Pension | Wells Gibson

Raising The Pension Age to Combat High Withdrawal Risk

By | News & Views, Pensions, Retirement | No Comments

There is a world of difference between retirement and taking the benefits from a retirement plan.   

Retirement describes a point in time when you might stop work and instead live a life without the commute or the daily grind of office politics.  Retirement is a point where you spend the bulk of your time doing the things that you want to do, rather than the things that you have to do! 

If you have a personal pension plan, you can take the benefits from that plan without having to stop work.  Soit’s probably more appropriate to call this a benefit age rather than a retirement age. 

The current minimum benefit age for a personal pension plan owner is age 55.  Some might consider this a rather young age to be taking benefits from a retirement plan; after all, with steadily increasing longevity, a 55-year-old might have to make their pension pot last 30 years, or even longer. 

Since the introduction of pension freedoms in 2015, some commentators are concerned that pension plan owners might have been taking too much too soon from their plans and therefore risking that they might run out of money later in life. 

High withdrawals are, of course, real risk and one that should not be dismissed lightly.  An imperfect storm of falling investment values and excessive rates of withdrawal can quickly run the value of a pot down. 

One solution currently being debated is to increase the minimum age at which benefits can be taken from a personal pension plan.   

Already it is planned that the minimum age at which personal pension plan benefits can be accessed is to be aligned with the State pension age which is set to rise to age 66 from October 2020 and age 67 by 2028 and 68 by 2039. 

The age at which benefits could be taken from a personal pension will rise to 57 by 2028.  There is a call to consider introducing the increase to age 57 now, in fact, in next week’s Budget statement. 

If we trust people with their pension pots, they are no longer compelled to buy a guaranteed income in the form of an annuity; then I think we should continue to trust them to spend their pension pots wisely from age 55. 

Our experience has been that the vast majority of people are sensible in the way in which they take their pension plan benefits. 

The flexibility that they enjoy, a higher income now knowing it will possibly be lower later is an essential part of how they can plan their financial future and get what they want out of life, now. 

Some may already be approaching age 55 with plans to use their pension pot wisely; it would be wrong to deny them that opportunity. 

Photo by Dwayne Hills on Unsplash

Are you a ‘Pension-Preneur’?

By | News & Views, Pensions, Retirement | No Comments

It’s no secret that the nature of retirement is changing.  What used to be considered by many as a quiet, relaxing time in life, is increasingly becoming a period of greater activity – perhaps it’s a new retirementality.


New research from Charter Savings Bank reveals that, instead of taking it easy, millions of those approaching retirement are planning to reinvent themselves and start their own business.


The study surveyed 2,005 adults living in the UK between 11 and 15 October 2019.  These 3.5 million so-called ‘pension-preneurs’ across the UK have already started their own business or are planning to do so.  At the same time, some want to invest in another business during their retirement.


The nationwide study reveals that 14% of over-50s have entrepreneurial plans for the years ahead.  Of these, 2.2 million people have already set up their own business or have invested in another.  While a further 1.6 million are planning to do so.


Pension-preneurs collectively invest about £22 billion in their enterprises, equating to £6,300 per person over 50 years old.  15% are planning to invest more than £20,000 in their new enterprise.


The majority of the over 50s plan to use their own personal savings to fund their new business in retirement, but 11% plan to use a lump sum from their pension.


Other options for financing include loans from family and friends (8%) and business loans (7%) for their new venture.


It appears there are millions of people heading towards retirement who don’t want to just stop working and put their feet up.


The most popular plan is for retirees is to volunteer with an organisation or start a charity (33%), while a fifth (22%) plan to start a new job part-time.  Setting up as a freelancer or consultant during retirement is another popular option (12%).


Paul Whitlock, Group Managing Director, Charter Savings Bank said,


“The fact that so many people over the age of 50 want to create a new business or invest in one is inspiring and shows such an entrepreneurial spirit.”


“However, starting a business takes funds and the fact that so many people plan to use their own personal savings to do so highlights how important saving is.”


“Whether spending one’s retirement travelling the world or starting a business, saving as much as possible from as early as possible is vital.”


Professional services (13%); education (12%); hospitality & leisure (12%); and wholesale & retail (9%) are the most popular industries for pension-preneurs planning to start their own business.


Over a third (37%) bravely plan to start their new venture in a completely different industry, while almost half continues in the same industry they’ve worked in during their working life.


Are you planning to be a ‘Pension-preneur’?


Photo by Joel Filipe on Unsplash