Latest news with #pension
South China Morning Post
3 hours ago
- Business
- South China Morning Post
Hong Kong lawmakers support MPF change to make accounts fully portable
Hong Kong lawmakers expressed support for allowing 'full portability' in the city's Mandatory Provident Fund (MPF) , which would allow members to move their entire pension balance to a different provider once a year. Legislative Council panel meeting discussed a legal change on Monday that would implement full portability next year. Currently, members can move their own contributions, but not those made by their employer, once a year. Chief Executive John Lee Ka-chiu unveiled the proposed change in his policy address in October. The change would 'give more choice to employees, while also adding to competition in the industry', said lawmaker Robert Lee Wai-wang, who is also the chairman of Hong Kong-based Grand Finance Group. 'The full-portability reform aims to encourage employees to proactively manage their MPF investments and promote market competition, thereby creating room for fee reductions,' said Sharon Ko Yee-wai, deputy secretary for Financial Services and the Treasury, during the council's financial affairs panel. Established in 2000, the MPF is a compulsory retirement scheme that requires employers and employees to each pay 5 per cent of the salary, up to a combined HK$3,000 (US$385) a month, into an investment account managed by one of 12 MPF providers. At the end of March, the scheme covered 4.75 million members and had total assets of HK$1.338 trillion Only employers could choose the MPF provider until 2012, when the Employee Choice Arrangement was introduced. Commonly known as 'semi-portability', this allows employees to transfer their own contributions – but not those made by their employers – to a new provider once a year. Employees conducted about 1 million transactions involving HK$50 billion under the semi-portability regime from its launch up to April of this year, Ko said.
Daily Mail
11 hours ago
- Business
- Daily Mail
Why isn't 8% of my salary going into my pension like it's meant to? STEVE WEBB replies
At my place of work, a big retail chain, the agreement for workplace pension contributions is 8 per cent, including 4 per cent from the employee. I work in the warehouse as a warehouse operator (not management). When I questioned HR on why 4 per cent of my wage was not being taken out, I was informed that there is a £480 (per 4 weeks) threshold and that the pension contributions start after this £480. Whenever I read up on work place pension contributions, I see it stated about the minimum 8 per cent but in reality this not correct, due to this threshold figure. My questions are: why is 8 per cent given as a minimum, and why and when did the £480 threshold come into effect? Steve Webb replies: The often-quoted figure of 8 per cent minimum workplace pension contributions is, as you rightly say, not quite what it seems. I'm happy to explain what is going on, why it was set up in this way and how it might change in future. To understand what is going on, it's worth going back to basics about what pensions are trying to achieve. One of the main reasons why we have a pension system is to help ensure that people's standard of living does not drop sharply when they no longer have a wage. To achieve this, we often talk about a target, for people on modest incomes, of securing around two thirds of pre-retirement income once you stop working. People should not need 100 per cent of their pre-retirement income because they typically no longer have 'working age' costs such as mortgage, travel-to-work or childcare costs, and also no longer pay National Insurance on their income. But a target of around two thirds would enable most people to enjoy a similar standard of living when retired to the standard they were used to when in work. The next thing is to look at how much of this will come from the state pension. As a very rough benchmark, the new state pension will replace a little under one third of the average worker's wage. This means that they need a similar amount from a private pension to bring them up to the two thirds target. When automatic enrolment was being designed, it was assumed that the first slice of earnings was fully replaced by the state pension and that what was needed on top of this was a percentage of the 'next slice' of earnings. For this reason, when the law was written to require workers and firms to make pension contributions at a set percentage rate, this percentage was applied to earnings above a floor, currently £6,240 per year. Earnings above this level (up to a ceiling of £50,270) are described as 'qualifying earnings', and the mandatory 5 per cent from the employee (or 4 per cent net of tax relief) and 3 per cent from the employer are applied to this band. I should stress that we are talking here about the legal minimum rates of contribution and that many employers and workers do more than this, including some who apply contributions from the first pound of earnings, not just on 'qualifying' earnings. Over time there has been growing concern over this system, particularly because of the impact on lower earners. To give an example, for someone who works part-time and earns (say) £12,480 – double the floor for qualifying earnings- the mandatory pension saving rate is applied to just half of their wage. By contrast someone working full time on £31,200 – five times the floor – is making contributions based on four fifths of their total wage. In response