Q&A with business champion for older workers Ros Altmann

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Hi
Good independent financial advice is becoming more critical for those of us with small pension pots as options increase. In my experience financial advisers are not too interested in this market or charge a lot proportionate to the amount involved. Where is the best place to go to find an adviser I can trust
In your opinion should people retiring this year who can do without the income wait until after April next year for more potential rule changes

I agree that it is not always easy to know how to find a good financial adviser and the best way is often by personal recommendation from friends and family. I know that the Money Advice Service is trying to put together a directory of financial advisers for next April. If you look on the website unbiased.com they have a listing of financial advice firms. You normally want to find a firm which charges fees, rather than taking commission on products and check the qualifications of the people they employ. Some firms say they offer ‘advice’ but it is really just guidance. Financial advice needs to be independent, with your own interests at heart, rather than the adviser being paid to sell you particular products. Advisers are regulated and, if they give you poor advice, you can complain which gives you some consumer protection.

nannalyn53

I've been told that if I defer taking my state pension by (for example)a year, I would receive 10% extra when I do start taking it. Is this correct? And how do I work out whether this is worth doing or not, as of course I would forego receiving a year's pension payments.
Many thanks.

If you reach state pension age before April 5 2016, then you can indeed delay your state pension and receive an extra 10.4% pension for each year you delay. The higher state pension in future can either be paid as a lump sum all at once, or as a higher weekly payment. Clearly, whether or not this is worthwhile depends on how long you live. If you do not live long after pension age, then you may never actually receive the higher pension, or you may receive it only for a short time and not make up the loss of the weekly pension payments. However, if you live a normal lifespan, the current 10.4% increase is a very good deal for you – and trying to buy the equivalent inflation linked extra income in the annuity market would cost you about twice the amount you have given up. However, I should also say that after April 2016, the increase for delaying your state pension will fall to just 5.8% a year, rather than 10.4% and you will no longer have the right to take the money as a lump sum, only as a higher income.

Notagran123

I am in the same position as Starling. I am 60 and have worked since I was 16. I gave up my last job a year ago because it involved a lot of lifting. I can't claim unemployment benefit because my savings are over the limit. I am living off my savings and won't get my state pension for another 5 years. With so many young people who have never worked wouldn't it make more sense for people of my age to be able to retire to free up jobs for the young? If M.P.s had to do a 'real' day's work, they would not have reached such an unfair decision as to increase the retiremant age.

It is simply not true that more older people working is taking jobs away from the young, nor is it the case that encouraging older people to retire will free up jobs for the young. There is substantial economic evidence that proves that having more older people in work actually creates more jobs for more young people and, if there are fewer older people working, the number of young people in employment also falls. In fact, we tried a policy like that many years ago, called the ‘Job Release Scheme’ and it was a bit of a disaster. However, I do think we need to do far more to help unemployed over 50s get back into work if they want to. Not forcing them to, but ensuring that employers and recruitment agencies take them seriously, appreciate the skills and experience they have to offer, as well as helping with retraining and job application procedures that sometimes hinder older job hunters.

Grandmama

I retired in Dec 2013 and haven't done anything about the small pension from the part-time job I had for 23 years - there was a pension scheme only for the last few years I was there. It's just over £5000. I had hoped to draw it as a lump sum to use for house repairs and maintenance but together with my teacher's pension from the 1970s (from which I receive a monthly sum) it came to over £18000 so I couldn't withdraw it. Can I withdraw it now - or next April? I could do with it. I am 66 and so drawing a state pension.

Thanks in anticipation for your advice.

I can’t give you individual financial advice and you could benefit from seeing an adviser who would have access to all your pension and income details. However, the rules about small pensions changed in April 2014, so that if you have an individual pension fund worth less than £10,000 you can take it all as cash (in fact you can cash in up to three funds worth up to £10,000 each). In addition, if your total pension savings are worth less than £30,000 you can take them as cash, but you will have to pay tax on this as income so you might lose a chunk of it. As from April 2015, you will be able to cash in pensions of any size so if your total pension savings are currently over £30,000 you will still be allowed to take the funds as cash, subject to marginal rate tax.

