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Financial Management

State pension age equalisation is here

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State pension age equalisation has taken place in the UK.

The gradual change now means that women qualify for their state pension from age 65, the same age as men.

State pension equalisation has taken a long time, 25 years in fact.  During that time, the age rise for women was gradually phased in, with women celebrating their 65th birthday on 6th November 2018 the first to qualify for a state pension at the same age as men.   Despite equal ages for state pensions, equality of retirement income remains a long way off.  Maike Currie, Investment Director at Fidelity International said:

“The pension system is relatively equal if people follow the same working pattern from age 20 to retirement, but they don’t.  Women are more likely to have fragmented careers, be self-employed or work flexibly during their working life as they continue to bear the brunt of the childcare or take a career break to care for sick or elderly relatives.

“Of course, these factors are increasingly affecting men too, however, the average women’s pension pot is already much lower than the average man’s so women need to have the ability to catch up. As the Cridland report pointed out, in the first year of retirement women are expected to have 25% less income than their male counterparts.”

The final report from the Cridland Review was published last year and made a number of recommendations in respect of the state pension.  Report author John Cridland, a business executive, proposed an accelerated increase in the state pension age.  It is already due to rise to age 68 between 2044 and 2046, having an impact on those born after 5th April 1977.  Cridland wants to see the state pension age rise to 68 between 2037 and 2039, bringing this increase forward by seven years.  As a result, anyone born after 5thApril 1970 would have a higher state pension age.

Further rises in the state pension age seem unavoidable in light of improving life expectancy.  Without a higher state pension age, people living for longer would make the state pension unaffordable for the taxpayer.

The Cridland Review also recommended abolishing the ‘triple lock’ for increasing state pension payments each year.  This currently gives state pensioners a degree of protection from price inflation, with their state pension income rising each year in line with the greater of average earnings, price inflation or 2.5%. Instead of having this triple lock in place, John Cridland proposed that state pensions in the future rise in line with average earnings.

One group who are unhappy with the equalisation of state pension ages for men and women are 1950s born women represented by the Women Against State Pension Age Inequality (WASPI) campaign group.  They are arguing for government compensation after claiming to be unaware their state pension age would rise, as the government did not routinely write to women to let them know about the change.

Your state pension is likely to form an important part of your total income in retirement.  It’s important to understand when you will start to receive a state pension income and how much this is likely to be.  A good place to start is requesting a free state pension forecast at gov.uk/check-state-pension and then speaking to your financial planner to incorporate these figures within your overall plan for retirement income.

Three steps towards a more financially organised life

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Are you managing your finances or are your finances managing you?

We’ve all got money, but how much we have is dependent on the work we do or did and the life we lead. Furthermore, managing our finances and staying organised can be a real challenge for most people.  We’re not always taught how to be financially well organised as part of our education, so a lot of us have had to figure it out as we go.

At Wells Gibson we want all of our clients to be better organised financially so we’re going to look at a few steps to help you achieve this.

Budgeting

Your biggest and perhaps best step to a financially organised lifestyle is learning how to budget effectively.  A budget is something that everyone needs as it helps to allocate funds to particular areas of your life; household bills, social events, debt repayment… they all need to be taken into consideration when it comes to you and your life.

By having a budget, you help to ensure that no matter what happens, you’re taking the time to plan out what you spend and when.

Have An Emergency Fund

You never know when a disaster will strike.  Something can easily occur which will require a lot of money.  Your car might break down, or you might find that something in the home needs to be replaced.  When this happens, it’s important to have an emergency fund, so that if you need to, you can pay for things without upsetting your main finances.

An emergency fund gives you peace of mind, stops you relying on family or friends and doesn’t leave you relying on your main finances to desperately find the money you need.

Consolidate Your Debt

Do you have a lot of debts scattered about?  Most people do.

With various loans and new items available on credit from companies, a lot of people balance multiple loans, all of which come from different places.  However, that’s a chaotic and stressful way to track them.

If you can consolidate your debt, it’s well within your interest to do so.  Consolidation means that all the money you owe to various places is condensed down into one place, which means it’s so much easier to keep track of what you’re paying, when you’re paying it, and most importantly who you’re paying to.

Overall, these are just a few of the steps that you can take to ensure that you are working towards a financially organised life.  It’s difficult at first and we appreciate that people aren’t always conservative with their funding or forward thinking with debt.

It’s so worthwhile trying to make sure you are better organised financially as you’ll soon discover that it’s so much less hassle, and also much easier to keep track of everything.  Better still, you will probably be less anxious about tomorrow.