to this, a Government review of automatic enrolment published back in 2017 recommended that the starting point for contributions should be reduced to zero, so that the 8 per cent headline figure would apply to all earnings up to the ceiling, currently £50,270. Despite the general consensus about this recommendation, nothing has so far changed. In the last parliament a law was passed which paves the way for this change, but it has yet to be implemented. Unfortunately, it seems that progress on this front is probably now further away than it has ever been. The reason for this is that any widening of the band of 'qualifying earnings' would cost both workers and employers more. With concerns over an ongoing 'cost of living' crisis for many lower paid workers, and with a very substantial increase in employer National Insurance in the Autumn 2024 Budget, there is very little appetite in Government for further measures that would hit paypackets or employer costs. In short, therefore, although we urgently need to get more money going into pensions, the chances of reform any time soon look very small. The one glimmer of hope is that the Government is expected shortly to announce the second phase of its major review of pensions, and this will include the adequacy of existing pension saving rates. It is possible that such a review will eventually (again) recommend applying mandatory contributions to the first pound of earnings, not just those above a floor. But, even if it did so, I suspect that the implementation process would be protracted and could even fall outside the current parliament. Ask Steve Webb a pension question Former pensions minister Steve Webb is This Is Money's agony uncle. He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement. Steve left the Department for Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock. If you would like to ask Steve a question about pensions, please email him at pensionquestions@ Steve will do his best to reply to your message in a forthcoming column, but he won't be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons. Please include a daytime contact number with your message - this will be kept confidential and not used for marketing purposes. If Steve is unable to answer your question, you can also contact MoneyHelper, a Government-backed organisation which gives free assistance on pensions to the public. It can be found here and its number is 0800 011 3797.
Times
a day ago
- Business
- Times
Why a mid-retirement MoT can keep you on track
You get your car checked every year, and even the boiler gets a regular service — but when was the last time you gave yourself a money MoT? People are living longer than ever, and while this is a welcome development, it also presents a significant financial challenge: ensuring your pension pot can comfortably last the distance. For many people in their seventies, a mid-retirement MoT has become an essential part of managing their finances. By this stage, people tend to have settled into retirement and have a clear picture of their lifestyle and outgoings. This makes it easier to work out a sustainable rate at which to take money from their pension pot. Only 48 per cent of people aged between 65 and 75 are confident their savings will last their lifetime, according to a report by the insurance company Aviva and the charity Age UK. That's despite the fact that many people underestimate how long they will live. Many people assume that their spending patterns will be consistent through retirement, the survey of 1,000 people found. That's wrong — it is usually 'U-shaped', say experts, with higher initial outgoings, a potential decline in the middle years, and then a resurgence in later life, particularly if there are care costs. Romi Savova from the pension firm PensionBee said: 'Just as regular pension check-ins are essential before retirement, it is important to assess your income and spending once you're in retirement, and especially around the halfway point. 'A mid-retirement MoT is a good way to make sure your savings remain on track, particularly as your lifestyle, spending and health needs may have changed over time.' John Ford has planned meticulously. Ford, 73, has an inflation-linked defined benefit pension — which pays a guaranteed income — and a state pension, which together give him an annual income of about £36,000. He also has £340,000 in a defined contribution (DC) pension — which gives him a retirement income based on how well his investments perform — which he has barely touched. 'I am keeping it for emergencies and future medical bills,' Ford said. 'Last year I paid about £7,000 to remove cataracts at a private clinic as I didn't want to wait for a slot on the NHS. I also need some money to make some repairs to my property near Bristol.' Ford retired from his job as a surveyor in the construction industry in 2017, when he was 65. His wife, Carole, 70, retired four years ago and gets a state pension plus a small defined benefit pension, giving her an annual income of about £15,800. • Flip-flopping is chipping away at our faith in pensions Ford said: 'Luckily we have enough to live a decent lifestyle and our spending has not really changed much since we retired. However, we know we may need money later in life for care bills, which is what the DC pot is for.' Reviewing your finances once a year can help you to identify whether you need to rebalance your investments or make any adjustments to the amount that you are withdrawing, and to check that you are on track with your financial goals. Lucie Spencer from the wealth manager Evelyn Partners said: 'The early years of retirement are usually where most of the non-essential spending happens. For many people this is the first time they have had a substantial pot of money and total freedom to spend it as they wish. 