A recent report into personal finance has created something of a stir in Government circles with the majority of the UK population apparently confused by the vast array of financial products available.
The report confirmed the Governments worst fears with less than 4 in 10 of the UK population saving for their retirement – which will surely result in an even greater strain on the UK Pension system in the future.
It seems that there is still much work to do to educate the UK public with regards to saving for their future retirement, how to budget and looking beyond the short term. This has further strengthened the call for more detailed financial planning to be taught at school, ensuring that the younger generation are more aware of their future requirements.
Why are people not planning for the future?
Of the reasons mentioned for this lack of long term planning were:
- Confusion with regards to the cost of financial products.
- A belief that the state would provide for people in the future.
- Scepticism with regards to the financial industry (recent mis-selling scandals).
- The cost of living.
When you bear in mind the fact that the UK has one of the most developed financial markets in the world, it does seem strange that the general public are not planning for their future.
The longer this situation continues the more chance of firmer Government intervention which would be sure to cause resentment with the UK population.
Did You Opt Out OF SERPS? Was It The Right Move?
It has recently been announced that the number of complaints from people who were potentially mis-sold State Pension opt out plans soared last year. Rising from 115 in 2005 to 954 in 2006, there is concern that many many more people may have been wrongly advised.
The plans centred around the opportunity to leave the State Earnings Related Pension Scheme (SERPS) or the more recent State Second Pension (S2P) and receive a national insurance rebate to start the new pension plans.
The problem is that while everything was upfront, and all payments were in line with the guidelines, there were some pretty hefty commissions paid. These commissions not only effect the short term value of the funds, but also result in less money to reinvest (and hopefully grow year on year) – with some people up to 40 years from retirement, the results could be fairly dramatic.
The Financial Services Authority are now suggesting that up to 120,000 people may have been mis-sold these plans and wrongly advised to opt out of SERPS / S2P. The industry will be undergoing yet another review of individual cases, in a chilling scenario to the more recent pension mis-selling scandal.
While it is estimated that the average loss per person will only be in the region of £7 a week, this can add up to a fairly hefty sum for those who enjoy a long retirement. It seems that every time the government try to sort out the pensions problem in the UK, another problem appears. This is starting to have a serious effect on the publics trust of the industry, and will not help the governments long term target to reduce the state pension liability.