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Advisers’ new role in retirement planning

By Adrian Boulding

I recently combed through the Department for Work and Pensions’ (DWP) second state pension age review report again, which is due to publish its conclusions this spring. The paper’s grasp on the demographic changes happening across the UK population is impressive.

Suffice to say, over a third of the entire working age population of the UK will be pensioners by 2047. The result of this ageing is that the burden of triple-locked state pension provision on HM Treasury is rising pretty fast.

Managing the gap between the age we leave the workforce and when we receive our first state pension payment could be the biggest issue in financial advice in the coming year
The state pension and other benefits being paid to UK pensioners already amounts to 4.8% of the UK’s GDP and that percentage is set to rise to 6.2% of UK GDP by 2049/50.

It seems certain that, as longevity continues to rise, albeit at a slower rate on recent estimates, the state pension age will be ratcheted up (if not now, then later) in order to temper growing pressure on the public purse.

This leads us to the natural conclusion that many more will need to be working deeper into what used to be called ‘old age’, especially as we also know more people will be dependent on the state pension to assure a modest retirement income.

That said, the same DWP report notes that rates of unemployment and inactivity among 50-to-64-year-olds actually increased during the pandemic. Average retirement age currently sits at age 65.1 for men and 64 for women.

Managing a potentially increasing gap between the age we leave the workforce and the age we are able to receive our first state pension payment could become the biggest issue in financial advice in the coming years.

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My view

How utterly depressing is that ?

This is fabulous news if your receiving any form of U.K. government work pension.

If you are not, the chances are, your paying towards those pensions out of your wage packet .!
They are unfunded, taxes raised today pay for them.

“Public service pensions which have been in payment for a year will be increased by 10.1% from 10 April 2023 in line with the September-to-September increase in the Consumer Price Index (CPI). Any pension which has been in payment for less than a year will be increased by a proportionate amount depending on the number of months it has been in payment.”

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The procurement Bill

SMEs

The Bill proposes that, for all “covered procurements” (Section 12(4)) and “regulated below threshold contracts” (Section 85), contracting authorities be required to “have regard” to the fact that small and medium-sized enterprises may face particular barriers to participation and “consider” whether these can be removed or reduced. Although this wording appears woolly at first sight, this is a significant inclusion as it creates a new procedural hurdle as contracting authorities will actively need to demonstrate that they have discharged this duty before proceeding with a procurement. This might create a potential ground for judicial review if, for example, an SME challenged whether a contracting authority had failed to give sufficient or given incorrect consideration to the reduction or removal of such barriers, to the alleged detriment of that SME and its ability to compete for relevant work. The fact this change has found its way into a focal provision of the Bill – the Section 12 ‘Objectives’ – is particularly notable. This SME focus can also be seen in the Government’s latest update: Benefits for Prospective Suppliers to the Public Sector (9

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1127905/The_Procurement_Bill_Benefits_for_Prospective_Suppliers_to_the_Public_Sector.pdf

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The Uk has around 5.5M SME’s

However the vast majority are not listed on the stock market.

Within the Tech software sector, you might find 6 that are in any way competition for Triad Group Plc. Few in any, will be paying dividends, and have a cash store to boot.

The number with exactly the same boutique business model, appears to be zero, however, I do stand to be corrected if others come to light.

Investors have failed to acknowledge, be it, at this very early stage, the tables are about to turn within the established government procurement sector.

The losers will be the large suppliers to government who have traditionally had the market virtually to themselves.

From now on , small fast growing companies, with outstanding new solutions, are to be given a real crack of the whip.

The procurement Bill is putting far more emphasis on SME’S , quality, social value and innovation.

Two items of legislation are due to receive Royal Assent in the spring.

I expect both to drive growth in my chosen single investment over future years.

Triad Group Plc

The procurement Bill has been written in part , to encourage SME”S to partake in new techniques and technologies that can be fast tracked, to improve outcomes across all government departments.
Ridding the U.K. of the old European tendering rule book, to encourage growth in the U.K. economy.

Triad Group Plc is an SME.

The Finance Bill paves the way for Triad”s partner, Stratis to introduce a U.K. Stablecoin.

https://bills.parliament.uk/bills/3159

https://bills.parliament.uk/bills/3326#timeline

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Neil Murphy
Feb 21, 202

Britain has reported a surge in the number of working-age people who are no longer in the labour market since the onset of the Covid-19 pandemic in 2020, prompting concern from both the government and the Bank of England.

