1995 and the Pensions Act of the same year gave us a number of changes, one of which was the equalisation of State Pension ages – making boys and girls retire at the same age, eventually.

This post is available as a download – State Pension Changes 2016

Of course the changes were blamed on EU law, but the truth is everyone knew that there was not enough money to keep the pension system afloat, and the Government of the time was helped through the changes by simply stating – it’s not our fault, the EU made us do it.

Not sure about you, but I was 34 at the time. Heavily into building my career as a financial adviser, and was about to add my first child to the family – and of course any increase to the State Pension would not affect me for some 31 (thirty one years) so nothing to worry about.

More change arrived a few years later in 2007 when the State Pension Age was further increased to 68 (not sure about you but I can see a trend coming here), and again in 2011 in the Pensions Bill there were further changes made.

Like you, I was not concerned about these increases then; far too young and with a range of other priorities like a mortgage and getting my two children through their education, at the same time trying to hold a marriage together – pensions could wait.

As I hit my mid fifties, the pressures changed as they do for us all. It’s more about planning a few more weeks away from the office, rather than concentrating on the hussle and bussle of business life. This of course has given me some more thinking time, and I have realised this, I have been royally shafted and it doesn’t feel nice.

Here’s The Story.

Despite the politicians of all colours telling us we have never had it so good and with the changes made [by them] everything is great, so here are the facts. Ready..

State Pension Age Changes – have cost me over £15,000 in lost income and my wife over £12,000 as they have moved my pension age to 68 with no compensation, for us it’s a £27,000 grab. How much have they cost you?

Obviously, something had to give as there is not enough National Insurance coming in to pay pensions, we are living longer and now retiring later. This was spotted in the late 1980’s.

Expect this trend to continue.

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If you are reliant on your State Promise (Pension) expect it to be reduced even further. It’s been on it’s way down for the last thirty years or so, a fair bet is that this trend will continue. Something about one of Isaac Newton’s Laws springs to mind.

At roughly the same time Pension Freedom arrived – another little gift for advisers and the pension industry. Of course if you are are pension provider, you want more pensions and they have certainly got that.

No matter what you try and do with your pension pot, someone else maintains control of it and charges you for the privilege. If you have what they call ‘safeguarded’ benefits of more than £30,000 it’s another nice gift to the industry because you are forced by law to take advice from a suitably authorised adviser – and there are not enough to go around. The industry has collapsed in recent years.

This special breed of adviser, that you are forced to use can charge what they like. I have recently been quoted 5% of my fund in order for one of these advisers to give me some advice. Given that you can do nothing about it, if you want the ‘freedom’ you have to pay it does seem a little unfair.

Ongoing Charges – with modern investment management tools making changes to your pension investments is simple – point and click in the main. Despite that advisers get a favourable treatment in relation to VAT on their services (exempt) and chunk of your pension fund every year for what they call – ongoing management.

It’s a bit like using a Solicitor to purchase your house (still far more complex than the setting up of a pension) and the firm coming back every year to take a small slice of the current value – and you not being fully aware of it being taken and the Solicitor not having to raise an invoice for it. I doubt you get a pension statement every year that shows in big letters on the front of the statement – ACME ADVISERS HAVE BEEN PAID £x FOR THEIR SERVICES.

What you do get is a paragraph on page seven of eleven stating the charge.

Auto Enrolment, another gift for the industry “Mandatory Pension Contributions” with fixed charges and no guarantees of anything. No matter how bad the investment returns are, no matter how bad the administration standards are, the provider still gets paid. And they make you jump through ‘burning admin hoops’ if you dare want to move YOUR cash.

And still the industry crows on about the efficiency of pensions which is a myth.

It was Steve Webb – the only pensions minister to really tell the truth about pensions, he stated that “pensions are tax deferred savings” not tax free. Of course there maybe some tax breaks, but they are just that breaks. Eventually someone has to pay tax on pension benefits drawn from any pension. If not now then whenever. This of course guarantees a return of at least some pension to the Government via income tax, in return for the tax breaks they are rewarded very nicely. No risk and close to a guaranteed return, without even having to cover any of the costs of the investment

What Else? Well, our man in the Treasury has been on rant for a few months about charges.

Indeed George Osbourne has announced reviews into Pension Charges. The way he talks it seems like something may happen. However another of Newton’s Laws is in play here, if there is no force on an object it doesn’t move. It’s a law.

Nothing has changed yet, no force on it. The providers retort is simple – there are contractual obligations. Something every regulator has known since regulation. Don’t expect things to change anytime soon.

I set up MoneyTrainers to teach non financial people some of these truths – as a qualified and experienced financial consultant I know a little about how these things work.

Two Realities

I have never met anyone who thought that locking hard earned cash away for 40 years or more was a good plan to become rich, and certainly not one that was dipped for charges every few days.
Despite a good a good run at things successive governments have not made pensions work for the masses, of course a few years ago they made sense as a planning exercise

If you are a teacher, work in local government or are an MP your situation is a bit different.

Under the Principal Civil Service Pension Scheme (PCSPS) The taxpayer picks up the cost of your valuable guaranteed pension. The current liability (to be funded by you and I) is £194,838 million based on the last accounts (14/15) and it’s running costs are in the region of £61 million for the same year.

The Teachers Pension Scheme is also an interesting one. With an unfunded liability of some £200b (that’s right billion) according to the accounts in 2012 (can’t find any later ones). It’s clear that money to fund all of this has to come from somewhere, just don’t delude yourself it won’t be you, the probability is that it will.

Pensions Four Things You Should Do Today

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Get out.

Since I left the industry in 2010 things have changed a lot, but the industry really doesn’t want you to know that.