Latest news with #retirement savings
The Guardian
a day ago
- Business
- The Guardian
Britain is facing a ‘tsunami' of pensioner poverty, says Kendall
Britain risks a 'tsunami of pensioner poverty' over the coming decades unless the system of saving for retirement is overhauled, according to Liz Kendall. At the launch of a major independent commission on the pensions system, the work and pensions secretary said growing numbers would struggle to make ends meet in old age. 'Unless we act, tomorrow's pensioners will be poorer than today's, because people who are saving aren't saving enough for their retirement, and crucially, because almost half of the working age population isn't saving anything for their retirement at all,' she said. The commission echoes the approach taken by Tony Blair's government to pensions reform in 2002, when an inquiry chaired by Adair Turner led to the system of auto-enrolment. The commission will be led by a member of Adair's team, Jeannie Drake, with former Barclays UK chair, Sir Ian Cheshire, and the economist Nick Pearce also on board It will consult the Confederation of British Industry and the Trades Union Congress, with the aim of building a consensus, which Kendall said she hoped would win the support of opposition parties. The proposals could include lowering the age at which auto-enrolment into workplace pensions starts – currently 22 – and raising contribution rates, now set at 8%. It will also look at the idea of 'sidecar savings', which are advocated by the Resolution Foundation thinktank whose former chair, Torsten Bell, is a pensions minister. This approach would allow a set amount of pension savings to be accessed as a rainy-day fund in emergencies. Kendall confirmed that she was also launching the regular statutory review of the state pensions age. It is set at 66 but is already expected to rise to 67 between 2026 and 2028. Kendall made clear that the costly triple lock pensions guarantee will not be considered by the commission, which is set to report in 2027. 'The triple lock is out of scope,' she said. The independent Office for Budget Responsibility has warned about the much higher than expected costs of the triple lock, which uprates the state pension in line with inflation or wages, or by 2.5%, whichever is higher. Questioned after her speech at a south London community centre, Kendall acknowledged the role in pensioner poverty of high housing costs after retirement. 'My big worry is, so many young people have not even got a hope in hell of getting on the housing ladder, they're being absolutely killed by their rent, and if you are paying off your mortgage in retirement, or still renting in retirement, that is what is driving this sort of tsunami of pensioner poverty that is coming our way,' she said. The commission will not be asked to look at housing policy but Kendall pointed to other Labour policies in this area, including boosting housebuilding. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion Bell, who attended the event, was asked about the prospects for reform of pensions tax relief, with higher rate taxpayers receiving it at 40%. Cutting this to the basic rate, or reducing the size of the lump sum pensioners can withdraw from their savings pot tax free, have been mooted as money-saving measures in the run-up to the autumn budget. Bell said: 'Tax changes are not in scope for this review. But the tax system obviously is important, and we have a system of pension tax relief costing around £70bn a year that does provide strong incentives for saving and that's a good thing.' Business groups gave the launch of the commission a cautious welcome but warned about the risks of piling more costs on employers by raising their contribution rate. Kate Nicholls, who chairs UK Hospitality and attended the launch, said: 'We've already seen the unintended consequences increasing business costs, like employer national insurance contributions, has had on the employment market, costing jobs. It's therefore crucial the commission embarks on a partnership approach with business and consumer groups to reach the right balance.' Kendall also alluded in her speech to Labour's U-turn on cuts to disability benefits, insisting the government would continue to advocate change. She said: 'Reforming the welfare state is never easy, and always contested. Let's be honest, the last few weeks have made that pretty clear – while the path of reform is inevitably bumpy, it cannot be avoided.'