Conservative Chancellor Jeremy Hunt — who last month told The Timesnewspaper that people aged 50 and above should aspire to more than playing golf — is considering measures to boost labour force participation before the presentation of his March 15 budget.

Only one in 10 people aged 55 to 59 who left the workforce after the onset of the pandemic is claiming welfare benefits, so changes to eligibility rules are unlikely to bring many back as workers, the think tank said.

People who had been out of the labour force for two and a half years — as is the case for those who retired in mid-2020 — historically had only a 2 per cent chance of returning to work in the next three months, it said.

If the government wants to make early retirement less attractive in future, the Resolution Foundation said it should consider increasing further the minimum age at which people can gain access to funds they paid into private pension plans.

This currently stands at 55 and is due to rise to 57 in 2028.

Largest decline in global pension assets since 2008

Global pension assets declined by 16.7% last year, with the UK pensions market in 4th place
Jasmine Urquhart
Jasmine Urquhart clock
16 February 2023

Largest decline in global pension assets since 2008

2022 marked the largest annual decline in global pension assets since the 2008 financial crisis, analysis by the Thinking Ahead Institute has found.
The Global Pensions Assets study, published today (16 February) showed global pension assets declined by 16.7% in 2022 and now stand at $47.9trn (£39.9trn).

The study, which covered 22 pension markets worldwide, known as the ‘P22', found the US pensions market remained the largest globally, followed by Japan, Canada and the UK.

It found that last year, the UK pension market had total estimated assets of $2.57tn (£2.1trn), with an assets to GDP ratio of 80.3%. The UK had an 81% allocation to defined benefit (DB) funds and 19% allocated to defined contribution (DC).

Learning from Warren Buffett

Why most investors never make it.

The reason I think some investors do that, is because they are attracted to “high risk, high reward” situations. I am not. As Warren Buffett says, the first rule of investing is “never lose money” – and the second rule is never to forget the first.

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Thus here is the list of ingredients that reduce risk.

No debt
Heaps of cash
Fast growth (30% target ) not the 7% average.
Dividends
High margins
Buy small companies before the crowd arrives.

Just to clarify personally I would not add the £200 each month. ( why wreck your lifestyle for 48 years when you don’t have to ? ).

The trick is to find a tiny company with the ability to grow profits and dividends on average 30% a year .

Continued from previous post :

Making a million

I reckon that if I can invest in dividend growth stocks at attractive valuations, I should be able to achieve a long-term average return of 10% per year.

At that rate, how much would I need to make a million?

If I invested £20,000 today and then added £200 to my portfolio every month, my sums suggest that I could reach £1m in 33 years, based on a 10% annual return. Of course, I might not achieve that return and could even lose money.

A great article by another, that explains how to make a million from a small £20,000 lump sum, in a single stock and walking away. NO MORE OUTSIDE INVESTMENT OVER ITS LIFETIME .
The writer uses a much slower growth rate (11%) while I target 30% a year.

It clearly illiterates even with a constant 11% any one can build a massive pension pot.
Better still, do the same with just one years ISA allowance. Tax free and can be called upon at any age.

Generating a passive income from shares is usually discussed as a strategy for income investing. But there’s no law that says we have to withdraw dividends.

By reinvesting my dividends and targeting growth businesses, I’m using a passive income strategy to build wealth for my retirement. As I’ll explain, I reckon this is a powerful technique that could deliver impressive long-term gains.

The magic of compounding

Withdrawing dividends can be a good approach for income, but it’s likely to limit portfolio growth. When we withdraw a dividend, we’re effectively taking away part of our investment capital.

Personally, I’ve never withdrawn a single dividend from my portfolio. I’m still working, so I want to build up my holdings as much as possible.

I use all of my dividends to buy more shares.
In turn, these shares generate additional income for me, which I then use to buy even more shares.

This approach is known as compounding — reinvesting previous income to generate more income in the future.
Compounding is a powerful growth technique over long periods. But it doesn’t necessarily deliver much share price growth. For that, I rely on a second technique.

How I target share price growth
I look for companies that can reinvest their retained profit successfully, so that their profits continue to rise.

In turn, this normally leads to steady dividend growth. And when the dividend rises, very often the share price does too.

One rule of thumb I use is to add a stock’s dividend yield to its forecast dividend growth. The result is the expected total return from a stock over the coming year.

This approach is based on the assumption that if a company’s dividend is increased, its share price will rise by an equal amount, so that the dividend yield remains the same.

Obviously this doesn’t always happen, at least not from year to year. There is no formal link between dividend payments and share prices.

