Retirement Round-up for January

Bringing together topical stories in the news

Pension Wise proving popular

You might remember reading about Pension Wise in previous issues of Thinking Ahead. And you may well have used the service yourself, if the latest figures are anything to go by. 

In case you’re not familiar with it, Pension Wise is the free service which the government established to help people consider their options at retirement. 

In December, the government published  the latest figures about the number of people who have so far taken advantage of the free service. There have been:

1.9 million visits to the website 

26,000 face-to-face discussions

14,000 telephone discussions  

An 89% satisfaction score

It’s always worth taking time to consider your options before acting, especially at such a crucial time as retirement... so it’s good to see that Pension Wise has seen so many visitors coming through its virtual doors.

Pension Wise is available to anyone aged 50 or over, and provides online, telephone and face-to-face guidance on defined contribution pensions (not the defined benefits or ‘final salary’ type of pension). The service outlines what you could do with your savings at retirement, but it won’t tell you what you should do. For the ‘should do’ part, you’d need to consult a regulated financial adviser.

>Find out more about Pension Wise

View Aviva’s short video  for an outline on our options at retirement.  

The state pension – cherished, but confused

If you’re a regular reader of Thinking Ahead you’ll know that one of the biggest retirement events of 2016 will be the introduction of a new state pension.

Coming into effect in April, the new state pension has been tasked with updating the time-honoured current model which has been around since the 1940s. In that time, our state pension has become one of the most complex in the world. Some may say it is ready for its own retirement.

The new state pension is designed to be simpler, to help people plan for their retirement. But it will take a number of years to move from the current system to the new – meaning its laudable goal of greater simplicity may not be realised just yet.

Some surprising stats... 

Aviva research has identified that the state pension is cherished by the British people. 98%  of over 55s see it as important to society and 80%  see it as important to their own finances. Despite this, barely two in three (65% ) are aware of the new state pension. 27%  of those aged 55 to 64 are completely unaware. This equates to about 2 million people in the UK . 

To get a head start on what’s about to take place, you can read Aviva’s seven top tips about the new state pension

Request a state pension statement

The state pension is intended to provide a foundation income in retirement. To help you to  plan ahead, it’s critical to understand how much you can expect it to provide. 

To help with this, the government has launched a free service for the over 55s. If you’re in this age group, you can request a state pension statement by contacting the Future Pension Centre at pension centre. 

It’s perhaps the simplest way to answer the big question: “What am I entitled to, and when?”

We’ll live to 100 – it’s official

The Office of National Statistics (ONS) has published  its latest life expectancy predictions. In 2014, average life expectancy at birth in the UK was 79.3 for men and 83 for women. By 2064 this rises to an astonishing 97.4 for men and 99.8 for women. 

Looked at more locally, women born in England in 2064 are predicted to have a life expectancy of 100. This is the first time this milestone has been reached. Women born in 2064 in Wales, Northern Ireland and Scotland can look forward to a life expectancy of 99.5, 99.4 and 98.3 respectively. 

Looked at internationally, the Organisation for Economic Cooperation and Development (OECD) have published figures that show life expectancy for men in the UK is above the international average. Life expectancy for women in the UK, however, is below the international average. Today, Japan boasts the longest life expectancy at birth for women, at 86.9, and Iceland claims this title for men, at age 80.

A longer life is to be celebrated, but it raises the need for us to plan our retirement. Aviva’s free online Retirement Planner  helps you do this, and includes a life expectancy predictor. But please note, this comes with no guarantee!  

Would you like to sell your annuity?

Quite a question, isn’t it? And although no-one is likely to be asking it just yet, things may be set to change. 

April 2015 saw the introduction of the new pension freedoms which give people approaching retirement much more flexibility in what they can do with their money. These freedoms have been well received, but they don’t yet extend to those who have already retired and have used their pension fund to purchase an annuity – i.e. a guaranteed income for the rest of their life. The government estimate there may be over 5 million people in this post-retirement group.

However, just before December 2015, the government recommitted itself to the goal of introducing a system that could allow retired customers to sell their annuity in return for a lump sum of money. 

In order to sell your annuity, you’ll need to find a willing buyer. This means that there’s no guarantee that you will be able to sell your annuity, even after these rules are introduced in April 2017.    

Commenting on the plans, Economic Secretary to the Treasury, Harriet Baldwin MP, said: 

“For most people, sticking with an annuity is the right thing to do. But there will be some who would welcome being able to draw on that money as they choose – the same freedom we gave people approaching retirement in April. That’s why I’m delighted that we’re extending our landmark pension freedoms to over five million people with annuities from April 2017.”

Nothing changes today, but over the next year all concerned – including Aviva – will engage with the government to agree how this plan can be implemented. We want to ensure any new freedoms are successfully introduced and all customers’ interests are protected. 

Watch this space.

For many, an annuity remains a popular choice at retirement. You can learn more about annuities  on the Aviva website. 

Pensioner bonds cut 

With their attractive rates of interest, the ‘pensioner bonds’ created quite an impact when they we re launched back in January 2015. 

These bonds, officially called 65+ Guaranteed Growth Bonds, allowed eligible savers  aged 65 or more to place up to £10,000 in a one-year or a three-year bond, or up to £10,000 in each. They offered before-tax interest rates of 2.8% for the one-year bond and 4% for the three-year bond. These rates led to some 1.1 million people investing £13.7bn.

But now all that is about to change.

In December, the government announced that the 2.8% available on the one-year bond will not continue beyond its one-year anniversary. Instead, the interest rate will be cut to 1.45%. 

It’s likely that this news will see many savers with money in this one-year bond considering if there’s a better home for their money upon reaching this anniversary.

Rest assured that there should be no changes to the 4% interest delivered on the three-year bond until it reaches its third anniversary, at the earliest.

If you’re considering saving and investing, you can view Aviva’s helpful short video on Savings or investments.

FED rates rise for the first time since 2006

When the FED acts, people pay attention. 

The FED – or the Federal Reserve, to give it its full name – is the central bank for the USA. As the US government’s bank, it regulates the nation's financial institutions. And watching over the world's largest economy as it does, the FED is one of the most powerful financial organisations on earth. 

In December, the FED acted by raising its Federal Funds rate for the first time since 2006 - from 0.25% to 0.50%. The change may appear small, but its significance is not. 

Commenting on this change, the BBC’s economics editor, Kamal Ahmed, said:

 “After nearly a decade of what has been, essentially, a global economic effort - and experiment - to save the world from financial calamity, the Federal Reserve, the central bank to the world's largest economy, has decided, finally, to try a touch of ‘normalisation’.”

While the increase may have no immediate, direct impact on UK savers and borrowers, it signals a change in the direction of travel. The UK’s Bank of England base rate has been at 0.5% for more than six years. There has been much speculation that rates in the UK would rise in the months to come. The Fed’s decision has increased this speculation.

For most of us, central bank interest rates may feel like a distant, technical issue – something of interest to economists alone. But the reality is that they shape our day-to-day lives. 

We’ve written a couple of pieces on our website to explain more about the significance of interest rates. You can read them here:


AR01597  01/2016

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