Don’t be shy – it’s time to prove you are the retiring type

Marie Ainsworth 

Have you ever looked out the window on a cold, wet, windy, miserable day and thought: “God, I’d hate to be out there on a day like this with no home to go to ... ”

The stark reality is that this country is facing hard times and while we all hope that we’ll come out the other side of this recession as a wise and stronger nation, there are some legacy issues that are just not going to go away.

One of the biggest is that of the “pensions crisis”, and not just for Ireland but most western nations. Let us put it in some context. The state pension bill — the retirement income paid to both state employees and all beneficiaries of the state pension — is increasing daily. It is paid from taxes collected on a daily basis.

If our workforce keeps shrinking — as it has been since 2009 (and by 33,400 in the past year alone to June 2012) — this has to result in an increase in taxes and PRSI contributions which pay the ongoing benefits, or in smaller pensions. Life expectancy has also been steadily increasing and pensions, including the state pension, must now be paid for longer. According to the National Pensions Framework report, by 2050, when workers who are just joining the workforce today are ready to retire, the number of over-65s will have doubled and will make up 28% of the total population and equal nearly 50% of the 15-64 age cohort.

Up to 2011, there were six working people to each pensioner. By 2021 there will be only three workers to each pensioner. If you are currently under the age of 57, you will not be entitled to your state pension until you are 68 and it is expected that this retirement age will most likely be moved to 70 if the state pension system is to have any hope of survival.

In the light of all this negative employment and demographic evidence, the question that everyone should be asking themselves now is: if your employer have plans to retire you off at 65, do you have sufficient savings or a private pension to live off until your state pension payment falls due?

With our government under so much pressure from its European and International Monetary Fund paymasters to keep cutting social welfare benefits, you may be forgiven for wondering if there will even be a state pension worth claiming in a decade’s time?

And on it goes...

If it is any consolation, we are not alone. Governments across the western world are having to deal with the enormity of the no-money and ageing population problem, and many are making it compulsory for all workers to contribute to private pensions. From next week, the UK auto-enrolment occupational pension scheme will be rolled out in an effort to increase private pension membership. Anyone aged 22 or over, earning more than £8,105 (€10,150) a year and employed for three months or more, will be made a member of an employer’s existing occupational pension scheme. Similar schemes already exist in Australia and New Zealand and have been under discussion here for several years.

There is an old adage: “How do you eat an elephant? Answer — One bite at a time.”

The only way Irish workers — and I believe these must include those employed by the state as well as those in the private sector — are going to avoid a financially meagre old age is to start saving early and increase their savings annually. If an employer offers to contribute into the employee’s plan, the long-term benefit will be significant. If he offers a death and/or disability plan, all the better as this allows you to pay even more into your pension fund.

Anyone who is 10 or more years away from retirement has to include real growth assets in their pension portfolio by diversifying across a broad range of assets. While it must always aim to get a return at least above the true rate of inflation, no pension fund is going to grow sufficiently if the holder doesn’t also keep an eye on product charges and fees.

Poor fund returns and the widespread disillusionment with formal retirement saving is the product of a litany of bad industry practices, high charges, volatile markets and a huge amount of ignorance and apathy by employers and employees. The only way to reverse this is to take the time to understand how the pension operates, what the plan incorporates and then to review it regularly.

There are thousands of people in middle age in this country who regret not getting into the habit of putting aside a small part of their earnings from an early age for their retirement.

Marie Ainsworth is a director of Mount Street Group financial advisers in Dublin.

The Future You Deserve

We all know what happened. A decade when it seemed a whole country had gone mad - spending as though there was no tomorrow. And then tomorrow came. You weren’t part of that. You carried on much as usual – investing prudently – trying to ensure that you’d be secure when you were older. And yet you’re suffering now. You’re a victim of something you didn’t create, didn’t endorse – and likely didn’t benefit from...

