'some think its all over...is it?'

According to two posts this week, the end of the financial world is doomed, so I thought I'd use the fire image!!

One post says that 'Generation Y' (apparently that's the 18-33yr olds..is it because they ask a lot of questions they got that specific letter?) will have no state pension to look forward to and a separate post says that by the year 2034, we could all be queuing up at soup kitchens for our meals, because we have no money. This last comment was made by a guy in the US who estimates his turnover of business is £60m, though what happens in 2034 to him is anyone's guess!

Keep calm people, now is not the time to panic and certainly scaring the bejesus out of everyone is of absolutely no use-especially if its for selfish reasons to get you to buy a book or invest in a 'futureproof' business.

Lets take a calm, mature look at things:

In State Pension world, the current pension received is around £120 per week for a single person, although this will rise to £140. Given that there are more people over 65 than under 16 in this country right now, it doesn't scaremongering to point out we have a bit of an issue, with more people living longer and drawing a pension and fewer people paying in. We also have this huge deficit we need to pay down and as such public sector pay is frozen and so the amount of National Insurance payable will not go up in the immediate future, therefore, we need the 16yr olds to become 18yr olds and go out to work, to start paying in, because lets face it, the Sate Pension in my view, is a Ponzi scheme. What's more likely-again, in my opinion- is that the state pension will decrease in fiscal power, in other words, it wont go up by as much causing to be eroded by inflation. This is nothing new. When the state pension was first introduced, it was hoped to represent 25% of national average earnings, especially with about 10 people working to every one person retired. Its now worth around 20% and potentially back up to 25% with the increase. Not great, granted, but enough to keep someone away from the soup kitchen?

Also with 'Generation Y' comes the new pension legislation that is Auto Enrolment, where 4% of an individuals salary will be used to make a contribution to a pension scheme, along with 3% from the employer and 1% from the government. This has been on national rollout since 2012 and will continue until 2018 until anyone, who employs anyone, will have to have been consulted about paying into a pension scheme. Given also the changes to pension legislation that allows remaining capital after death to pass down a generation without a 55% tax charge from April 2015, we can now see that maybe 'Generation Y' will not be so worse off as these posts predict?

Remove your head from the sand, put away the sandwich boards and don't be scared...just be prepared.

See you soon

Victor

If I've made you stop and think, the please, visit my website: www.business-ifa.co.uk and lets have a coffee and a biscuit together.

Stop...I need time to catch up!

You may wonder why the iconic picture of Marvin Gaye sits atop my blog this week. One of his many legendary hits had the title 'Whats Goin' On?' and that's exactly what I'm being asked this week by my clients!

Mr Osborne has done it again with the reversal of a 55% tax charge on any pension fund passing down the family line. This comes into force on April 6th 2015, along with the lifting of the restriction as to how much cash you can extract from a pension fund. Add to that the re-announcement of 'no compulsion to purchase an annuity' and you suddenly find yourself thinking 'what's going on?'

My own belief, is that this is trying to create wealth for the next generations. We already know that austerity measures will continue for 3 or 4 terms of government at the going rate and that the gap of 'Middle England' is now wider than the country itself.

With more people about to face being Auto enrolled into pension schemes over the next 3 years (from 2016 120,000 COMPANIES A MONTH with need to sort this out), it is clear that the Coalition are trying to make pension schemes-regardless the size of the pot-a very advantageous investment to provide income for the retiree, but also for that capital to be passed down to future generations, with the aim to help the next generation have deposits for homes, money for schools etc, without having to borrow too much. This will then hopefully trigger our children (& grandchildren) to see the benefits of a pension scheme and for them to get involved, or better still, to get the kids saving into one as well if possible.

I also think (or is that hope?) that Inheritance Tax will be reviewed. I long for the day to see Inheritance Tax raised to £500,000 and applied only if the 'family house' is passed down to the next generation. If it is sold, with cash given to the next generation, then it is passed free, allowing the beneficiaries to purchase a house, or start a business & employ people, so it is put back into the economy or used to create jobs. that's my philanthropy done with.

For some, retirement is too way off to even start thinking about it, which I totally understand, but if you wait to when you can see, feel, touch and smell it, then its probably too late.

Out of all of this, Politicians of all parties have made us talk about pension schemes and made us think about our ability to live on £140 per week state pension, that seems to be moving further away from age 65 that I grew up with.

If this latest blog has made you want to have a chat then please visit www.business-ifa.co.uk where you'll find all my contact details.

Have a great week and don't forget, 3rd Monday of every month, 7pm-8pm catch my Radio Show on HCR104FM or, if you're out of the catchment area, listen online!!!

Victor