It’s been some days since I’ve reported on the fabulous Freddy Flumper -“fabulous” in the sense that he lives only in the fable on this blog.
For anyone who missed the instructive fable of Freddy and Tony Lamborghini , we left Freddy “chicked up” as his long term retirement strategy of financial prudence left his bitter rival in the gutter (nursing repair bills on his new motor).
News of Freddy’s savviness soon got round town and it wasn’t long before he got a call from the local financial wise guy – Andy (forever) Young.
“Freddy, I think you should take a note of the following link http://lifetime.faife.co.uk/ It’s a death predictor!”
Freddy knew where Andy was coming from – the rumour was that Andy was that kind of actuary who didn’t just know when you were going to die but who was going to kill you. No one messed with Andy (forever) Young.
So Freddy, having written down the link http://lifetime.faife.co.uk/ on the back of his hand, checked out his life expectancy. It was good news and bad news.
The good news was that Freddy was going to live for a long long time; the bad news was that even with the (heroic) assumptions Freddy was using for his Flump, his Flump would not last his lifetime.
He decided to pay Andy (forever) Young a visit to review his options. He found Andy resting in a hammock on his veranda. The two were old friends so Freddy cut to the chase.
What should I do, Andy old friend? My money looks like it won’t outlive me and I’m keen to be as wise and sensible as you!
The old sage twizzled the cornstock behind his ear and remarked
Have you considered your state benefits Freddy? The State Pension is changing and if you’re reaching your State Pension Age after April 2016 the amount you are entitled to will change too. All you have to do is go online and get your BR19 -which will tell you what you are due. Here’s the link https://www.gov.uk/state-pension-statement
Having his Ipad with him, Freddy decided to request the statement there and then. The two friends chatted late into the night and Freddy began to see that what he got in retirement depended on him taking wise decisions now and in the remaining years of his life.
Andy told him that one of the options he could consider was to buy additional state pension and he gave Freddy another link https://www.gov.uk/state-pension-topup so he could model the cost benefits of this option.
Finally, over a glass of aged Bourbon , Andy told Freddy about a new type of pension that wasn’t available yet, a pension into which Freddy could transfer the uncrystallised benefits of his Flump together with other pensions he might have (so long as he hadn’t cashed them in like Tony Lamborghini). This new type of pension wasn’t guaranteeing Freddy anything , but it aimed to provide him with a steady pension till the day Freddy died.
Freddy was relieved by this but wanted to know whether it might not be a bit expensive. He’d looked at lifetime annuities and decided they weren’t giving him enough to live on.
Andy explained that these new pensions (he called them CDC) were likely to give Freddy more pound for pound than annuities though they wouldn’t give Freddy quite the flexibility he had at the moment. He needn’t worry about the detail and the good news was that the way his money would come to him could still be a Flumps, the difference would be in something Andy called pooling and Freddy understood to be a bunch of likeminded folk insuring each other against any of them living too long.
Freddy thought about this. Did he want flexibility or did he want to feel comfortable that his money wouldn’t run out in his old age?
Planning for his retirement wasn’t as simple as he thought and Freddy thanked his lucky stars he had a friend like Andy to help him through the maze,
This post first appeared in http://www.pensionplaypen.com/top-thinking
Using a pension plan as a bank account – with so many changes in legislation – IT IS NOT SAFE TO DO SO. Your financial planning requires consistency – of product – returns and legislation. Tinkering with pension legislation means WE CANNOT TRUST, we have no confidence in the legislators or the regulator – who change their minds like the wind changes direction. As a consequence Independent Financial Advisers, Brokers, Financial Planners ( Chartered and Certified with Level Four and Level Six, Qualifications ) – are prevented from advising ( leaving the market for the restricted adviser – the Tied Agents and Banks and Direct to customer providrs like Aviva and Stran Dread Life LloydsTSB – to give advice as they have large pockets of clients cash – with which they can pay regulatory fines. EG this year to date £ 309,000,000 in Fines have been paid – to the Treasury ( according to Age UK ). Put simply Stealth Tax by George Osborne and his Cronies, like David Cameron – cross subsidisng the insolvent UK – ready for their Fire Sale . Clearly with the TRUST removed form product providers and their High Charges – and the potential changes in legislation – the undermining of Banks and Insurance companies by George Osborne – ( in Millions of Pounds worth of Fines – or possible ” Inducements ” or Bungs and Backhanders ” to allow them to continue to trade . . . . . A cynical person might believe this is a kind of “Licence” by the back door . . .? We the government and the regulator will permit you to continue to sell or trade if you pay us a fine ?