People over 50 have weathered other recessions but none quite like this. Interest rates are falling, inflation – and continuing inflation – is a fact of life. Inflation that affects medical and pharmaceutical services – even the basic necessities of life like food and heating and that interest rates cannot keep pace with. The State is no longer the kindly, rich relative who will see us right as regards services and benefits; who will keep the state pension at its present levels. And, of course, we’re all living longer. Not surprisingly, we feel we’re on our own. You’re not.

Your most critical need today is to anchor your savings in an inflation linked vehicle. Not just to save – but to safeguard. And we can help you do that. Mount Street have decades of experience in savings and pensions. Just how safe is your pension? If you’re in a defined benefit or defined contribution scheme, we can address your concerns – help you make the right choices. Should you take a transfer value or leave your benefit in the scheme, should you opt for an Arf or an annuity, for example. What are your future investment options? We can help you put together a financial plan that is a perfect fit for you. Because we listen. Listening is something most institutions claim to do. We actually do it. Because we’ve discovered it is the best way – the only way – to do our job effectively. We’re open in all our dealings – because we’ve found that complete transparency makes life easier for both of us.

We’re big players. We have access to the leading global investment providers – we deal with a multitude of world class financial services providers, banks and fund managers. We’re proud of our long-standing relationship with Eddie Hobbs, someone whose breadth of experience and razor-sharp instincts keeps us and you on top of every economic nuance.

A man, above all, who knows whose side he’s on: yours. We research the markets rigorously on your behalf; we keep you abreast of what’s relevant to you; ahead of changes in the marketplace. For example, how will fluctuations in the euro effect you – how safe are your bank deposits/savings? We put you in charge of the years ahead so you can make the most of your life and enjoy it. We believe in preservation of capital in real terms. Our primary focus is on correct asset allocation and wealth preservation. We don’t take risks with your livelihood. We think that, in these uncertain times, we can bring stability, security and first class financial advice into your life. And all you have to do is call us. Then we can start working on the future you deserve.

Contact: Marie Ainsworth, Mount Street Group, 18 Merrion Road, Ballsbridge. Dublin 4.
www.mount-street.com  email: mta@mount-street.com. Tel: 01 6674730

71% not confident about State Pension

More than one in four expects to retire at age 70 or older

In a survey carried out by Standard Life, 71% are not confident that they will receive the same level of today’s State pension when they retire. 

When asked the question, “Do you feel confident that the Government will pay you the same level of today’s state pension when you retire?”

• 71% are not confident, only 13% are confident and a further 16% don’t know.
• The  most confident group where those aged over 65. However only 25% of this age group expressed confidence even though this age group is closest to retirement age.
• The least confident group are those aged between 45 and 54 – only 7% of this group is confident whilst 78% are not.

“It’s not surprising given the state of the economy that people are concerned if the State pension can continue at the current rate.” said Jim Connolly Head of Pensions at Standard Life. “These results confirm that people cannot purely rely on the State to fund their long term financial needs. More people should be encouraged to take responsibility for their long term financial needs and it’s really important that Government policy make private pensions an attractive option.” he added

One of the areas that would make pensions more attractive is to make them more flexible. In the same survey – nearly half of those surveyed said they would save more into a pension if they could access some of the fund before retirement. Interestingly this feature was most likely to appeal to younger people. 60% of 35-44 year olds said they would save more into a pension if they were more accessible.

More than one in four expect to retire at age 70 or more

When asked what age people think they will retire,

• The average expected retirement age is 65.1
• More than one in four (26%) expect to retire at age 70 or more
• Only 9% expect to retire before they reach 60

Notes for Editors

These results are based on an independent online survey conducted by Research Plus Ltd on behalf of Standard Life of 1,003 adults aged 18+, in the Republic of Ireland between 23^rd March – 2^nd April 2012.