Nansypansy

I have an Aviva Income Bond which I took out in 2007 for £50k. This was to give an extra £300+ a month to boost my pension. Is this the best thing I could have done? I know it's reducing all the time, but is there anything better I could do with the remaining capital? Thanks in advance for your response.

I’m so sorry but this is not the kind of question I can answer. You would need to consult an independent financial adviser who can look at all your circumstances and advise you what is best for you to do.

neena

Hello Ros,

Could you tell me what you think about whether retirees should defer their state pensions (to increase their value) and whether you advocate this?

Also, I am thinking of moving abroad when I am due to retire in 2016 (as a teacher) but am confused about what my rights are in terms of transferring my pension abroad or whether I have to take it in one lump sum. What do you recommend for pensioners living abroad (I would be moving to the South of France).

Thanks very much and congratulations on your appointment as the Older Workers Business Champion!

Neena

I'm so sorry but this question requires me to know the details of your pension arrangements, so it is not the kind of question I can answer. You would need to consult an independent financial adviser who can look at all your circumstances and advise you what is best for you to do, especially as moving abroad has many potential financial implications. As regards delaying the state pension, if your pension age is before April 2016 then you will still benefit from the 10.4% annual increase and the ability to take your delayed pension payments as a lump sum, but if you reach state pension age after April 5th then the increase is 5.8% with no lump sum option.

Daisydo

Hello Ros

My husband and I are in our early 50s and both working. We both work for small organisations who do not offer employee pension schemes. I have a pension pot from a previous employer which I paid into for a decade (but obviously don't pay into any more) and that's it. We have been put off making private provision after waves of publicity saying its not worth the while. But now, with ten to fifteen years left (max) of working we are starting to panic and would value any advice you can offer.

Many thanks

Daisy

I believe it’s never too late to start saving for retirement. The more you save, hopefully the more you will have in future, whereas if you've spent all your money when you were younger, it won’t be there for you in older age. In addition, following the recent pension reforms, there are even more reasons to save in a pension. The future system will not force you to buy an annuity or income draw-down fund if you don’t want to, it will be more flexible and user-friendly. Any money you don’t spend can pass on to loved ones tax free and, by 2017, even the smallest employers will have to offer pension schemes to their staff, so you will be automatically enrolled in a pension scheme by your employer and, unless you opt out, you will be starting a pension then. I would say it would be in almost everyone’s interests to stay in the scheme because, if you do, then each £1 you put in will immediately become £2! This is a ‘buy one get one free’ offer, where you put in £1 and straight away your employer puts in another 75p and the tax man adds 25p, so you will have £2 in your pension (less any charges of course). If you don’t put your £1 in, though, then you lose the employer contribution and the tax relief. So even if you’re in your 50s and only save for another 10 or 15 years, you should still have time to build up some extra money for retirement.

papajoe

There's been much made of rights to flexible working in the last few months - but I am still not convinced about the reality. All we have is the right to ask - which means nothing and for older workers like myself we are often worried about rocking the boat as it is so hard to get new jobs at our age. But it would make a big difference to me so can you advise me on the best and most constructive way to approach an employer a) in terms of getting a result and b) in terms of not damaging the relationship. Thank you in advance

You’re absolutely right that you only have the ‘right to request’ flexible working, but the employer still has the right to say ‘no’. However, in practice, the evidence suggests the vast majority of requests for flexible working are granted and, indeed, many employers and employees have found this works well for both sides. It is a shame if you feel you cannot approach your employer to ask. Most employers should be willing to have a discussion with you about this, without it being too confrontational. You would not want to go in saying – ‘I need to work flexibly or I can’t carry on’ – but perhaps have a conversation about how committed you are to staying with the company, how you really enjoy your work and appreciate the firm, but thinking ahead you just wonder if they might consider allowing you to work more flexibly, is this something they have thought of and, if so, you’d really be interested.

annamay

Hi Ros, thanks for coming on the site today. I am 56 years old and have been made redundant recently. I am a widow, so money was tight before my redundancy and now the prospect of going for a long period without a job is keeping me up at night. I find that I lose out on opportunities because I'm not terribly good at job searching online, filling in the forms, registering for umpteen different sites. I cant find jobs on the internet the way my daughters can but they are no longer living with me and I can't ask them to spend their lives searching for a job for me. I feel that older people are being let downb by the way that everything is now online. I look in my local papers and see nothing in my field.

