Record low annuity rates is increasing demand for temporary annuities, according to Gallagher Employee Benefits. Life annuities are becoming less attractive to retirees as the amount of income one can get has fallen sharply over the past few years. According to financial journalist Jeff Prestridge, those buying an annuity now are 25% worse off than those who bought one just three years ago. Some of those approaching retirement have also seen their pension funds shrink due to poor performance on the stock market. This has created a double whammy affect of a smaller fund coupled with lower annuity rates. Hardly surprising then that many are turning away from locking themselves into a life annuity now and are looking at viable alternatives. A fixed term annuity is bought for a set period generally 5 or 10 years (minimum 3 years) and has a guaranteed maturity payout at the end. It allows retirees to potentially benefit from possible higher rates in the future and/or any health conditions that would make them eligible for enhancements.

Stuart Grennan from Gallagher Employee Benefits reported both an increase in those asking and also taking out fixed term annuities. Mr Grennan said…”…we believe that the take up of temporary annuities will continue well into 2012 and perhaps beyond, as we think it unlikely that annuity rates will rise anytime soon, as gilt values are likely to remain low given the current austerity measures and fall out from the eurozone.”  He added that the impact of Solvency II legislation would further decrease the likelihood that annuity rates would rise.

The popularity of fixed term annuities is certainly one reason why sales at Just Retirement have hit an all time high, as reported earlier this week. Just Retirement’s CEO Rodney Cook commented that the rise in profits for the company was in part due to the success of their own pioneering fixed term annuity product. He said that…”‘…our innovative fixed term annuity product the first in the UK with an enhanced annuity conversion feature, has achieved pleasing results as advisers look for alternatives to standard annuities for those customers in good health.” However they are not universally popular as this week L&G’s executive director for protection and annuities John Pollock said that fixed term annuities were…”…not a good product for consumers. They place quite a large bet on markets and longevity in a manner that is uncertain.” He added that the company had voiced concerns about this to the FSA.

A poll commission by YouGov has found that a majority of Conservative supporters think it is unfair to make the British work for longer for their state pension compared with those on the continent. The company questioned 1,700 adults and found that a majority felt “uncomfortable” about plans to increase the state retirement age.  The YouGov poll was funded by a collection of Trade Unions including Unite, the Public and Commercial Services (PCS) union and the National Union of Teachers (NUT). Thousands of public sector workers are expected to come out on strike this week against government plans to reform public sector pensions which will see workers having to work for longer and increase their level of contribution.

Although it is often perceived as a Union and Labour centric issue, the evidence from the poll is that many Conservative voters are also uneasy about the changes to the pension system. Over a third believe that keeping the older generation working longer will mean fewer jobs for younger people and at the same time reduce the retirement span for older workers.  Mark Serwotka, leader of the PCS union argues that “…in an economy that can afford tax breaks for the very rich, it ought to be a national scandal that the rest of us are being forced to work so much longer. Mr Serwotka alludes to changes in the budget which will see a reduction in the top rate of income tax of 5%. Christine Blower, general secretary of the NUT said it was not in the interest of the younger generation that a majority of people should be working until they are 68.

Although the reforms will make public sectors workers have to pay more for their pensions, they are still well ahead in term of benefits compared with the average private pension. Final Salary schemes are for most a relic of the past and DC pensions are on average much less generous on in the private sector. The Unions counter this point arguing two wrongs don’t make a right and just because private sector pensions offer poor value that is no reason to decimate public sector pensions.

A report commissioned by the Institute of Directors has found that the UK’s “failing pension architecture” is driving thousands of workers away from pensions towards alternative options including ISA’s. ISA’s have been growing in popularity over the past five years, for example in 2007 the total amount saved into ISA accounts totalled £35.7 billion but this grew to £43.9 billion in 2009/10. At the same time contributions by individuals towards their pension funds reached £25.6 billion in 2007, but then dropped to £22.9 billion by 2009.

