News Review: Equity Release
Government is engaging by
Andrea Rozario, director general, SHIP
For years now, the concept of the perfect retirement has been under threat from a combination of factors including a lack of retirement provision, increased longevity, an over-reliance on limited
state funding and a rapidly aging population. Just how serious this situation has become was made
clear earlier this month when the Chartered Insurance Industry released a report revealing the potential size of the problem. In its report An Age-old Problem – Developing Solutions for Funding Retirement, it looked into the savings required to fund retirement once costs associated with long-term care and debt are taken into consideration and estimates the UK retirement savings defi cit stands at £9 trillion. This fi gure is staggering and highlights how it is simply
no longer enough for people just to plan how much they will need to save in order to live comfortably in retirement – rather they need to plan for the likelihood that they will require some form of care in later life. The government cannot meet this shortfall alone and
therefore encouraging people to plan for their income in retirement is a key issue. The current system is creaking badly and successive administrations have been aware that steps needed to be taken. But only in the last 12 months has the need to shake-up and rationalise the system become a top priority for the government. Nevertheless the sheer pace at which the new coalition
government has issued proposals and the volume of consultations it has launched has been staggering. And from the perspective of the fi nancial services industry they represent an almost unprecedented shake-up. Looking back on the proposals, the government has announced plans that include: raising the state pension age to 66 by 2020 – six years earlier than fi rst planned – and linking future increases to longevity; cutting the annual pension contribution allowance from £255,000 to £50,000, and reducing the lifetime allowance (the limit, set by Treasury, on the value of benefi ts a member can take without incurring a tax charge) for pension savings for individuals from £1.8m to £1.5m; increasing the requirement to annuitise from 75 to 77 and then abolishing it completely; introducing fl exible (for those who meet the £20,000 minimum income requirement) and capped drawdown and removing the default retirement age of 65 from October 2011. Then there are the consultations it has launched which
are still ongoing. SHIP supports all reform that will enable people to enjoy a fi nancially secure retirement. And this focus on encouraging greater saving for retirement and simplifying the UK pension and related benefi ts system is to be applauded.
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MORTGAGE INTRODUCER JUNE 2011 23
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