Yahoo
a day ago
- Business
- Yahoo
Long-term triple lock commitment ‘out of scope' of pensions commission
A long-term commitment to the triple lock on pensions is not in the scope of the resurrected Pensions Commission, Liz Kendall has said. The Work and Pensions Secretary has announced that she is reviving the commission, which last met in 2006, to tackle the issue of working age adults failing to put enough money into their retirement savings. Experts have warned that people looking to retire in 2050 are on course to receive £800 per year less than current pensioners. The commission is expected to provide recommendations for how to boost retirement income in 2027. Ms Kendall also confirmed that the next statutory Government review into when and how to raise the state pension age will start work now. 'Unless we act, tomorrow's pensioners will be poorer than today's, because people who are saving aren't saving enough for their retirement,' she said during a speech launching the commission. Lowering the age and earnings threshold at which people are brought into auto-enrolment and as well as looking at easy-access 'sidecar' savings accounts will be among the options the commission looks into. Ms Kendall was asked if she thought it was impossible to maintain the triple lock guarantee given its cost and if she could guarantee it would be in Labour's next manifesto. She said: 'The triple lock is out of scope of the commission. We've got a very clear commitment to that for the entirety of this Parliament. 'And what we're asking the commission to do is genuinely look medium to longer term, the middle of this century, and how the state pension and second pensions work together.' The Office for Budget Responsibility recently said that the triple lock has already cost three times more than initially expected and suggested it was unaffordable in the long term. Ms Kendall was also asked about the potential hit to small businesses from increased automatic enrolment costs. 'I want our small businesses to be successful, but it is also the case, you know, flag forward to the middle of the century, 2050, if we don't act, the amount of pensioner poverty we face will cost everybody if we don't act,' she said. She said she was 'under no illusions about how difficult this will be'. The Department for Work and Pensions (DWP) said 45% of working-age adults were putting nothing into their pensions. The previous pensions commission recommended automatically enrolling people in workplace pensions, which has seen the number of eligible employees saving rise from 55% in 2012 to 88%. DWP analysis suggested 15 million people were under-saving for retirement, with the self-employed, low-paid and some ethnic minorities particularly affected. Around three million self-employed people are said to be saving nothing for their retirement, while only a quarter of people on low pay in the private sector and the same proportion from Pakistani or Bangladeshi backgrounds are saving. Women face a significant gender pensions gap, with those approaching retirement in line to receive barely half the income that men can expect.
Yahoo
a day ago
- Business
- Yahoo
Government to conduct early review into state pension age
The work and pensions secretary has announced a review of the state pension age. The government is required to conduct a review into the state pension age - currently 66 - every six years, but it appears to be starting this one earlier as the last one concluded in review will consider whether the current state pension age is still appropriate, based on factors such as life expectancy. The announcement comes following warnings from experts that people looking to retire in 2050 are on course to receive £800 per year less than current pensioners. The Department for Work and Pensions (DWP) said 45% of working-age adults were putting nothing into their pensions, with concerns that the cost of living crisis is preventing people from investing in their retirement. Liz Kendall she was "under no illusions" about how difficult it would be to map out plans for pensions for the coming decades, as the cost of living crisis continues to bite. She said "many workers are more concerned about putting food on the table and keeping a roof over their heads than saving for a retirement that seems a long, long way away", and that many businesses "face huge challenges in keeping profitable and flexible in an increasingly uncertain world". Giving a speech in west London, the work and pensions secretary also announced that she would revive the Pension Commission to consider why future pensioners are on track to be poorer than pensioners now. "Just because pensioner poverty has fallen does not mean all the problems have gone away," she said. "Far from it. Women who are now approaching retirement have half the private pension wealth of men, so the average woman in her late 50s can expect a private pension income of just over £100 a week, compared to £200 a week for men. "Only one in five of the self-employed are saving into a private pension, down from half in the late 1990s, meaning over 3 million self-employed people aren't saving anything at all for their retirement." The commission, which was first launched in 2002 under Sir Tony Blair's government, will look at such challenges and consider policy ideas such as lowering the age and earnings threshold at which people are brought into auto enrolment. Read more: Ms Kendall argued that young people in particular were struggling to invest in their retirement because of housing costs. She said young people " haven't got a hope in hell of getting on the housing ladder" and were being "killed by rent" - which she said was driving a "tsunami of pensioner poverty". "Put simply, unless we act, tomorrow's pensioners will be poorer than today's, because people who are saving aren't saving enough for their retirement," she said. "And crucially, because almost half of the working age population isn't saving anything for their retirement at all." The commission is expected to provide recommendations for how to boost retirement income in 2027.
