Page 11 - Bus365 Issue 10 2021 WEB
P. 11

PENSIONS






          IN A POST-





          COVID






          WORLD








          Chris Bell
          Ravenscroft Isle of Man Portfolio Manager


          t was fascinating to read a recent survey in   The concept of auto enrolment is one way to   get spent.
          the UK by the Pensions and Lifetime Savings   address the savings gap, with all employers   With the current level of pent-up demand in the
         IAssociation (PLSA) that a staggering 46% of   obliged to provide a workplace pension for   economy, we are witnessing product/service
          non-retirees did not know how much they receive   qualifying employees. There are now an   shortages as well as signifi cant price increases.
          each year in State pension payments. A slightly   impressive 10 million additional individuals in   The long-term level of infl ation is very important for
          higher number of this group, 56%, were also   the automatic enrolment programme. However,   your pension, as it erodes the future value of your
          concerned that they were not saving enough   according to the PLSA, one in fi ve non-retirees are   spending power. Many ‘safe’ bonds now o er a
          for their retirement. Presumably it would help if   still not contributing to any pension. There are also   negative ‘real’ yield when you consider infl ation,
          you knew the fi rst number in order to know the   concerns that workers earning less than £10,000   hence why more people have been attracted up
          second number! Once again it is another example   per annum are excluded as are those younger   the risk scale to generate returns. Fine when the
          of the challenge in educating workers on how   than 22. With the advent of ‘fi ntech’, there should   going is good but, as ever, you need a balance.
          important it is to build up a pension pot alongside   be accessible, cheap o erings that individuals can
          the state benefi ts. A full state pension in the UK   start regularly saving into from ultra-low amounts.  There are times when setting aside money for a
          by the way is currently £9,339 per annum and in                     pension is just not what you want to do – you may
          the Isle of Man it is £10,199. To put that in context,              be worried that you might need those funds in fi ve
          a recent Which? report highlighted that a married                   years’ time, for example.  Remember that for most
          couple would require a combined £26,000 per    The long-term        people, there are tax benefi ts for contributing to
          annum for a ‘comfortable’ lifestyle. This rises to   level of infl ation is   a pension scheme, so it is a fantastic way to save.
          £41,000 per annum for a ‘luxury’ lifestyle, which                   However, if you don’t feel you can commit to a
          includes long haul holidays and a new car every   very important for your   pension, then saving for the future is still a sensible
          fi ve years.                                                         option and investing regularly helps smooth the
                                                 pension, as it erodes
          I am no fi nancial planner, but you can see the   the future value of your   ups and downs of the market - we are happy to
          ramifi cations of retiring and then living perhaps for               talk about the options available.
          at least another 30 years. There has been criticism   spending power
          in some quarters that the blanket retirement age
          is rising to 67 by 2028 but that the life expectancy
          data has become more disperse. Covid-19 has   The landscape for savings looks very di erent
          had an impact here and in the poorest regions   to the one this time last year and it is worth
          (according to the King’s Fund health charity) the   highlighting once again the savings that were
          average life expectancy of a male is currently 72.4   built up, by many but I appreciate not all,
          years compared to 82.6 years in the richest areas.   during the pandemic. It is estimated by the UK
          For females, the poorest area’s life expectancy is   Government that the savings ratio rose from   The value of investments and the income
          77.3 years compared to 85.8 years in the richest   8.9% pre-pandemic to a staggering 25.9% in the   derived from them may go down as well as
          area. So, is it really equitable that payments are   period April – July 2020. By June of this year, the   up and investors may not receive back all the
          made at the same speed rather than considering   estimate for the total additional savings is over   money invested. Any information relating to past
          individual’s circumstances? It therefore seems to   £200 billion. Clearly one of the reasons why the   performance of an investment or investment
          be the optimum strategy to take as much control   CBI’s estimate for the UK GDP fi gure for 2021 is   service is not a guide to future performance and
          as you can as an individual.      8.2% is that some of these savings will inevitably   may not be repeated.


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