Simon Read: Start saving for the longest longest holiday of your life
Saturday 11 June 2011
Another week, another pensions survey pointing out that we all need to save more. Last week HSBC suggested that there's an ostrich generation of folk failing to take responsibility for their retirement. This week it was Scottish Widows turn.
The Lloyds Banking Group-owned insurer published its seventh annual UK Pensions Report, launching it with a debate in Westminster on Tuesday. Frankly there wasn't much of a debate to be had. Instead there was consensus from alll the interested parties there – including the likes of charity AgeUK and the Personal Finance Education Group – that the coming pensions gap is a problem and something needs to be done about it.
Scottish Widows' pensions guru Ian Naysmith suggested that people need to be "frightened" into doing something about their pension planning. Shadow Pensions Minister Rachel Reeves said she wants to find ways to "encourage" people to save for their retirement.
The problem, as most attendees conceded, is that most ordinary folk have more pressing financial priorities that saving for retirement. For young adults that could be the worry of paying off student debts or building up savings in the possibly folorn hope of buying their first home.
For slightly older folk, raising children or the ongoing cost of maintaining a home can swallow all their spare cash leaving little or none for the future. Even those who have money to spend or save often choose to spend it now on holidays or a better car than lock it away. That's totally understandable. As Ian Naysmith pointed out: "There's no point in living in poverty now to have a decent time later."
Scottish Widows' figures show that only 51 per cent of people are making enough provision for their retirement. Last year the figure was 48 per cent, which sounds as if there's been an improvement until you look back and discover the figure was 54 per cent in 2009.
In other words, as many people as ever are failing to prepare for the financial implications of retirement. Personally, I'm not too fearful as I reckon in my profession I may be able to continue working into my seventies earning a crust and any money I have goes towards my children. But I've thought about the issue and made a decision accordingly.
The fact that half of us is not saving for our retirement may not be too big a problem if we've all done the same and are aware of the financial implications. But if we are really ostriches ignoring the future and simply living and spending for now, then that is a worry. Think about retirement as a long holiday – does that help you take it more seriously?
Buy-to-let mortgages are back with a bang with lenders lining up to tap into the market with juicy new deals. Shockingly, some seem to be exploiting potential landlords by charging among the highest mortgage fees I can ever recall seeing.
Two mainstream lenders this week trumpeted their buy-to-let deals. The Skipton has a two-year fixed rate at 3.99 per cent, while the Coventry has a five-year fix at 5.49 per cent. Both are reasonably competitive rates for their length until you look at the arrangement fees.
The Skipton is charging £2,495, while the Coventry tops that with an outrageous £2,999 fee. There may well be additional work in setting up a buy-to-let mortgage, but not to that extent. It's time to stop this practice and for all fees to be scrapped so borrowers can compare interest rates easily.
Advice: Online action plan may not be enough
the money Advice Service has launched an online money health check which aims to put people in charge of their money. In 10 minutes, the free health check (at www.moneyadviceservice.org.uk/healthcheck) promises to give a personal action plan.
This is to be welcomed, of course. Anything which helps people focus on their finances and think about ways to improve them is a good thing. And with questions about such subjects as emergency savings, or how you would cope with a change in your circumstances, many people could benefit from spending 10 minutes taking the health check.
I haven't taken the health check myself, but would be interested to hear from anyone who has and how useful it proved. But when it comes to money, experience has shown me that most people prefer to have a face-to-face chat rather than an online questionnaire. The reassurance that can come by talking to someone in person can offer much more than a faceless set of online tips or action plans.
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