However, over long periods, my experience suggests that it is a reasonable approach.

One example of this is FTSE 250 baker Greggs. Over the last 20 years, Greggs’ dividend has risen by an average of about 11% per year.

Over the same period, Greggs’ share price has risen at an average rate of 12% per year.

Obviously this share price growth hasn’t happened in a straight line. But it has happened.

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Continue to next post

Hardly surprising so many suffer from depression.

Paying a lifetime of subs to a pension company. !

My view as explained in the first few posts, is to put a small lump sum into a pension and invest in a single company, that has potential to grow at 30% rather than the industry standard of 7%.

Compounding then does all the work for you, without paying in any monthly payments.

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Automatic enrolment explained

All employers must offer a workplace pension scheme to their staff, and automatically enrol those who fit certain criteria.
They include people who are not already signed up to a workplace pension, earn at least £10,000 a year per job, and are aged between 22 and state pension age.
Workers can opt out if they do not want to save. Otherwise, 5% of their earnings above £6,240 a year, including tax relief, and a contribution from their employer worth 3% of earnings, is automatically saved into a pension pot which is invested.
The idea is to encourage saving for retirement from an earlier age, to top up the state pension in later life. It has been widely regarded a success since its introduction in 2012, with relatively few people opting out.

The very reason, that your standard pension plan , run by the pension professionals, will never give you a rate of return above the 7% long term average .

My view : 30% growth a year, will , over time produce a massive pension pot from a tiny original investment. ( Without any additional monthly payments ).

Consultants advise diversification as recession fears mount

By Henry Smith | February 8, 2023

As recession fears rise, investment consultants are advising institutional clients to ensure their portfolios are well diversified to reduce downside risks. They also advocate a degree of dynamic asset allocation in a bid to capitalise on changing market conditions.

Rich Nuzum, global chief investment strategist at Mercer, says: “I’m sure there will be both positive and negative shocks [this year] that we’re not anticipating [at the moment], but right now our outlook for global capital markets in 2023 would be pretty benign.”

However, citing a wage-price spiral and the fallout from Russia’s invasion of Ukraine as two “shocks” that policymakers globally are grappling with, he adds: “One of the big mysteries is why market expectations of near-term volatility [are] so low when there’s such huge uncertainty about which tail we’ll be into two to three years out.

“Could we have deflation instead of inflation? Do we get a favourable resolution to the war in Ukraine or not?”

Pension schemes to disclose performance under VfM rules

By Sonia Rach

Pensions schemes will be required to disclose investment performance, net of all costs, as part of the new value for money framework.

The value for money consultation paper published by the Department for Work and Pensions — alongside the Pensions Regulator and the Financial Conduct Authority — on January 30 proposes that schemes should disclose investment returns over three, five, 10 and 15 years, if available.

This is because it may be difficult for some providers with vertically integrated business models, or with single or combination charging structures, to retrospectively determine the split between investment charges and administration charges for longer periods going back.

The government said the proposals would encourage greater transparency and standardisation of reporting across the defined contribution pensions market, allowing trustees to make more informed decisions and employers to better compare the value and performance between schemes when choosing where to automatically enrol their employees.

New pension report that I support.

Stuart Adam Isaac Delestre Carl Emmerson David Sturrock Published on 6 February 2023

How should pensions be taxed? We propose income tax and National Insurance reforms that would more evenly support pension saving.

The current system of pensions tax provides overly generous tax breaks to those with the biggest pensions, those with high retirement incomes and those receiving big employer pension contributions. It does relatively little to support many of those facing low income in retirement, who most need it. Reducing limits on pension saving – the route taken in recent years – is not a good solution: it does nothing to support low earners, adds significant complexity and leaves subsidies that are still too generous for some. A long-term vision for the system is needed.
In a new report, A blueprint for a better tax treatment of pensions, published today and funded by the abrdn Financial Fairness Trust, IFS researchers set out proposals to even out tax support for pension saving – reducing subsidies where they are overly generous and increasing them where saving incentives are weaker.
The reforms would boost the retirement incomes of the bottom 80% of earners and provide greater encouragement for them to save more in a pension, while getting rid of overly generous subsidies that benefit those on high incomes could enable the removal of the complexities created by tapering away annual savings allowances.
The report proposes the following changes:
Reform the 25% tax-free component to provide a more equal subsidy to all private pensions, benefiting those with a low retirement income.

Give up-front employee NICs relief on all pension contributions, and tax pension income instead.

Decouple the up-front tax subsidy from employer NICs.

