Workers expecting a big pension pay out need to watch their backs following a Court of Appeal ruling backing the sacking of a top public servant to save cash.

Nigel Woodcock, 53, was fired as NHS chief executive in Cumbria during a management reshuffle – and lost a pension pay off that could have topped £1 million at the same time.

In 2006 the trust cut Mr Woodcock’s job as part of a management restructure and failed to be picked him to head a replacement organisation.

During the reshuffle, his employers realised that if they kept him in post until he was 50, they would have to pay at least £500,000 and possibly more in to his pension.

Mr Woodcock claimed his sacking was age discrimination and took the case to an employment tribunal, which ruled against him.

The ruling could put jobs at risk as organisations could see staff shortly qualifying for large pension payments or other bonuses are more cost-effective to sack than other workers.

Mr Woodcock was given a redundancy payout of £225,000, but claimed he was owed more and was targeted because of his age.

If Mr Woodcock had still been employed by the NHS in June 2008, he would have been offered an enhanced retirement package worth up to £1million.

Rejecting the appeal, Lord Justice Rimer agreed Mr Woodcock was a victim of age discrimination.

“I do not question his merits as an able and loyal employee, who had given long and valuable service to the NHS,” said the judge.

“Mr Woodcock’s long and able service with the NHS did not entitle him to a job for life, or even to the expectation of a job for life.

“Employment in a particular post will commonly carry with it the risk of redundancy and Mr Woodcock enjoyed no special immunity from the risk that applied to his.”

Millions of people are retiring in debt – and this could worsen as mortgage lenders warn millions of homeowners are unlikely to have the money to pay off interest-only loans.

Two reports highlight the cash crisis facing the over 55s who will find themselves struggling to pay off mortgages, loans, credit cards and other borrowings.

The Council of Mortgage Lenders, trade body for the UK’s mortgage lenders, says up to 158,000 interest only mortgages a year are due to be redeemed and a third of borrowers have not saved or invested to settle the loans.

In some cases, the mortgages may be small as they were taken out some years ago, says the CML, so homeowners may be able to refinance.

However, for those who plan to remortgage, many banks and building societies have slashed loan-to-values for interest only deals to around 50% of a property’s selling price, which may baulk their plans and leave them unable to repay their borrowings.

Around 3.9 million interest only mortgages are outstanding – with two thirds maturing after 2020.

Meanwhile MGM Advantage, a financial firm dealing with annuities, has revealed the average retired individual has £8,180 of unsecured debt on cards, personal loans and overdrafts.

Around 178,000 retire owing £100,000 or more, just over 729,000 owe between £25,000 and £100,000 and around 3.5 million owe between £1,000 and £25,000. , says the firm.

Around 525,000 don’t know how much debt they have, if any, while 57% of the retired population has no personal debt.

The average retired person in Wales has the most personal debt in the UK at £13,857. This is followed by £11,758 in the South West, and £11,255 in London.

The least is £4.164 in the East Midlands.

MGM Advantage director Aston Goodey said: “These figures are alarming. As the cost of living continues to stress household finances, many retired people will feel under growing pressure to take on debt to fund everyday living.”

Teachers and lecturers today are taking to the picket lines to stage industrial action over the Government’s proposed pension reforms.   

Members of several teaching unions including the National Union of Teachers (NUT) and the University and College Union (UCU) have forced many schools and colleges across the country to close due to staff walk-outs.

Other public sector workers, including many health workers, will also be going out on strike to demonstrate against the changes to their pensions.

The Unions are against the coalition’s plans to make employees in the public sector work for longer, make larger contributions towards their pension funds and end up with less money in their pension pot.   The latest strikes follow industrial action staged last year, where over a million public sector employees, represented by most Unions, refused to agree to the new reforms.

The first of the planned reforms on public service pensions comes into effect next week, when employees will face an increase in their pension contributions.

NUT general secretary Christine Blower said: ”Teachers cannot be expected to do anything other than defend the right to a pension which they have paid into in good faith, especially as the Government has shown no evidence that their pensions are either unsustainable or unaffordable.

”No teacher wants to be in this position. Pension increases are just an extra tax on teachers, when the top rate of tax is being cut. It is the Government’s intransigence and total disregard of the facts that has forced teachers to continue with this action.”

Health workers in the union Unite warned that its members will be campaigning against the plans by demonstrating outside of hospitals and clinics up and down the country in a series of strikes over the summer.

Len McCluskey, General Secretary for Unite, said: “Public sector employees are experiencing multiple cuts to their take-home pay – pay freezes set against a backcloth of high inflation, paying more for pensions, large-scale downgrading of staff, with regional pay looming as employers seek more cunning ways of cutting pay, including introducing performance-related pay.

”Hard-working public sector employees are fed-up with taking the pain and being used as a financial punchbag for a failed economic policy, which last’s week’s Budget proved once-and-for all favours the rich at the expense of working people.”

Other members of Unite—in the Ministry of Defence and other civil service departments—are due to vote on the pension changes, with the Union recommending them to reject the proposals.

 

According to recent figures, half of older people are unaware of how much money they need to pay for any care they require in old age.

A report published by the equity release company, Key Retirement Solutions, reveals that nearly 50% of over-65s questioned had no idea about how much care services cost, another 35% believed that a cap on costs at £20,000 was in place.  Only 7.5% of those questioned thought the cap was the £35,000 suggested in the Dilnot report last September.

