Pension Management

UK residents over the age of 55 are being hit hardest by the rises in living costs and the tightening in consumer credit markets, Skipton Building Society has found.
According to research recently published by the group, Britons in this age group are more likely than any other to have tightened their belts in recent months as fuel, food and energy costs increase and credit, mortgages and loans become more difficult to come by. In the first report in a Credit Crunch Britain series, Skipton identifies that more than eight out of ten (84 per cent) of respondents have cut back on spending in an effort to protect themselves against the worsening financial climate.
The group notes an overall trend in which the older people are, the more likely they are to have attempted to rein in spending. While 55.7 per cent of people aged between 16 and 24 said they had cut back on outgoings as a result of the credit crunch, 57.8 per cent of 25 to 34-year-olds answered positively. A sharper jump was seen when 35 to 44-year-olds were questioned, with 72.6 per cent saying they had limited their outgoings recently.
People who have found themselves in an untenable financial situation as the cost of living soars and lending markets dry up may find taking out a debt consolidation loan useful. In taking out this type of loan and entering into lowered payment arrangements with energy providers and creditors, borrowers may find they are in a better position to meet the inflated monthly payments.
For 76 per cent of 45 to 54-year-olds, cutting back had also been a priority, while those of pensionable age were said to be most likely to have reduced spending. A number of regional trends were also identified. In the north-east, Skipton notes the effects of the Northern Rock crisis beginning in the summer of last year may have been more sharply felt in this area. More residents in this region said they had cut back in recent times than in any other area in the UK, with 62.8 per cent of people saying they had made financial sacrifices. In Scotland and the south-west meanwhile, residents seem more reluctant to rein in spending, with 54 per cent and 54.8 per cent of respondents respectively saying they had done so in recent months.
Londoners followed those living in the north-west with a positive response from 62.3 per cent of people in the capital, with residents in the east rounding out the top three areas forced into frugality by the credit crunch.
Commenting on the findings, Steve Haggerty, managing director at Skipton Building Society, said: “It is clear that the credit crunch is having a marked impact on UK consumers’ spending. But the fact that almost a third of adults have not cut back on their spending at all suggests that either they are financially strong or that they see the current economic climate as short-term. It is our view that, the credit crunch will ease in the short-term; making mortgages cheaper and more available. However, the wider, global issues, such as oil prices, will continue to create pressures on the pockets of UK consumers for some time to come.”
For those who have found themselves out of pocket and facing money management problems, taking out a debt consolidation loan may be of assistance. It may also prove a prudent course of action for the 23 per cent of people identified by Fairinvestment in a recent study who are set to cut back on life’s luxuries as the credit crunch takes hold.

As financial worries increasingly prompt Britons to attempt to review their finances and reduce their debts, one aspect that may be overlooked is the pension. With various surveys demonstrating the extent to which people are finding themselves having to cope with mounting credit card bills and loan payments, thoughts about saving for retirement could be pushed to the back of minds.Yet it could well be that the current economic problems highlight just how important careful financial planning is. This is certainly the view of the Association of British Insurers (ABI), which has produced a guide aimed at addressing the issues and concerns consumers may have.Simply entitled ‘People need pensions’, it intends to make just that point. The ABI observed that confidence is the most important factor in pulling through the recession, but investments and long term savings have taken a knock due to stock market falls.Director of consumer strategy at the organisation Maggie Craig explained that pensions remain an excellent prospect, particularly as savers can benefit from “free money” – both from the government and employers.”Saving for retirement is crucial both for individuals, as it helps to ensure they will have a more comfortable retirement, and for society, as it reduces the burden on future generations of taxpayers,” she remarked.And the importance of having a nest egg in place has been emphasised by a recent study by Help the Aged and Age Concern. Beginning early could be the key, as nearly half of those over the age of 50 told the charities that they are less confident their pension and savings will be enough to fund retirement than they were six months ago. The organisations also cited Office for National Statistics figures showing that the number of unemployed people in this group has risen nearly 50 per cent over the last year, which could mean even more people are relying on their investments.One provider that has recognised the need for investments to be made is Scottish Widows, which has announced the launch of two new multi-manager funds. Through these, customers are being offered the chance to see their money spread across a range of assets – including equities, commodities, bonds and property.This particular approach may not be to everyone’s liking, but the advice from various quarters does appear to be clear – consumers should not forget about pensions despite the economic problems currently taking hold around the world. To this end, Ms Craig stated: “In these difficult economic times, it is especially important that people make the right decisions about their finances, now and in the future.”

The “confidence crisis” surrounding the British pensions sector is deepening, it has emerged.

According to Alliance Trust’s annual retirement confidence index (RCI), the gap in those failing to put money away for later life is rising as some 26 per cent of consumers are currently without any form of pension – up from 20 per cent noted last year. However, with evermore Britons set to face financial difficulties later in life, it appears that women could be in line for the greatest strife. Just under a third (31 per cent) of females are currently not making any contributions towards a savings fund, an increase from the 23 per cent recorded during last year’s RCI. Meanwhile, 22 per cent of men are without retirement provisions, up from the 17 per cent noted last year. Also the proportion of people that believe they will receive a state pension has dropped form 40 per cent last year to 35 per cent.

It was also revealed by the study that just over half (55 per cent) of Britons aged between 19 and 29 have not made any savings for later life. However, with this in mind, only six per cent of consumers in the age bracket feel “totally unconfident” that they will not be able to put enough money away to fund a “comfortable retirement”. Yet it was consumers in the “prime of their working lives” who could be set for the most retirement trauma as one in ten people aged between 30 and 49 are “totally unconfident” that they will be financially comfortable in later life. Meanwhile, only one per cent of Britons within this age group are “totally confident” about their future.

Hyman Wolanski, head of pensions at Alliance Trust, said: “It is worrying to see that many in the prime of their working lives are most uncomfortable about their retirement prospects. It has been made clear that action needs to be taken to overcome this problem, and to break the trend. Our research shows it is now more important than ever for people to ensure they have a proper pension plan tailored to suit their individual circumstances. For example, locking regular sums into a pension might often be put off in favour of more immediate financial demands but with the range of saving products available today, there is now much more flexibility than ever in how people can save for their future.”

He claimed that a pension is not the only method by which consumers can prepare for their financial future, indicating products such as individual savings accounts as possible options. Mr Wolanski stated “no matter what means are used, it is of the utmost importance that action is taken, and future provisions are made”.

And with millions of consumers struggling to save into pensions, problems managing their money may extend into other areas of their finances such as developing difficulties in paying back loans and credit cards. Consequently opting for a bad credit loan could well be an advisable option for reorganising your monetary situation and getting back on your feet. Earlier this year, James Cotton, mortgage specialist for London & Country, suggested that those who have taken out a bad credit loan may still be able to access mortgages with competitive rates of interest.