Reform the lifetime allowance and end the tapering of the annual allowance

Minimum pension age for private pensions

The normal minimum pension age (NMPA) for taking benefits from a private pension was set at 50 when it was first introduced on 6 April 2006. The current NMPA is age 55, having been increased to that age on 6 April 2010. A further increase in the NMPA to 57 is due in 2028.

Martin Lewis advice this morning

An example of this is someone who is 30 would need to save 15% of their annual income every year. If they earned £30,000, they would need to put away £4,500 each year, the equivalent of £375 each month.

I can not give advice , but personally I think paying in to a pension each month for 50 years is a dumb idea.

My view is to invest a lump sum in a single share that has the ability to grow rapidly that can do all the work for you.

I have described the principle in my last post.

Growing a companies dividend at 30% a year has a magical effect on your investment.

Compounding does all the work for you.

Let’s start with an example

Triad group at £1.00 a share today paying out 6P in dividends. ( assuming 30% a year potential dividend growth ).

Assuming the share price remains the same over a period of years.

Year one 6p dividend , followed by 7.8P, 10.1p, 13.3P, 17P, 23.1p, 30P, 39P, 48P, 62P, 80P, £1.04P

Put another way,

Year one yield on your investment is 6%

Year 2 7.8% per year
Year 3 10.1% per year
Year 4 13.3% per year
Year 5 17% per year
Year 6 23% per year
Year 7 30% per year
Year 8 39% per year
Year 9 48% per year
Year 10 62% per year
Year 11 80% per year
Year 12 over 100%

It’s not only the dividend that goes ballistic if the company grows profits and dividends and 30% a year.

The share price should respond the same way , trading on a PE Ratio of 30 ( the growth rate ).

Thus each million of profit is valued at £30M on the market capitalisation.

If any company can consistently grow at this rate , investors will beat the market hands down , more to the point, a very small investment can grow to be a massive amount given time.

Triad Group Plc is my single Share that I hope will get me over the line, ( 100 times portfolio increase within 20 years within my SIPP Pension)

Dividends and a share price increase are required.

Today we have inflation that is higher that the shares current yield, 10% V 6%, however the stock, and other high yielders ,could soon be extremely attractive.

It’s absolutely possible the world could soon enter a deflationary phase.

Any company that can still grow and pay out a huge yield ,will be extremely popular with investors.

Meanwhile Triad is benefitting from ever higher interest rates , on its £4.3M cash pile.

Press release
Minister unveils plans to start closing the pensions inequality gap
Minister for Pensions Laura Trott announces shake-up of private pensions to create fairer, more predictable, and better-run pensions.

From:
Department for Work and Pensions
Published
30 January 2023

Measures include consultation on new Value for Money framework, defined contribution scheme charge cap reforms, further work on small pots, and extension of Collective Defined Contribution (CDC) pension schemes.

These plans will help address the pension inequality gap which has risen since the decline of Defined Benefit (DB) and the emergence of Defined Contributions (DC).
Minister for Pensions Laura Trott has today (Monday 30th January) unveiled a package of measures to deliver value for savers and boost fairness, predictability, and adequacy across the private pensions sector.

The measures include a consultation on a new and much anticipated Value for Money (VFM) framework, developed in partnership with The Pensions Regulator and the Financial Conduct Authority, which sets out how schemes will be expected to provide savers with better value from their investments and a quality level of service.

Minister for Pensions Laura Trott MP MBE said:

There is a pension inequality gap between those who had secure retirements thanks to DB, to much more uncertainty now. Since 2012, Automatic Enrolment has transformed the pensions landscape in the UK for the better, but we know there’s more to be done to ensure a fairer future for savers.

Being in an underperforming pension scheme can lead to someone missing out on thousands of pounds. The Value for Money framework and our new measures will improve security and create better returns for savers, so they can enjoy the retirement they’ve worked so hard for.

Today’s proposals include plans for:

Schemes to disclose their investment performance, costs and charges, and quality of service via clear and comparable metrics to the benefit of savers;
Reforms to the charge cap, giving schemes more flexibility to invest in so-called “illiquid assets” such as start-up companies, renewables and infrastructure;
Feedback on workable solutions to tackle the issue of small pots;
An extension of Collective Defined Contribution (CDC) schemes, most significantly to include multi-employer models

Nadhim Zahawi, (who was chancellor for two days) , last year, has finally been kicked out.

Personally I wish he will be locked up in the tower, where the public could throw rotten apples at him. !!!!