MARC MILLAR from North Wealth Management, and Senior Partner Practice of St. James's Place Wealth Management talks to Highlights PR's Keith Newman about his work and in particular pensions.
There’s been lots of political comings and goings recently and many people are concerned about their pensions and about mortgage rates going up. What is this thing called the triple lock?
Triple lock is where the government over many years have been committed to increasing pensions in one of three ways and with inflation in mind usually straight forward, meaning that people on state pensions can at least see some increase in their pensions on an annual basis. The number of people on state pension benefit is a huge burden and a massive increase to the government spending. The problem is that inflation is close to 10% with the governments and the Bank of England’s target around 2.0%. This therefore is an enormous commitment.
Should the ordinary man or woman in the street be worried?
I think people just under retirement age should have concerns but there’s also a lot of people on state pension that live alone, or the pension is their only income because they haven’t arranged company or personal pensions before they retire. It’s a worry for them because the cost of living is increasing hugely including heating, energy, gas, electric so yes, some people need to think about what they need to do to maintain their standard of living in retirement in advance.
What sort of percentage of people actually have a private pension and why should they have one?
Difficult to put a percentage on this, with workplace pensions brought in which is a statutory guideline as anyone starting new employment with the company has to be enrolled in to a company pension. It works out that the employer and employee contribute 8% of their income for the year. There are so many people in the UK heading towards retirement with no provision and everyone knows that people are living longer so the state pension may not be in its current form in say 20 years’ time.
Everything comes back to affordability. Private personal pensions are what everybody should try to have because there’s no guarantee that a state pension will be there later in life. It’s just becoming more important for people to look at what their lifestyle is going to be like in retirement and how this can be funded.
Is it ever too late or too early to take out a pension?
It’s never too early but it all comes back to priorities. When a person is young, they tend not to look at pensions as it’s a little bit more important to look at the protection side of things. Life cover linked to mortgages and income protection being examples.
For someone older, it’s never too late as again it comes back to affordability and depends on time to retirement, other provision, income required.
How do you calculate what a person needs from a pension?
I simply ask them what they need to live comfortably and then take it from there.
I visit the client finding out about their lifestyle, their finances, goals, pensions, assets and determine opportunities.
Any other information people might benefit from?
Yes, don’t forget there’s a lot of people who have pensions lying idle from previous employers. I investigate these and advice accordingly as to the options based on potential projections.
I would always advocate any person taking on a new job or moving employers to join their pension scheme immediately. Yes, your contribution is 4% but you’re gaining 4% free from the company’s legal commitment.