My question is - what is being done to ensure that jobs are also open to those who are not online/not very good (me!) at the internet thing? We seem to be missing out on so much there is a library near me but only a couple of compouters and no classes i could take.

I am so sorry to hear that you lost your husband and also that you have been made redundant. I can imagine it must be a very difficult time. You are certainly right that not have IT skills is a huge disadvantage in the jobs market these days. The vast majority of vacancies are advertised on line and online applications are more the norm, so if you are not proficient in IT, then you will be at a definite disadvantage. However, you are on this Forum so you must be able to use a computer and it’s probably a question of practice and a course to help you with CV writing and online job applications. I would ask your local Job Centre if they run any such courses and also your local Citizens Advice Bureau, as there are such courses around which could really help you. Another tip when filling in applications is that you don’t have to mention your age. You can also re-name your ‘O’ Levels as ‘GCSE’s perhaps, since mentioning ‘O’ Levels certainly dates you.

sheilam10

I am interested to read the figures of how long retirement is likely to last these days (ie over double) but it worries me - for those of us of a certain age the provisions were the same as they ever were but we are expected to make it last over a decade longer. What can we (who are already in/approaching our 60s) do? And what should the government be doing to make things better for our children/GC when they reach this age?

You are absolutely right that retirement is (hopefully) lasting much longer for millions more of us and that means pensions have to stretch over an ever increasing number of years. If the number of years of retirement doubles, either you have to work longer, or save much more than people used to do when retirement was shorter, or you will obviously have less money to live on each year. The Government is increasing the state pension age, and has introduced automatic enrolment into workplace pensions, as well as abolishing the default retirement age, but I think employers and all of us as individuals need to start thinking differently about retirement too. If we can embrace a few years of part time work in later life, in order to keep more money coming in and increase our lifetime income, as well as saving more if or when we can, then it could become more normal that retirement is not just stopping work altogether all of sudden, but a period of slowing down first. This is healthier for most of us, if we can manage (we mustn't force people to work on, but if they can’t then they may not have as much to live on as those who can) and will mean better pensions too.

Charleygirl

In financial terms April 2015 is quite close but still the Government has not issued any detail (as far as I am aware) about withdrawing money next April, rather than taking out an annuity. Have you seen any details?

How much can one withdraw before tax is claimed by HMRC? Does the amount of tax paid be dependant on one's pension (s) paid at present?

Also if there is an avalanche of money going out, will companies be allowed to charge what they like for the privilege of us taking our own money?

Thank you

We will get further details of the changes next April soon, however we do know quite a bit already. After April 2015, you will be allowed to take out as much money as you like from your pension fund, if it is a personal pension (this won’t necessarily be so easy with final-salary-type employer schemes and if you work in the public sector and belong to an unfunded public sector scheme such as civil service, teachers, policy, firefighters you will not be able to take cash out other than the usual tax free lump sum). Any money you withdraw from your pension fund (beyond the tax free cash) will be taxed as your income in the year that you withdraw it. So, if you have a £40,000 pension fund and are receiving, say £10,000 a year in state pension and other income and then you take all the money out of your pension fund, you may lose a substantial amount in tax. Your total income for the year would go from £10,000 (which means you pay no tax) to £60,000 and push you into higher rate tax. However, if you took just small amounts out of your pension fund each year, you would not face such a big tax bill. As regards how much companies will charge you to take money out of your pension fund, we do not know yet, but hopefully it would not cost much. However, they may try to incentivise you to stay in the pension, rather than taking the money out with some kind of loyalty bonus, but we haven’t seen such activities yet. Watch out for new products coming next year.

ambertoby

Hullo, what do you think is the most valuable piece of advice I can give my grandchildren in terms of providing for their own futures and the pensions of the future

thanks.

