Retirement planning will have to be reviewed by private sector members now as it is not only those in public sector pension schemes that may be worse off in retirement following announcements from the new coalition government. Pensions minister Steve Webb announced in a written paper that there are intentions to link increases to pensions in payment to CPI as opposed to RPI as currently used.

Historically RPI as increased at a greater rate than CPI (which excludes the cost of mortgages) and so the change risks annual income increases not matching the actual cost of living.

There is potential for good news however. Final Salary schemes, which are a much valued employee benefit, have been closing at an increasing rate as employers can’t afford to keep them open. By reducing the cost of maintaining the schemes some employers may decide they can continue to offer these attractive schemes for a while longer at least.

It is also important to note that this is applicable to Final Salary schemes only and not employer sponsored Defined Contribution personal pensions or stakeholder pension schemes where a retirement income is bought by the individual with an accrued pension fund.

The overriding message is clear: If you want to have a comfortable retirement the onus is on you to build up a retirement pot to support you for the whole of your life. Do not delay though, the longer you defer your retirement planning the greater the contributions you will need to make into an investment vehicle (not just a pension) to meet your lifestyle needs.

More on the story can be found at: http://news.bbc.co.uk/1/mobile/business/10557675.stm and in Jennie Kreser’s recent blog regarding changes to the State Pension.

If you would like to discuss how retirement planning can ensure a comfortable life after work contact me.

Andrew Neligan is a fee based, award winning, Chartered & Certified Financial Planner who helps legal professionals achieve their Financial Planning goals.

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