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To have and have not

Liz Mancini reports that there is a growing divide in pension provision but hopes are rising that personal accounts could boost saving

The UK is heading for a retirement split between haves and have nots.

A survey by Scottish Widows found that 26 per cent of people aged 55 and older say they do not see themselves retiring at the statutory retirement age.

Forty-two per cent explain they may retire later because they lack enough money in their pension pot to afford to stop working.

Widows found 53 per cent of people over 55 believe people should be forced to save, suggesting there is support for the concept of personal accounts.

The research shows that people over 55 are concerned about their future financial standing. Forty-one per cent say money is tight while 23 per cent are more worried about their financial security than their health and 26 per cent say the only investment they have is their house.

A survey of 200 SMEs by Barclays Financial Planning reveals that 19 per cent of employees do not make any contribution to their pension pot. Fifty-five per cent of members of definedcontribution occupational schemes contribute less than 4 per cent of their salaries, according to the Office of National Statistics.

Barclays Financial Planning commercial director Stephen Ingledew says: “Figures from the Office of National Statistics showing 56 per cent of working-age people in Britain expect their retirement to last at least 20 years it is clear more has to be done to encourage people to take control of their financial affairs and plan for the future.”

Scottish Widows head of pensions market development Ian Naismith says: “The current generation of over-55s is divided into the haves and have-nots. The haves generally have good employer pensions, often based on final salary, and can retire at or before state pension age with good incomes. The have-nots are discovering they will have to work for longer than they might have expected just to make ends meet.”

Some dispute the idea that people are having to continue working through financial circumstances. HSBC says in its Future of Retirement report that increased longevity and longer retirement means that many older people want to continue working past their traditional retirement age. It says they want to stay in the workplace to maintain independence and control over their lives.

HSBC Life chief executive Robert Lang says: “Older people have reported that life is still full of opportunities and they feel able to achieve everything they want to do. Our research found that over three-quarters of men and women over retirement age who continue to work do so because they want to. This desire also seems to be prevalent among those still to retire. Of the pre-retirees surveyed, 79 per cent of men and 88 per cent of women want to continue to work for as long as possible after retirement.”

But research by Aegon shows that 22 million adults risk poverty in retirement and 9.6 million adults have no long-term savings or a pension. Thirty per cent believe they would need between £15,000 and £20,000 a year in retirement to live comfortably.

Aegon Director of Individual Pensions Malcolm Flanders says: “Many people are still expecting to retire before age 65 and lead a comfortable lifestyle. The fact is that a large swathe of the population risks being impoverished in retirement.

“Our survey suggests many people are still expecting to rely solely on state benefits or are gambling on the prospect of their children taking care of them.”

Hargreaves Lansdown head of pensions research Tom McPhail believes people often put off saving because they cannot see the immediate positive results.

He says: “If the economy is doing well, then people do not bother saving. When there is a recession, then you get much higher savings rates.

“We are very much in a world of the concept of instant gratification. It is difficult to sell the idea of deferred consumption. It is an unfashionable concept.”

Standard Life head of pensions policy John Lawson says: “Many people see saving for pension as not as import-ant as saving money for other things, such as a house or a holiday. But a lot of people just cannot afford to save for retirement.

“If you want to stop work at the suggested time then you really have to save for a long time or you will end up working until you drop.”

The existing savings system is too perplexing, says McPhail. He says: “There are also elements of the system that are too complex, such as the private savings system. There are elements that I think are designed to confuse people.”

Lawson says: “People need to start saving now and get their priorities straight. The system really is not that complicated now. You can pretty much save wherever you want and however much you want. The Government needs to get the message out how important saving is and they are not really doing that.”

Both McPhail and Lawson agree that the concept of personal accounts would make a positive impact on people, stressing the importance of saving.

McPhail says: “I think that personal accounts will help the situation. They will encourage people to take pensions seriously.”

Lawson says: “Personal accounts should make a difference because people tend to not make active decisions, they go with the flow. If they are put into saving as an employee, then they will have to make the decision to get out of it. I do not think they will make that decision and this will increase take-up rates from 55 per cent to 80 per cent.

“There are 15 million people employed who are saving and this would increase it to about 20 to 30 million. It is a big step in the right direction.”

THE QUESTIONS

1:

What four actions might constitute grounds for a divorce?

2:

Which one of the above answers does not apply to the dissolution of a civil partnership?

3:

Which form submitted to the court after the petition for divorce gets the whole thing going?

4:

What information about pensions needs to go on to Form E?

5:

If either party to the divorce wishes to pursue a pension-sharing order, then the court can issue a request for completion of which form?

6:

What four pension options are available in a divorce settlement?

7:

True or false? An attachment order can be applied against the basic state pension.

8:

How do you establish the value of state earnings-related pension/state second pension benefits?

9:

What does a Duxberry calculation do?

10:

What was the main point held in the Martin-Dye judgment?THE ANSWERS

1:

l Adultery

l Unreasonable behaviour

l Two years’ desertion

with consent

l Five years’ desertion

without consent

2:

l Adultery

3:

l Form A

4:

l Pensions CETVs (in the case of

additional state pension,

valuation of rights)

5:

l Form P

6:

l Offset

l Ongoing maintenance

l Earmarking (attachment)

l Sharing

7:

l No, but the divorcing spouse can claim the NI record of the other spouse if it is better than their own

8:

l By completing DWP Form BR20

9:

l It is a means of capitalising an income requirement

10:

l It was held that pensions in course of payment should be treated as income and not capital

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