision, such as ISAs and share portfolios.” he says.

Likewise, as the tax treatment on death has become less penal, more people with alternative income sources are ring-fencing their pension with the aim of passing it on to their family, rather than using it to fund their own retirement.

But Price says that the principles that most people need to save more and start saving earlier still apply.

“In a decade during which we have witnessed the demise of final salary schemes, a financial crisis, and countless changes to pensions, the five simple messages from a decade ago are still fundamental to achieving a prosperous retirement,” says Price.

If you would like me to help you to review your pension situation, then please drop an email to Sophie-Jane Keelaghan.

Despite pension simplification, these 5 crucial maxims still apply. http://wp.me/P4VtZ … via @womeninthecity

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