The report itself looked into a number of issues impacting on retirement in the UK including increasing longevity, debt dependence, lack of pension provision and low levels of savings. The report came out with a number of recommendations aimed at alleviating some of the issues raised. The principal conclusion was that the retirement age should be raised to 70 by 2044, which is sooner than under the government’s own plans which would see the retirement age rise to 68 in 2046. The government also plan to introduce a single and flat rate pension that is not means tested as well as to abolish pension credits.

Malcolm Small who wrote the report and is a pensions adviser from the IoD says that…”…traditional pensions are now outdated and increasingly unattractive. Society has changed but pension provision and Government policy have failed to keep up with the new challenge we face. The fact that so many people are either not saving at all for retirement or moving to other investment vehicles such as ISAs is a stark illustration that the current architecture has lost public confidence. If we are to avoid millions of people facing poverty in old age, then we need to give them an attractive structure to save into, not simply order them to save. A simpler system, a higher state retirement age and a proper savings policy would at least provide the foundations for a new retirement savings architecture. We cannot go on like this, and if nothing is done then people will continue to walk away from pension saving.”

Experts believe part of the attraction towards ISA’s over pensions is that they are easily understood by the public but warn that ISA’s should not be considered an alternative for pension savings. Other issues that have been highlighted is the amount of jargon associated with pensions savings, as well as various high profile mis-selling scandals which have engendered mistrust from the public.

A nurse caught slapping an elderley Alzheimer’s patient at a care home in London has been sentenced to jail. Maria Worroll was repeatedly slapped by carer Jonathan Aquino, after the victim’s family secretly filmed the assault using a hidden camera. The assault took place at Ash Court Care Centre in Kentish Town last year and is set to be screened in a BBC Panorama documentary to be shown tonight on BBC1. The home is run and operated by Forest Healthcare who have also sacked four of Aquino’s colleagues as part of their own investigations into the matter. Aside from the violent slapping, the patient was also manhandled by her carers despite he suffering from acute arthritis. In addition to this, it was said that carers also put her to bed as early as 5.30pm and did not greet her, preferring instead to make her watch television.

The Care Quality Commission the body who review standards at UK care homes gave the home an ‘excellent’ rating just a few months before the abuse took place. In addition to this a secondary report which was produced four months after the event failed to even mention that there were pending charges over the incident. Judy Downey from The Relatives & Residents Association criticised the report saying that was not a useful or honest document as it did not mention the charges relating to the incident. She argues that the CQC should use their powers to cancel the registration of care providers who are not shown to be fit to offer care services.

The patent how now been moved to alternative accommodation.

A new survey conducted on behalf of skilledpeople.com has found that more than one in 10 of out of work over 50′s feel the government is ignoring the issue of unemployment. The company which helps place older workers with companies requiring candidates asked 702 respondents what their views were on the governments policy for unemployment. Many of the respondents claimed that the issue of youth unemployment was ‘exaggerated’ and that older workers were now being expected to work longer before they can retire. It is argued that economic growth could be hampered by employers continuing to overlook older workers in favour of younger candidates.  Although the media appear to relentlessly focus on youth unemployment, the reality is that the number of people aged 50 to 64 who can be classed as ‘economically inactive’ is 3.53 million, whilst the figure for 18 – 24 year olds is 1.72 million.

As well as the government ignoring the issue of over 50′s unemployment, the survey also found that over 80% of those questioned believed that they had been discriminated against when looking for work. An official report into age related discrimination conducted on behalf of the Department of Work and Pensions (DWP) found that this was indeed ‘rooted in British society’. Often employers will opt for younger candidates as they feel more certain about their longevity in the job and can also often offer a lower salary.

Keith Simpson from Skilledpeople.com says that…”…we see a constant flood of CVs from exceptionally well qualified people seeking new opportunities who are under-employed for one reason only – they are aged over 50. We are appalled that respondents feel they have been victims of ageism. It’s extremely short-sighted of employers to discriminate on age grounds. Over 50s require little or no training, making them productive workers from the outset. If a company hires a quality experienced person to support business growth it’s more likely that they will be hiring an additional youngster after few months than the reverse.”