'However, many do not plan for their later years. What will happen if they go into a care home or need support at home? Who will pay the bills if all their funds are spent? Will the state pension be enough to live on if they've exhausted all their savings? Such questions tend to become more pressing from the mid-seventies.' Withdrawing money from your pension is a fine balance — it needs to be enough to provide the lifestyle you want, without depleting your pot so fast that it runs out. A common guideline suggested by experts is to withdraw money at a rate of 4 per cent of the value of your pot per year. The idea is that since the rest is still invested, it should be able to replenish itself in time for the next withdrawal. Fidelity International, the wealth manager, analysed what happened to a £100,000 pension pot after ten years of withdrawals starting at 4 per cent a year and rising by 2 per cent each year to factor in inflation. Its analysis looked at withdrawals starting each year from 1994 to 2014 to see how much the pot would be worth after a decade. Based on a typical portfolio of 60 per cent global shares and 40 per cent in bonds, there were only three years (1999, 2000, and 2001) in which someone could have started taking annual income and been left with a pot worth less after a decade — in all other years the pot's value would have increased, even after ten years of withdrawals. For example, if someone had started making withdrawals of 4 per cent a year in January 2014, the value of their £100,000 pot would have grown to about £154,000 by January 2024. However, if they had started withdrawing in January 2000, the value of their pot would have fallen to £81,319 by January 2010, according to Fidelity's analysis. • Are you on track for your dream retirement? It is important to bear in mind that managing withdrawals can become problematic at times of stock market turmoil. When the market falls, so too does the value of your pot, as many savers experienced during the recent Trump tariff upheaval. Spencer said it was best to avoid withdrawing money at such times as it could mean locking in losses, and make it harder for the value of your pot to recover: 'During retirement if you are drawing down on your pension after a market shock, you could be selling investments at impaired values and that can deliver a serious blow to the longevity of your pot.' It is recommended that you have about a year's worth of spending, including bills, saved in cash which you can use instead during such times, allowing your investments to recover. An alternative to leaving your pot invested is to use some or all of it to buy an annuity, which provides a guaranteed income for life in exchange for a lump sum. Tom Selby from the investment platform AJ Bell said: 'Once you reach your seventies, you may start to consider whether drawdown is still the right option, or if using some of your fund for an annuity could be a good choice.' Life expectancy directly affects annuity rates — the longer you are expected to live, the lower the rate, because the income will have to paid out for a longer period. This means that if you buy an annuity later in life, you could get a higher income. A healthy 75-year-old with a £100,000 lump sum could secure an income of about £10,129 a year, according to the pension firm Just Group. That is about 30 per cent more than the £7,813 a 65-year-old is likely to get. Disclosing health or lifestyle factors that might reduce life expectancy, such as smoking or diabetes, could also mean you get a better rate. Shopping around for the best deal is always advised. Annuities do have drawbacks. The level of income is fixed so you may find it is not enough if your circumstances change, such as needing more money for care costs. You also forgo potential long-term investment growth, and unless you choose a policy that pays out to a surviving spouse, the income dies with you. A concern for older people in retirement is cognitive decline and the associated anxiety with technology, digital accounts, and a general loss of confidence in managing money, especially investments. It is important to arrange for someone to manage your money if you aren't able to do it yourself. 'I recommend all clients have a power of attorney in place in case they do start to lose mental capacity,' Spencer said. • Do I need to update my power of attorney? A lasting power of attorney is an official document that gives someone the authority to manage your financial and medical interests if you are no longer capable. There are two types of power of attorney — ordinary and lasting. The first is used as a temporary measure, for example if you are overseas and cannot do it yourself. The lasting power of attorney comes in two forms — health and welfare, and property and finance. One allows someone to make medical decisions on your behalf, while the other covers your money. It is usually advisable to have both. You can apply for both at the same time and must have them in place while you still have the mental capacity to give someone the authority to act for you. The forms can be downloaded from and each costs £82. You get a 50 per cent discount if your pre-tax income is less than £12,000 a year.
