The Association of British Insurers (ABI) has called upon the Government to review its policy with regard to the state second pension, the top up pension over and above your basic state pension paid for out of National Insurance contributions.
They suggest that a flat rate second scheme will help to bridge the savings gap. They believe that action has to be taken now to incentivise people to save again as the savings gap increases and more and more of us will find ourselves below the poverty line in retirement.
Our view:
There has been a steady drift way from savings given market instability and so-called stealth taxes such as the removal of the ability of pension funds to re-claim tax credits, effectively reducing returns even further. The problem is quite simple, the Government reward those who do not save by providing a minimum income guarantee and paying for any nursing and residential care by retaining some of your basic state pension.
If you have saved and have built up pensions or other assets, you end up paying for everything bar the nursing fees part of care yourself. People are not fools but government officials in their planning think they are. The 'house view' from the team of advisers is that there is no point saving or owning property for when you retire as you get penalised. You are better off moving abroad.
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Learn more about the rules of care when you are older in the Care Fees Adviser.com.
What is the minimum income guarantee? Visit the Pensions Adviser.com.