Skilledpeople.com themselves have come up with an innovative plan to help older workers back into work by offering candidates who can work on shorter term, more consultative contracts on lower than market rates. Ros Altmann from SAGA applauded the work being done by Skilledpeople.com saying that older workers had so much to offer.

Steve Webb, the pensions minister was forced to defend the government’s policy of quantitative easing in response to MP’s claims that it penalises savers and pensioners. The Treasury Select Committee this week discussed the affect on pensions of the government’s £325 billion QE policy, advising ministers on how to help dampen the impact on retirees. QE is effectively printing money which is then used to buy up government bonds, which in turn, heightens the price of these bonds. The consequence of the price of bonds rising is that the yield (the rate of interest) is lower, meaning insurers have less money to offer in the form of annuity rates.

Steve Webb, the minister responsible for pension policy rejected the correlation between the policy of quantitative easing and the fall in annuity rates. He told the BBC in an interview that…“…annuity rates have been falling year after year after year. There is no clear evidence that QE has made a difference to that. Annuity rates are falling partly because people are living longer.” However, there are several members of the Bank of England’s MPC who disagree with this analysis. Charlie Bean from the MPC told a committee of MP’s earlier this year that… “…annuity rates might have been driven down by asset purchases”. David Miles, another member of the MPC conceeded back in March that QE had inevitably left pensioners…”…worse off.”

Ros Altmann, a seasoned campaigner for the over 50′s and a critic of QE says that the government must acknowledge the damage that can been committed by their policy of printing money. She argues that the government should raise the limit on cash ISA’s as well as re-examining the rules relating to income drawdown.

A new survey produced by Metlife has found a majority of IFA’s would reduce their fees for those retirees with a pension pot of under £50,000. Of the 100 IFA’s they questioned, 67% said they would reduce fees where the client had a small pension fund. Another finding from the data was that there was strong demand for advice from those people with ‘minimal savings’. Nearly a third of those questioned also thought that those retirees with a fund under £50,000 would still be willing to pay for advice. There was also a striking geographical divide among IFA’s with 87% of those based in the South-West saying they would reduce fees but just 17% in London, perhaps reflecting the higher cost of living in the capital.

The report also found that the average pension fund size in the UK was around £68,000 but that nearly 40% of funds were indeed under £50,000. Again there are sharp regional differences when it comes to average fund sizes. For example IFA’s in London manage client’s with pension funds of around £86,700, whereas the average pot size in the North-West is just £54,000. Dominic Grinstead MD of MetLife UK says that retirement income planning is as much as getting the best rates as it is about getting advice. He added that with auto-enrollment commencing this October there will be a lot more clients with smaller funds in the future, so it was encouraging that a majority of advisers would reduce their funds for small pots.

The survey comes on the back of news that the National Association of Pension Funds have been lobbying the government to tackle the problem small pension pots. They cite research undertaken by Institute of Fiscal Studies andthe Economic and Social Research Council (ESRC) showing that £1.4bn is tied up in small pension pots worth less than £5,000, leaving those individual’s ‘stranded’. Darren Philp from NAPF says one solution would be to combine small pots and also to create ‘super trust schemes’ that would accept small pots and consider the interests of those savers will a lower than average fund.

Long term unemployment for those aged 50 and above has doubled since the start of the recession, according to official statistics. The number of over 50′s who have been out of work for more than a year is now at it’s highest level since the mid 1990′s. With the media almost exclusively focusing on long term youth unemployment, the over 50′s age group can sometimes become forgotten. Ian Brinkley from the Work Foundation thinktank says that..”…there’s huge political capital with young people … but the most important thing is not to forget about over-50s.” Although the default retirement age has been abolished, it still seems employers will naturally prefer younger candidates compared with those in their late 50′s and 60′s. Of the over 50′s who are unemployed, half of them have been so for more than one year, compared to just 25% of unemployed 18 – 24 year olds.

