What’s the biggest financial challenge that some of us will face in 2015? It could come from an unexpected quarter. The much-vaunted pension freedoms – one of the key planks of the Tories’ pre-election strategy – could cause problems for many. Why? Complications and lack of clarity.
And that’s not just because many of the specific rules about what we will all be able to do with our pension cash from the age of 55 remain unclear. It’s because a new government after May’s general election could conceivably scrap the new freedoms.
Frankly that’s unlikely, but many of the changes could be overturned, pension experts warn. Will pension tax relief be abolished or redistributed to benefit lower- paid workers at the expense of higher-rate taxpayers? What action, if any, will the City watchdog decide to take on historic annuity sales, which have been heavily criticised?
The pension industry is also waiting with some trepidation to see what changes the Financial Conduct Authority may make to the design, pricing and sales rulebook for retirement income products.
If you think that doesn’t concern you, think again. Bear in mind that your retirement years could last many decades and you’ll realise the importance of ensuring you have enough cash to last.
What decisions do you need to make now, ahead of the new rules being introduced in April and, indeed, ahead of May’s election? One problem, anticipated by Alan Higham of Fidelity is that many pension companies could choose to do nothing with their current retirement-income products until things become clearer.
“As a result, many people will be faced with moving their pension to take advantage of the new freedoms in April,” he predicts, adding: “And fears of Labour potentially reversing the changes together with pent-up demand could see a massive spike in consumers seeking to access their pension pots.”
He points out that it can take up to 12 weeks to transfer pension funds safely, so people who want to access their pension under the new rules in April should start the process of investigating as soon as possible.
I talked to Mr Higham about the changes and some of the things that people should be preparing to do now. To watch a video of that interview go to ind.pn/1C8dFK6.
Rare but useful advice from an energy company boss
I had a long chat recently with the chief of an independent energy company. I put to him some of the many problems readers have with energy suppliers, such as confusing tariffs and poor service.
Doug Stewart is chief executive of Oink Energy, a new company that launched towards the end of 2014. Being independent, I hoped he might prove to be a little more outspoken than one of the big six suppliers about what energy customers can expect in 2015. I was right.
First I asked him what might happen to energy prices this year and whether we should be rushing to fix tariffs. No, he said. “The outlook for both gas and electricity prices will stay the same across the next couple of years, so Mr Miliband needn’t freeze anything if he gets voted in in May. It looks like prices are staying where they are through market forces.”
That certainly sounds like good news for consumers, but what can we do to cut energy bills? Mr Stewart said 2015 is the year to focus on consumption rather than price. “The UK has some of the cheapest prices for energy in Europe and yet our bills are some of the highest. That’s because we consume a lot and waste heaps through thermal inefficiency in our housing stock.” In other words we have leaky houses.
What can we do about it? There are grants available for improving your home, and the Government’s green deal if you want to borrow to make improvements. “But there are the simple little things that can be done,” Mr Stewart pointed out.
Don’t leave windows open if you are heating your home, is his first suggestion. It sounds obvious but many people do leave windows open, meaning expensive energy simply flies out of the window. By the same token, it’s sensible to close internal doors if you are heating a particular room.
“If your boiler is over 15 years old you might want to think of replacing it. It’s an investment, but the payback can be swift,” he reckons. “Have you insulated your loft? Lots haven’t, and it could be worth at least £145 a year in savings.”
Our talk is littered with such common-sense tips, including advice to switch stuff off that isn’t in use – including lights. “It’s the little things that add up!” He also mentions the modern problem of phone battery anxiety, pointing out that they really don’t need to be on charge when not in use.
“It’s not rocket science but pocket science, perhaps,” Mr Stewart says.
Whatever he calls it, it’s useful information, which is unusual to be coming from an energy boss, in my experience!
How technology will disrupt our futures
It sounds like the stuff of science fiction, but a new book warns that technology is set to change the world much more than it ever has done before. That’s good news, yes? Not necessarily, warns co-author Michael Baxter, who says: “Technology will disrupt business, the economy, jobs, our health, and above all what it is to be human.”
How so? He looks back to make his point. “Imagine that at the turn of the last century you had received a message from the future saying that in 2012 people would take more photographs than in any previous year in history. You may have rushed out to buy shares in Kodak. But that would have been a mistake. The company went bust that year.”
Sound chilling? The book – entitled iDisrupted – celebrates some of the incredible technologies in the pipeline, but warns of the effect they may have. Graphene, for instance, will revolutionise energy, storage and computers. Meanwhile nanotechnology will transform health care. Robotics, the Internet of Things, and 3D printing will change the way in which industry works.
Mr Baxter warns: “The sharing and free economy may mean fewer tax receipts for governments, and robotics may lead to job losses. Demand may be permanently less than potential supply. All money may soon be electronic, governments may fund spending via a kind of virtual money printing press, and interest rates may even go negative.” Still feeling so positive about the future?