Couples urged to shop around as mortgage protection premiums fall

By Charlie Weston Personal Finance Editor
Wednesday May 25 2011

COUPLES can save up to €126 a year on their mortgage protection premiums by seeking out a better deal, according to the National Consumer Agency.
Mortgage protection and life insurance premium rates have fallen dramatically recently due to fierce competition among insurers and the fact that people are living longer, so insurers are having to pay out less often.
Now a new survey by the state agency has found massive variations in premium rates for life insurance and mortgage protection.
Premiums range from €53 a month to €76 a month for a couple who smoke and want to take out mortgage protection insurance on a €380,000 home loan.
Difference
Over a year, the difference works out at €274. But over the 35-year term of the mortgage the difference climbs to more than €9,500.
Non-smokers can save €126 a year by seeking out the best rates in the market.
The couple in this example have joint mortgage protection cover, which means the policy will pay out the sum insured if one of them dies.
Huge savings can also be made on life insurance.
A couple who smoke could be over-paying by €335 a year by failing to get the lowest premium in the market, the National Consumer Agency research found.
The survey examined the cost of term-life and mortgage protection cover against a range of different consumer profiles.
Maria Hurley of the consumer agency said the research also found that smokers who kick the habit for at least a year can save up to €590 annually for life insurance by getting the best deal.
Chief executive of the Irish Brokers' Association Ciaran Phelan said households typically phone a couple of insurance companies every few years, identify the best deal at that time and just assume that the same provider will continue to offer the best price. But this is wrong.
"Prices change dramatically all the time, so it pays to let a broker shop the market and get the best cover at the most affordable price," he said.
Most consumers need mortgage protection and term assurance to replace their income in the event of their untimely death. A 40-year-old couple spending €1,000 per annum can typically afford €200,000 to €300,000 in cover.
With increasing longevity resulting in falling insurance prices over the last few years, a saving of at least €200 could be achieved, he said.
- Charlie Weston Personal Finance Editor
Irish Independent

Wisdom from Oscar Wilde

“When I was young I thought that money was the most important thing in life, now that I am old I know that it is” – Oscar Wilde.

During the Celtic tiger years, it may have seemed that spending money,
was for most people their main objective. Now that we are living through
the austerity years, saving money for many of us is a major priority.

Recent CSO figures have consistently shown an increase in the level of
household savings, clearly many people are now making sacrifices in their day to day spending in order to save more of their hard earned cash. 

The increase in the level of savings, starkly illustrates a new reality,
"financial fear", we now need to build up savings to offset the potential effects of a "rainy day", for the future cost of our Children's 3rd level fees, or for the drop in our income, if and when we stop work. The increase in saving reflects an overall sense of reality, that the state won't be picking up the tab to the same level it has been, for many of the services and benefits that we all have come to take for granted.

There are many different savings choices out there  from pension to regular saving accounts, and hundreds of investment options  from deposits with a bank, to investing in absolute return funds.   
  
We strongly recommend that you talk to us here in Mount Street Group today, and let us help you to put a savings strategy in place.

Niall Power QFA Grad Dip Financial Planning.
Mount Street Group.

Where did that €16,000 come from?

We had a client who was totally focused on keeping his business trading, he wanted to make sure he was properly covered in terms of life insurance, he didn't want to leave his wife and kids in the lurch!
When he looked at his policies he knew he could save a few Euro but didn't think it was worth the hassle, he had 3 seperate policies with different terms and thought he would be better off putting his time towards running his business than chasing savings on his policies.

When carrying out an investment review for him we convinced him to let us review his life cover, guess what, when we added all the savings, he would be €16,300 off over the term of the policies, while keeping the same level of cover for €2,000 less p.a. To say he was shocked is an    understatement, as he said himself the work he would have to put in to make €16k "didn't bear thinking about"!

Trustees Training Obligations - Update!!

Trustees are required to receive training within six months of their appointment and at least every two years thereafter.

Where a person was already a trustee before 1 February 2010, the training had to be completed before 1 February 2012 and at least every two years thereafter.

Trustees must record in the scheme’s annual report that they have received appropriate trustee training as required by the Pensions Act within the time limits set out therein.

The Board will monitor trustee training compliance on an ongoing basis.

For further information see FAQs on Trustee Training