Forbes
2 days ago
- Business
- Forbes
Raising The Retirement Age Also Requires Employment Policy Reform
Last week, Denmark passed legislation to raise its retirement age to 70 in 2040, positioning the country to have the highest statutory pension eligibility worldwide. But Denmark is not alone. Many other countries in Europe and Asia are making similar moves in response to demographic shifts. The OECD projects that by 2060, the average retirement age in the EU will approach 67, with several countries expected to reach age 70 or more. However, pension reform is only a partial solution. Without protections for older workers, systemic ageism will continue to reduce employment opportunities–risking increased unemployment and poverty. Governments are responding to increasing longevity and declining birth rates. This demographic duo produces older populations and shrinks the labor force, pressuring the sustainability of pension systems designed for shorter lives and larger labor pools. The OECD projects that age-related spending could increase by 6.5 percentage points of GDP between 2021 and 2060. Few governments can sustain multi-decade retirements on a mass scale. As it is, many pensions are inadequate to support independent living. In 2022, the EU had nearly 30 working-age people (20 to 64) for every 10 people aged 65 or older. By 2045, the ratio is expected to drop below 20 for every 10. In China, the retirement age is one of the lowest: 60 for men, 55 for white-collar women and 50 for women in factories. Yet, China's National Health Commission projects that the over-60 population will grow from 280 million in 2022 to more than 400 million by 2035. A decade ago, 10 workers supported each retiree. Today, it's only five. By 2050, it may only be two. Even the U.S. has discussed the possibility of increasing the age for full social security benefits from 67 to 70. However, raising the retirement age creates additional economic challenges. For pension reform to be successful, it requires parallel employment policy reform. Pension reforms are needed. But without systems to support continued hiring, development and retention of older workers, economic insecurity for older workers only increases. Older workers face systemic employment barriers. A 2022 study by the National Bureau of Economic Research revealed workplace age discrimination as a leading indicator of financial instability and heightened poverty risk. Once unemployed, older workers struggle to find re-employment for months or years–often without success. Millions lack retirement savings. The Pew Charitable Trusts reports that in the U.S., as many as 56 million private sector workers lack an employer-sponsored retirement plan. One in five people over 50 have no savings at all. Almost 40% worry about meeting basic living costs such as food and housing. For these people, working indefinitely is the only option for financial security. The consequences of extended unemployment include rising homelessness. The 2024 Annual Homelessness Assessment Report to Congress reported that one in every five people experiencing homelessness was aged 55 or older, with more than 104,000 people experiencing homelessness between the ages of 55 and 64. Another 42,150 people were 65 or older. The report noted that 'nearly half of adults aged 55 or older (46%) were experiencing unsheltered homelessness in places not meant for human habitation.' Homelessness becomes a discriminating factor because most employers refuse to hire people who do not have permanent residence. Once homeless, people find it challenging to re-home, leading to a cycle of chronic homelessness. Some countries are already pairing reform with protective policies, usually falling into one or more of the following four categories: 2. Flexible Retirement and Work Arrangements 3. Targeted Support and Training 4. Income Support for Vulnerable Older Workers Denmark, Netherlands, Germany and the U.K. are notable for integrating flexible retirement options, retraining, and robust legal protections as they raise the retirement age. The U.S. has foundational protections for older workers through the Age Discrimination in Employment Act and the Older Workers Benefit Protection Act; however, these laws have limitations, particularly in enforcement and the burden of proof. Despite numerous legislative proposals to strengthen protections (like POWADA), legislation has stalled in committees for years. As a result, age discrimination remains widespread, and older workers—especially those in their 50s and 60s—face significant barriers to employment, increasing the risk of poverty as retirement ages rise. Since the Trump administration has begun slashing government funding, protections for older workers are disappearing. For example, the Senior Community Service Employment Program (SCSEP), the only federal job