Game of Gnomes – 5 thoughts about life after pensions choices
In the summer of 1979, as a keen-to-earn teenager, I did some rudimentary gardening for neighbours. I quickly learnt three things:
- The people most likely to be in, and friendly enough to tolerate my sales pitch, were retired.
- They all had gnomes in their gardens (it was clearly a late 70s thing – for me this era was more about ripped jeans, safety-pins and The Clash)
- The wealthiest (by my simplistic first glance and the amount they paid me on a voluntary ‘give me what you think I deserve’ basis) had the most gnomes.
My thoughts turned to gnomes again recently when reading the excellent research report from Citizens Advice, ‘Life after pension choices: consumer reflections on pension freedoms and thoughts on the future’.
For those of you who, like me, groan at reading long documents, here is a brief summary of my thoughts:
- Long-term care costs – Not enough people have made any kind of planning provision for this likelihood. Statistics currently show that more than 50% of retired people will need to pay for long-term care in some form. So why is it not in the forefront of people’s planning? For me, this points once again to the need for advice, not just at the point of retiring, but before and afterwards as well. It certainly shouldn’t just be for those with lots of gnomes!
- Pension language – It is still not right. For years we have pushed for consistency of terminology and plain English. We still don’t have it and, to add my tuppence to the narrative, documentation is vastly too voluminous. Never has the phrase ‘less is more’ been more apt. When your big toe is in danger of being squished by an A4 envelope as it comes through the letter box, because it is stuffed with too much guff that providers feel they have to send you, enough is enough.
- Cry freedom – On the whole, consumers like the freedoms introduced in April 2015. Where people have used the new flexibility, the common reasons are not a surprise and chime healthily with our advisory experience: gain more control, enjoy the healthy years, minimise tax, and pass assets to the kids.
- Work and retirement – 1.1 million people are working and receiving a pension after age 60 (up by a whopping 500,000). I frowned initially, but I like this, because it implies people have enjoyed the freedom and choices on their own terms, possibly semi-retiring in order to enjoy the healthy early years, spend time with grandchildren and tend to their gnomes.
- Post-retirement health – Citizens Advice recorded reasons why people needed help after making retirement choices. These often related to Employment Support Allowance (ESA) and Personal Independent Payments (PIPs), revealing that health remains very high on the worry list. It raises the importance of enhanced annuities (where you get more money if you have health issues). Let us not rule these out post April 2015; our advisory experience proves they are still a valid part of the financial planning journey.
I applaud the endeavours of Pension Wise, they do a wonderful job. It is a serious subject and gnome laughing matter!