Yahoo
3 days ago
- Business
- Yahoo
How Boomers Can Take the Guesswork Out of Retirement Planning To Know They Have Enough Saved
According to a new Vanguard consumer survey, many Americans are unsure about how much they should save or where to start. While the survey focuses on summer savings habits, such as building up emergency funds and reducing idle cash, it also highlights a deeper issue: Widespread uncertainty surrounding financial planning. Learn More: Read Next: How Much Money Is Needed To Be Considered Middle Class in Your State? This includes older Americans, such as baby boomers, many of whom are navigating short-term needs as they approach retirement age. Here's how boomers can take the guesswork out of retirement planning to know they have enough saved. Use a Retirement Calculator Nearly a third (28%) of all respondents listed 'not knowing where to start' as a chief reason for not saving more. However, guessing based on past income or general rules of thumb won't cut it, especially with inflation, rising healthcare costs and longer lifespans. Individuals can use retirement calculators from trusted financial institutions such as Vanguard or Fidelity to estimate how much they'll need to save. These tools typically factor in a person's age, expected expenses, desired retirement age and current savings to assess whether they are on track for a successful retirement. For those seeking a more tailored approach, working with a fee-only financial advisor can provide deeper insight. Advisors often use Monte Carlo simulations, a method that models thousands of potential financial scenarios, to help clients understand their likelihood of meeting retirement goals. Even using a general benchmark, such as aiming to replace 80% of pre-retirement income, can offer more clarity than relying on guesswork. Check Out: Start With the 50/30/20 Framework Not having a savings plan is comparable to driving without a map — forward motion may still occur, but the destination is uncertain. A strong financial plan extends beyond retirement, encompassing near-term objectives, emergency reserves and timelines for various investments. To reduce uncertainty, many financial experts recommend starting with the 50/30/20 framework, which involves allocating 50% of your income to essential needs, 30% to discretionary spending and 20% to savings and debt repayment. That final 20% can then be divided further to cover an emergency fund, retirement contributions and short-term financial goals such as travel or medical expenses. Budgeting tools like YNAB (You Need a Budget) or PocketGuard can help automate this process and provide real-time visibility into spending habits. For retirees or those in semi-retirement, income sources may include Social Security benefits, portfolio withdrawals or annuities. A structured withdrawal strategy, such as the 4% rule, can help ensure savings last throughout retirement by setting a sustainable pace for drawing down assets. Open a High-Yield Savings Account Many boomers have substantial savings in 401(k) plans or IRAs but lack readily accessible cash for emergencies or large purchases. Without liquidity, unexpected expenses can force you to sell investments or take on high-interest debt. Open a high-yield savings account (HYSA) with a competitive annual percentage yield (APY). Many currently offer 4% or higher interest rates. Keep at least three to six months of living expenses there. For added yield, consider a certificate of deposit (CD) ladder, which involves splitting money across multiple CDs with staggered maturity dates, ensuring some funds are always available. Vanguard and other brokerages also offer money market funds that combine safety with better interest than a checking account. Set Up Automatic Transfers Some boomers continue to earn high incomes, but steady earnings do not necessarily translate into long-term wealth. Lifestyle inflation, where spending increases as income rises, can quietly erode savings potential. In many cases, the lack of progress stems from failing to automate savings or establish consistent financial habits. To remove the guesswork, financial planners often recommend setting up automatic transfers from checking accounts into designated savings and investment accounts, timed to occur shortly after each payday. Using a percentage-based approach, such as allocating 10% to 15% of one's monthly income, can help individuals naturally scale their savings as their earnings grow. Reviewing one's savings rate twice a year and tracking net worth through platforms like Empower can provide valuable insight into overall financial progress. Use Free Tech Tools Many boomers still rely on paper statements or broad advice, overlooking tech tools that can simplify financial planning. However, today's platforms are designed to be user-friendly, even for those less comfortable with technology. Free tools from firms like Vanguard, Fidelity and Schwab enable users to set goals, model their income, and track their investments. Others, like Boldin and SmartAsset, help visualize scenarios such as downsizing or delaying Social Security. Even linking all accounts in a single dashboard can reveal gaps or inefficiencies, bringing greater clarity to a retirement plan. More From GOBankingRates How Far $750K Plus Social Security Goes in Retirement in Every US Region This article originally appeared on How Boomers Can Take the Guesswork Out of Retirement Planning To Know They Have Enough Saved Sign in to access your portfolio
News.com.au
7 days ago
- Business
- News.com.au
Simple change set to pocket Aussies $110m in super a week
Australian workers are losing $110m a week in unpaid superannuation. Super Members Council (SMC) analysis of 2022-2023 tax data shows 3.3 million Australian workers lost collectively $5.7bn in superannuation payments. This is based on the average worker losing $1730 in superannuation a year. Australians living in the ACT or the Northern Territory had the highest average underpayment, while more than one million people in NSW lost $1760 a week, 848,000 Victorians lost about $1670 and 377,450 people living in Western Australia lost $1790. The SMC said unpaid super could cost the average worker more than $30,000 from their final retirement nest egg. When not intentional, superannuation underpayment can occur due to the timing of payments. While wages and salaries are paid weekly, fortnightly or monthly, businesses only need to pay the superannuation guarantee quarterly. Under new laws coming in July 1 2026, superannuation payday reforms will require employers to pay superannuation, salaries and wages at the same time. These reforms have been three years in the making after the federal government first announced the changes back on May 2, 2023. SMC deputy chief executive Georgia Brumby said Australians would pay the price for any further delays. 'Each week these laws are delayed, Australians are made $110m poorer in retirement, which means less money to pay the bills after a lifetime of hard work,' Ms Brumby said. 'The sooner this legislation is introduced and passed, the more time and certainty it will give businesses and the super payment system to prepare so all workers can get paid their super on time and in full. 'Payday super will not only stamp out unpaid super, it'll put nearly $8000 more in the average Australian's pocket at retirement thanks to more frequent payments and the power of compounding.'