The most valuable advice would be to help them learn how to plan their finances. A big lesson is ‘don’t put all your eggs in one basket’ – not to rely only on one source of income or investment. Most of our children or grandchildren would benefit from learning how investments work, how to budget our spending, how to think about the future and the power of compound interest for our savings. Tell them how valuable savings can be, that if they spend all their money now, or just try to live on borrowing, what will they live on in future?

nannymoocow

Hello Ros, I took early retirement earlier this year as I could not face getting up at 3am to get to work after my employer had a change of hours review. I felt I was being pushed out because of my age (60). I too am living off my savings and a very small pension. I had hoped to claim job seekers allowance, but after a chat with the job centre, realised this was going to be too stressful so withdrew. When I started work I was on track to get my state pension at 60, now the goalposts have been moved twice and it is now 65+ . Yet I see friends only slightly older already getting theirs, this is so unfair. I have worked, brought up a family and would like to know your views on how this has been handled and if you think we should be entitled to some form of help.

I have huge sympathy with how you feel and campaigned hard in 2011 to get the Government to change its plans for the sudden rise in women’s state pension age. We managed to get some small concessions but many women like yourself are left in a position of having to wait longer than expected to receive their state pension and had no time to plan properly for it. It is a shame that you felt you could not continue working. I would hope that you could still try to find other work that did not require you to get up at 3am. This might mean retraining, or perhaps even starting your own business (have you thought about approaching the Prince’s Initiative for Mature Enterprise (PRIME) which helps older people with the skills they need to set up in business. It’s one of the Prince of Wales’ charities and does marvellous work. I do wish you well.

RobbieD

Ros - If you had a pension pot of £100,000 what would YOU do with it? (I sincerely hope you have more than that in reality, as you are worth your weight in gold!).

I know we have to be careful with regard to the amount of tax incurred, so taking the whole lot is not an option, but I, like many others, would like some suggestions as to investments - ranging from the pathetic ISAs to somewhat risky options.

Thanks.

Thank you so much for your kind words Robbie! I obviously can’t tell you what to invest in, but certainly if you don’t actually need to spend the money that’s in your pension fund, then I would say the best thing to do is leave it in there. If you have a SIPP (Self Invested Personal Pension) there are strong reasons not to take it out until you really need to. Firstly, the money in a pension fund grows tax free. Secondly, if you are unlucky enough to pass away before age 75, your fund will pass on to anyone you name entirely free of tax, so it’s a very tax efficient form of saving. Thirdly, if you only take money out slowly as you need it, the tax implications will be favourable. Taking out a large sum may tip you into top rate tax, whereas leaving it there can avoid the tax. If you pass away after age 75, you will still be able to pass on your fund tax free to anyone you like, and they will just pay tax at their marginal rate on any money they spend if it is not in a pension.

Possiejim

Dear Ros Altman , I am sure you are aware of the immoral practice of this and all past UK Governments freezing the pensions of of such a small group of its pensioners. We comprise only a penalised 4% of the 12 million pensioners and include over 1000 stuck in such countries as Zimbabwe.
I note a recent article in the Times, identified 5 reasons this Government practice has to cease;- www.thetimes.co.uk/tto/money/article4104695.ece

Sir Roger Gale with Dame Ann Begg and Sir Peter Bottomley have established an All Party Parliamentary Group APPG to investigate the issue and endeavour to have this offending, unfair regulation repealed.
blogs.independent.co.uk/2014/04/02/mps-join-the-fight-for-justice-for-those-stuck-on-frozen-state-pensions/

How might you help us publicise to the British public our fight for justice please? The Government's attitude is very shortsighted, for it's discouraging thousands of black and ethnic minority people from retiring back to their cultural homelands, which would save £billions in NH services winter power subsidies etc.

This article below was written in YourMoney magazine, after I gave a presentation at a pensions conference in London at end May this year. The author, Lawrence Gosling, found it very difficult to comprehend that the British government has these draconian rules leveled at such a small group of its pensioners especially we now know that the Government spent $11.4 billions on foreign aid this year. www.yourmoney.com/yourmoney/opinion/2349052/blog-the-plight-of-expats-on-frozen-state-pensions.

I have spoken out before in support of this campaign and do find it difficult to justify this arbitrary position where pensioners in some countries receive inflation increases on their UK state pensions, but those living elsewhere do not. I know this has been raised many times in Parliament and the media and wish you luck with your campaign.