training program specifically for low-income seniors, is currently facing complete defunding in 2026. The SCSEP specifically provides job training, reskilling and part-time employment opportunities for low-income, unemployed individuals aged 55 and older. A 2025 report ranks U.S. states from best to worst for older workers. Leading the way are Washington, New Hampshire, Alaska, Maryland and Colorado. These states offer strong labor markets, pay transparency, remote work opportunities, and higher median incomes for seniors. They also provide additional protections and workforce development initiatives that help older workers remain employed. The worst states for older workers include Mississippi, Arkansas, Alabama, West Virginia and Kentucky. These states tended to have higher rates of age discrimination at work, the lowest household incomes and few remote workers among older adults–coupled with a poor entrepreneurial environment. 'Increasing retirement ages have become a prevalent measure taken around the world to address the sustainability of pension systems. However, doing so requires a comprehensive approach that considers broader social, economic, labor market, and health-related factors,' according to a 2024 report from the International Labour Organization. Smart countries are investing in a longevity-centric policy. Instead of viewing ageing populations as an economic threat, they recognize a willing and untapped talent pool. Leveraging older workers is always a smart move, but it is essential in a shrinking labor market. Raising the retirement age may be a necessary step. But without additional employment protections, pathways and purpose, it risks leaving millions behind. In an age of longevity, ageing populations are not a threat to prosperity—they're a key to unlocking it.
Yahoo
2 days ago
- Business
- Yahoo
Are you saving smartly? Top pension advice experts want you to hear
With the cost of living rising in recent years, many Brits are struggling to put money aside for retirement. At the same time, life expectancies are rising, meaning that the need to save is becoming ever more pressing. According to a survey from YouGov, 38% of UK respondents aren't currently saving towards retirement. Around 28% are saving up to 10% of their annual income for old age, while 22% don't know how much they're currently putting aside. While many Brits are wrapped up in immediate financial pressures, experts say it's important to engage with pension planning as soon as possible. Saving even a little, and knowing how to manage that money, can make a big difference further down the line. Here are some top tips to build your pension, collected from conversations with financial advisors. While our focus is on UK pensions, international readers can read more about other European schemes here. This one may seem obvious, but it's worth reiterating. The more money you put into your pension pot, the more likely you are to have a stellar retirement income. If you contribute when you are young, it also means that your investments — in the case of a personal or workplace pension — have time to grow. 'One key way of boosting your pension is to try and increase your contributions wherever possible,' Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, told Euronews. One way to do this, she explained, is by boosting contributions every time you get a payrise. 'You aren't used to having the extra money in your pocket so it's easier to portion some of it to go into your pension,' Morrissey explained. In the UK, most employees are automatically enrolled in a pension scheme. Generally, you will pay 5% of your wages into your pension pot, and your employer must make a contribution worth at least 3% if you earn over £6,240 a year. 'Auto-enrolment minimum contributions are set at 8% - this is a good start but ideally you need to be contributing more to get a good retirement income,' said Morrissey. She explained that some employers will offer more generous rates than 3%, sometimes matching your contribution level. Related Boom or bust? Economic impact of ageing populations and lower birth rates Can't wait to give up work? Why some people are not the retiring type Another option on the table is a salary sacrifice scheme. Your employer may let you reduce your wages or bonuses and instead allow you to funnel this money into a pension, topped up by employer contributions. As well as paying less income tax on this money, this also means that you and your employer will pay lower National Insurance contributions. Staying on top of your pension plan is an important part of building a nest egg, said Claire Trott, divisional director of retirement & holistic planning at SJP. 