The Pensions Regular has published a report examining the impact of automatic enrolment so far, along with future challenges.

A key finding was that more people in their twenties are now saving into their workplace pension due to the success of automatic enrolment. The report also shows a significant reduction in the gender gap in pension saving and an increase in savings among employees of small and micro businesses.

The report has been published annually since the start of automatic enrolment in 2012 and this is the final publication. Key highlights of the report include:

• Between the introduction of the reforms in 2012 and April 2018, the overall proportion of eligible staff saving into a pension increased from 55% to 87%.

• In the private sector, participation seen in 22 to 29 year olds increased from 24% in 2012 to 84% in 2018.

• In 2018 participation rates for both male and female eligible employees in the private sector was 85%.

Official Statistics on flexible pension payments show a 21% increase in the amount withdrawn from pensions flexibly, increasing from £1.97 billion in Q3 2018 to £2.37 billion in Q3 2019. The number of individuals making withdrawals saw an increase of 27% over the year up to 327,000.  This was a slightly lower number than in the previous quarter but reflects the seasonal trend where more people withdraw funds at the start of the tax year.

The average withdrawal in Q3 2019 fell slightly to £7,250, down from £7,600 in Q3 2018.  The statistics have shown average withdrawal amounts consistently decreasing since reporting became mandatory in Q2 2016 with peaks in Q2 of every year, again in line with the start of the tax year. The decrease in average withdrawals suggests fewer people are paying unnecessary income tax on large withdrawals, however, advice is still essential to ensure money is taken in the most tax efficient way.

Even where careful planning is sought, due to the way withdrawals are made under the PAYE system too much tax is often deducted at source.  Where this occurs clients can make a reclaim during the tax year.

Viewing 65 as the marker for old age is an outdated notion, a report from the Office for National Statistics (ONS) has said, as new data suggests the health of a 70-year-old today is comparable to that of someone five years their junior a decade ago. The report has renewed calls from experts for employers to reconsider their attitudes towards older workers and those who choose to work beyond the traditional retirement age. The analysis of health data and life expectancy by the ONS found that men in England and Wales aged 70 in 2017 had the same remaining life expectancy – 15 years – as a 65-year-old did in 1997.

Similarly, women aged 70 had the same remaining life expectancy as a 65-year-old in 1981. The report also found that men and women were now comparably healthier in their older age. In 1981, 45% of people aged 65 to 85 had poor general health, compared to 39% today. Levels of poor health for women aged 70 in 2017 were the same as those aged 60 in 1981, while men the same age had comparable health to those who were 65 in 1997. While highlighting the limitations of its own analysis, the report said the age of 70 now “appears to be the new 65 (or even younger) in terms of health”. The ONS predicted that, by 2050, those over the age of 65 will make up almost a quarter of the population, while the number of people aged 85 and over is growing faster than any other age group.

Five years after its introduction onto the national curriculum, students still say they are not getting enough access to a comprehensive financial education and that they worry about money. They want to learn more about the practicalities of managing money – budgeting, debt management, tax and how products work. And well over half (60%) would like this to be a separate subject.

The findings are from the latest Young Persons’ Money Index, an annual research tracker run by The London Institute of Banking & Finance to assess the take-up and impact of financial education in schools. The research found:

Today, 64% of students say they have access to financial education compared to only 29% in 2015. That’s a big difference.

However, most are taught financial education as part of other subjects and the majority don’t receive financial education regularly.

• Only 18% had access within the last month
• 16% only in the last term
• 17% only in the last year
• 15% more than a year ago
• The numbers who say they get most of their financial knowledge and understanding outside of school – from their parents and/or self-learned online – remain high (86%).
• It is significant therefore that the majority also say they would like to learn more in school (82%) and regularly worry about money and their personal finances (69%).
• When asked how they would like to learn more about money, 60% would prefer to learn this as a separate subject.
• Learning more about financial products such as mortgages and credit cards, tax, budgeting and debt management are their top priorities.

Based on the Annual CPI to September 2019 of 1.7% and legislation, the Lifetime Allowance for 2020-2021 would be calculated as £1,072,900. However, based on last year the Government chose to round up to the nearest £5,000 which would mean the Lifetime Allowance for 2020-2021 would be £1,075,000.

Trapped investors in the £3 billion Woodford Equity Income fund are forecast to lose a third of their remaining investment according to modelling of the wind-up process commissioned by administrator Link Fund Solutions. The modelling, conducted by private equity specialists PJT Park Hill last month, outlines a base case forecast of 32.5% losses as the fund is liquidated. Under the worst-case scenario, the fund’s value would fall by 42.6%. Woodford Investment Management, the sacked former managers of the fund, had claimed the impact on the fund had it reopened would have been much less severe.

In a presentation for Link prepared by Woodford in October in a bid to retain the mandate, it estimated worst-case losses of 9.3% from the remaining repositioning it believed was required for the fund to reopen in December. The fund group was sacked before it was able to deliver the presentation. This estimate did not however account for the likely impact of the large-scale withdrawals expected. Woodford Investment Management was anticipating the fund would shrink to around £750 million had it reopened, retaining some support from financial advisers who had signalled their backing.

Link said its decision to wind-up Woodford Equity Income was based on ‘insufficient progress on the repositioning of the fund’. The fund’s wind-up is set to add to the mounting losses already suffered by investors trapped in the fund. Since the fund’s launch in June 2014 to the announcement of its wind-up last month, investors have lost 18%, while the FTSE All-Share has risen 33%. In the last two years the fund is down 37% as the portfolio has unwound dramatically, including a 19% fall since the fund was suspended in June.

The investment trust sector may be more than 150 years old, but it has not stood still. The types of trusts available to private investors have changed markedly over the years, and in particular, during the past decade. Perhaps the most striking development has been the huge increase in trusts that hold alternative assets — covering a vast range of non-equity-based investments such as infrastructure, renewable energy, property and debt.

In July 2019, total assets under management in this area exceeded £80bn, according to the Association of Investment Companies (AIC) — an increase of over 150% since 2009. Trusts focused on alternatives comprise around 40% of assets under management across the entire investment trust universe.

The growth of this sector has been fuelled by investors seeking higher income investments. But some of these trusts are higher risk as well as higher yielding, so investors must weigh these risks carefully when deciding how much to allocate to them — if at all — and which trusts to pick. While it is good that there is an increasing range of options on offer, as well as being higher risk than traditional trusts focused on mainstream equities, alternatives trusts invest in assets that are hard to understand so thorough due diligence is called for.

A total of £30 billion being withdrawn ‘flexibly’ from pensions, new figures published by HM Revenue and Customs (HMRC) show, taking advantage of the “pension freedoms” introduced in 2015. In this quarter, 327,000 individuals withdrew from pensions – up 27% from 258,000 in the same period of 2018. The latest withdrawals statistics is a 3% decrease from 336,000 individuals in the second quarter of this year. Figures show the average amount withdrawn per individual in this quarter of 2019 was £7,250.
This has fallen by 5% compared to last year – which stood at an average withdrawal of £7,600. Since reporting first became mandatory in the second quarter of 2016, average withdrawals have fallen “steadily and consistently”, HMRC said, with peaks in the second quarter of each year. Experts believe that the falling average withdrawal rate suggested that people are thinking carefully about how to spend their hard-earned pension rather than risking retirement ruin with an ill-advised binge.