Aside from alleged in-built prejudice against older workers, other factors which favour younger people is that older workers are often less able to relocate because of existing commitments. By 2020 33% of the working population will be aged over 50′s, which could see a large number people in this age group having to live on benefits due to lack of employment opportunities. Despite the rising level of unemployment in this age group, older workers can be of huge benefit to companies according to Dianah Worman from the CIPD. She says that…”…the business case for older workers is strong and research shows their impact and experience within the organisation enables better customer service, enhanced knowledge retention – and can help to address talent and skills shortages.”

According to recent survey of over 50′s of the 441 questioned, 65% said they would work for free in order to gain more experience. In addition to this, 75% said they would work for lower wages in exchange for a full or part time job that offered more security. One explanation for these responses maybe that government back to work initiatives and employer incentives almost always focus around younger people.

The average state pension is set to rise by £6 for the coming financial year 2012/13 to £124 a week, according to official figures. This represents an additional £4.5 billion pounds of expenditure from the government. Speaking about the increase David Cameron says that…”…we owe older people in society our respect, our support and our care. That’s why from the start I’ve made sure this government protects pensioners and gives them the help they need.” The average figure of £124 includes the basic state pension payout (which is rising from £102.15 to £107.45 a week) plus the additional state pension. This takes the basic state pension to over 17% of average earnings, which is the highest level it has been since 1997.

The increase is being introduced as part of the so-called  ’triple guarantee’  to increase the state pension based upon either earnings, prices or 2.5%. This new system means someone approaching state pension age will receive approximately £15,000 more income over the life span of their retirement. No doubt this increase will be welcomed by hard pressed pensioners who have had to deal with rising prices and inflation whilst often living on a fixed income.

However, there will not be universal praise for the government as many retirees will still be reeling from the proposals to freeze pensioner’s tax allowances dubbed the ‘granny’ tax. And this week it has been widely reported that the government is possibly planning another hit on pensioners with proposals to tax the basic state pension at source. This would mean that those pensioners who currently pay the basic rate tax would see their state pension reduced to £85.96 and those who pay the 40% tax rate would see their’s reduced to just £64.47. The idea has come from the Office of Tax Simplification who say that this will reduce administration as well as ensuring that 1.6 million fewer pensioners have to fill in an annual self assessment tax return. John Whiting from the OTS said that…”…there is poor liaison between the Department of Work and Pensions and HMRC, so tax on your state pension has to be captured by fiddling with your tax code. One result is that a lot of pensioners [1.6 million] get drawn into self-assessment, filling in forms, mistakes are made and it is a big source of problems.”

Private sector employees would have to increase their pension contributions ten fold in order to match the pensions offered to those in the public sector, a new report has disclosed. Many public sector employees enjoy lucrative final salary pension schemes (also known as defined benefit schemes) that offer workers an income for the rest of their life, based on what their salary is at retirement age. This is on average much higher than the pensions being taken from those who have worked in the private sector, as the average pension fund is only around £30,000.

The research was undertaken by the Pension Corporation who calculated that someone aged 35 paying into a defined contributions scheme would have to pay a whopping 55% of their salary to gain the equivalent retirement income of someone paying just 5.1% into a defined benefits pension. If in theory this were the case both workers could expect a retirement income at 50% of their final salary. Unsurprisingly perhaps, the vast majority of these DB schemes have closed in the private sector as they have become unaffordable for employers to fund. In fact 90% of DB schemes have now closed, including oil giant Shell who has recently closed their scheme to new members.

David Collinson from the Pension Corporation, said: “…leaving aside the far more generous employer contribution rates, the individual in the DB pension scheme benefits hugely from economies of scale in everything from pension administration to asset management fees.”

Because of the enormous cost of funding these pension schemes, the government has recently announced plans to reform public sector pensions to reduce the burden on the tax payer. However the reforms have been met with stiff opposition from the trade unions who want to protect the pensions of their members.