'Once a year — as a bare minimum — work out what you've got, what you're likely to get, and whether it will be enough for retirement,' she explained. When it comes to private and workplace investments, one way to engage is by carefully choosing where your contributions are invested. Workplace contributions will be placed in an average fund designed to suit all employees, which may not necessarily be your best option. 'The default fund might suit what you want to do. But for the majority of people, it's just okay. And you might be able to do something more with your money,' said Trott. Saving for retirement doesn't have to simply revolve around a pension fund, as there are lots of different products on offer. 'Pension savers can also utilise their tax-free ISA allowance to run alongside their pension,' Lucie Spencer, partner in financial planning at Evelyn Partners, told Euronews. 'Money invested … can grow free of tax on income or gains, which is ideal for retirement saving. Take note, however, pension saving effectively increases your basic rate tax band to reduce income tax whereas savings into an ISA are withdrawn from net income.' In other words, withdrawals from ISAs are tax free but the money put in is taxed. The age when you can access your state pension — which is separate from the workplace pension and built up through National Insurance contributions — is currently 66. For those born after 6 April 1978, it will be 68 years old. On the other hand, you can currently take a private pension, including some workplace pensions, from age 55. This will increase to age 57 from April 2028. Unless you need to, many advisors warn against taking your pension until you need it, as leaving it untouched allows the investments to grow. On top of this, taking your pension while earning can push you into a higher tax band — and you also don't want to risk running out of money. It's now very uncommon for people to stay with one company for their whole career, although job hopping has consequences for retirement planning. When you start a new job, your workplace pension doesn't automatically follow you. This means you can choose to keep your old pot separate from your new one, or you can consolidate it. 'Consolidation does mean admin is a lot easier when you want to start taking your pension, as it's all in one place,' said Claire Trott. Related Why are Gen X workers in the UK so pessimistic about retirement? Swiss officials admit to three billion-franc pension blunder Even so, she explained that grouping pension pots means you may lose out on scheme-specific perks. 'One particular scheme may be better than another one. So if you've got an old scheme, anything pre-2006, they can have really great benefits that you wouldn't have in one started today because of legislation changes,' she said. Evelyn Partner's Lucie Spencer also advised people to look into 'carry forward' rules, which allow savers to access unused tax relief from the last three tax years. You're only allowed to pay a certain amount into your pension each year before normal income tax rates kick in. The standard annual allowance for the 2025/26 tax year is £60,000, but 'carry forward' rules mean that this can be topped up in some cases. 'A large bonus, for example, can be put to work in a pension, with a saver potentially able to make a gross pension contribution of up to £220,000 before the end of this tax year on April 5, 2026, if they have not used any of their pension allowances from the previous three years,' Spencer told Euronews. Finally, experts said it's important not to forget about your state pension — although you won't be managing investments in this case. The amount of money paid out by a state pension is determined by a saver's level of National Insurance contributions, which depends on how many 'qualifying' years you've worked. To get the full amount, you need to have accumulated 35 qualifying years, and you need to have at least 10 years to get anything at all. 'Checking your state pension entitlement on the HMRC app for any gaps in your record is important,' explained Lucie Spencer. 'While the deadline to plug gaps all the way back to 2006 has now passed, there is still an option to pay for missing years over the past six years. Buying back missed years can be a great way for people to bolster retirement income as the state pension provides a guaranteed monthly income for the duration of your retirement,' she said. While the state pension typically requires less management than workplace and private pensions, it's still a key part of retirement planning. 'A reminder, the information in this article does not constitute financial advice, always do your own research on top to ensure it's right for your specific circumstances. Also remember, we are a journalistic website and aim to provide the best guides, tips and advice from experts. If you rely on the information on this page then you do so entirely at your own risk.' Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
