Gold Magazine February - March 2013, Issue 23 | Page 88

pensions

Not
Enough

{MONEY}

Money
in the P

t

THE FUTURE OF UK PENSIONS
By Glen Richards

A

s has been widely reported, UK borrowing
levels, quantitative easing (QE), and ‘money
printing’ are at record
highs. This means that
Gilt Yields (the rate at
which the UK government borrows money) are at all-time lows and
this is important for pensions because Gilt
Yields are the figures used when the UK Government Actuary’s Department (GAD) decides
how much it will permit you to take from your
hard-earned pension. A pensioner’s individual
GAD rate is based on the 15 Year Gilt Yield
as published in the Financial Times on the
15th day of the calendar month preceding
the month of determination and calculation.
Thus, the GAD rate for a 65-year-old man retiring today will be based on a gilt yield of just
2%. When you consider that, as recently as last
year, this would have been based on a gilt yield
of 4.25%, it’s no wonder every newspaper in

the land continues to stress what a bad time it
is for British retirees and how negative QE has
been for pensioners. Because of QE, the man
in my example is worse off by £1,500 per year
for every £100,000 held in his pension fund.
With little room for manoeuvre, what’s
more worrying is the future of the UK state
pension, how the problem can be addressed,
and what affect it could have on private
pensions. The number of people entering
retirement has increased significantly and is
expected to be about 600,000 every year until
at least 2018. Put simply, the UK’s generosity
is simply unaffordable. This is true whether
we are talking about job-seekers’ allowance,
pensions, the NHS, immigration, or disability
benefits – there is simply not enough money
in the pot.
This is primarily a result of the increase
in population, as well as improvements in
medicine and healthcare which mean we are
all living longer. When state pensions were
introduced in 1909, the average male life

GLEN CII (MP) is Managing Partner
RICHARDS
Cert PFS, Cert
at Pembridge International Ltd and has been
providing pension analysis & services for over
a decade. Pembridge has representation
by UK-Qualified financial professionals with
pension experience across 9 countries and 3
continents. Pembridge offers world-leading
pension products and analysis through many
providers, including the Sovereign Group with
offices worldwide, including Cyprus (www.
sovereigntrust.com) and offers third party,
independent pension analysis – in addition to
its own – from specialist international pensions
technicians and actuaries such as
PenTech (www.pentech.
im). Glen Richards
is a member of
the Personal
Finance Society,
the Chartered
Institute of
Insurance, and
CIFSA in Cyprus.
www.pemrbidgeinternational.com.

86 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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01/02/2013 12:37