Personal Finance

Financial advisers expect further changes to state pensions

Financial advisers are anticipating even greater changes to pensions in the future
Financial advisers are anticipating even greater changes to pensions in the future Financial advisers are anticipating even greater changes to pensions in the future

THERE are rumblings on the horizon in the world of pensions again this week, this time with regard, not to your personal or workplace pension, but with regard to your state pension, as financed by your National Insurance contributions.

A new research paper just published by the UK pensions company Aegon has confirmed that industry experts expect further big changes with regard to the state pension, as the government continues to come up with zippy ideas for cost-cutting changes in pension rules.

Aegon asked 200 of the UK’s leading financial advisers for their views on the most likely medium and long-term changes, and how the state pension landscape could look in 30 years’ time.

First of all, the vast majority (96 per cent) of financial advisers believe the state pension will change from its proposed form, which sees a new flat rate state pension the value of which is protected by the so-called ‘triple lock’.

The triple lock promises an annual increase in the state pension equal to growth in average earnings, inflation or 2.5 per cent – whichever is the greater. But at what cost to the exchequer?

The promise of the triple lock helped the Tories secure almost twice their usual share of voters over 60 in the election (according to a recent post-election survey of 100,000 people by YouGov).

However, Robert Chote, the chairman of the Office for Budget Responsibility (OBR), said the triple lock was pushing up government spending.

Part of the reason is the emergence – due to better lifestyles and medical care – of a generation of ‘wellderly’, who are living longer, and taking their basic state pension for longer too.

The good news in the near-term is that the UK should post an overall budget surplus in 2018-19, according to the OBR's latest forecasts.

However, with the proportion of people aged 65 projected to jump from 18 per cent today to 26 per cent in 50 years, The OBR has said that the costs of the triple lock, combined with rising cost of healthcare and social care, could see Britain fall back into deficit by 2023/24.

Obviously, if this comes about, it would leave one of the successor’s of today’s chancellor, George Osborne, in a dilemma of epic proportions, with some tough choices to make.

Or, as we the plain people of Norn Iron say: ‘a whole handlin’.

It comes as no surprise, then, that in Aegon’s research, two financial advisors in five (41%) expect the state pension to become less generous, and move away from the triple lock; and half (49%) believe the government will make further increases to the state pension age beyond those currently planned.

Or, as we say: they’re going to make us work longer for less money.

So how do you, as a pension saver who already have your hands full earning a living and bringing up a family, keep track of all these developments?

How do you plan ahead to ensure that you are on track to enjoy the standard of living you hope for, at the time you hope to retire?

Well, while many believe they can keep themselves up to date, gleaning the important facts from their daily paper or on the internet and fully understanding them, industry experts are increasingly advising that this DIY approach is not enough.

It’s a real-life case of ‘do not try this at home.’

As I always say: If you have a burst pipe, you call in a plumber. If you have engine trouble, you call on a mechanic.

So, if you want to secure your lifestyle and standard of living in retirement , you should talk to a qualified, professional, and independent pensions adviser.

And incidentally - calling in to us for a chat won’t cost you a penny.

:: Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005.