Currently, anyone in England has to pay for all of their own care costs if they have assets, including property, over the value of £23,250.  At present there isn’t any cap on the cost of care in old age although the Dilnot report advised £35,000, and a working group for the Department of Health suggested cap of between £50,000 and £60,000.

The Office for National Statistics (ONS) recently revealed that we are living longer than ever, and that of the babies born this year, approximately 33% will live to celebrate their century.  The figures also showed that for people who have their 65^th birthday this year, 10% of men and 14% of women will live to be a hundred.

Although we are experiencing greater longevity, we are now spending more years of our life in ill health, meaning that more and more people will require either home help or residential care in their later years.

A Director of Key Retirement Solutions, Dean Mirfin, said: “It is striking that despite the high-profile debate around long-term care that so many people are not aware of how much they might have to contribute. And when they do express an opinion their estimate is clearly well below the figures recommended by the Dilnot Commission and the Government.

“The worry is that thousands of retired people are heading for a nasty shock when they should be preparing for the possibility of having to fund long-term care.”

Currently, approximately 20,000 pensioners a year are thought to have to sell their properties to fund care in old age, leaving little or no inheritance for their families.  It is unlikely that any change to the current system, including introducing caps and raising the asset threshold, will happen before 2014.

 

Chancellor George Osborne is sneakily taking cash away from pensions to pay for tax cuts in Budget 2012.

This year’s budget is one of those where the Chancellor giveth and taketh away – leaving many perplexed over whether they are winners or losers.

Two big changes affect the over 55s -

• Advance warning of the single-tier flat rate pension payment for all without means testing from 2014.

The figure is estimated at £140 per week per pensioner, but the final amount needs adjusting for inflation over the coming months.

Like the current State pension, the amount paid will be linked to the cost of living and increased every year.

• Freezing age related income tax allowances is a stealth tax on pensioners and affects everyone born after April 6, 1948. The move will save around £3 billion over the next three years.

No one receiving the age-related allowances will gain any increase until the personal allowance catches up – currently the figures are frozen at £10,500 for those aged 55 – 74 years old and £10,660 a year for those over 75.

“The net result is no one loses in cash terms,” said the Chancellor. “Personal income tax allowances are simplified and made fairer because everyone receives the same amount.”

Another pension change that slipped through under the cover of other tax changes was linking the State pension age to longevity.

This will result in the date the state pension is paid depend on how long people live.

This could lead to the state pension age rising to 69 by 2031, according to actuaries at annuity firm MGM Advantage.

This link makes state pension age an ever-moving goalpost for younger retirement savers focussing on the current 65-year-old finishing line for working.

– withdrawn when someone in household has income of £50,000 at 1% of benefit for every £100 over £50k – only those on £60k will lose all benefit. Keeps 750,000 in and 90% of all families. Tapered relief

Personal allowance – best way to support people on lowest incomes is to take them out of tax.

Want to go further and faster. Largest ever increase in PA – £1,100 increase April 2013 (£9205 before they pay any tax or £220 better off every year) 24 million earning less than £100k will gain

Within touching distance of £10,000 target

Age related allowances frozen from 6/4/2013 – ring fenced until personal allowances catch up

“Saves money and no pensioner will lose out in cash terms.”

Single-tier pensions instead of means tested at £140 based on contributions. More details in the spring

- Confirm annual tax statement from April 6 2014 that shows how the government is spending the tax pound. The personal tax statement will show how much the government spends, and breaks down to how contributes to public spending.

Corporation Tax

R&D tax credit

Enterprise management incentive scheme grant rules relaxed so academics can turn great ideas in to great companies

CT – headline rate – April fall to 25% – further cut 1% right away from April 1, 2012 – 24% plus two further cuts to 22% by 2014.

18% less than US 12% below France and 8% below Germany

Aim to align income tax basic rate, small companies rate of CT and main rate CT

Cigarettes up 5% above inflation – 37p a packet

Alcohol

No fuel duty changes -

VEL up by inflation -

Personal and property tax

Goal is where lowest paid are lifted out of tax while that from the richest increases.

I regard tax evasion and tax avoidance morally repugnant.

General anti-avoidance rule (GAR) to be introduced – consultation and legislation to follow in next year’s finance bill.

Stamp duty – abuse should stop. SDLT to residential properties over £2m bought by corporation – up to 15% with immediate effect

Consult on mansion tax for £2m + properties held by companies and CGT for overseas companies holding residential property

Will move without notice and retrospectively if stamp duty rules are continued to be bent or broken.

SDLT 7% properties worth £2m +

No significant changes to pensions relief in budget

Cap on uncapped reliefs – anyone claiming £50,000 in a year will have reliefs capped at 25% of their income.

Ed Miliband – Millions will be paying more while millionaires pay less. It’s the end of everyone being in it together.

14,000 people earn over £1m – each gets a tax cut of over £40,000 for every year.

Claims hidden tax rise in the small print for pensioners, but did not say more.

The good news is inflation is falling – but the flip side is prices are still rising, just at a slower rate and the over 50s are bearing the brunt of the increase.

The consumer price index (CPI) dropped from 3.6% in January to 3.4% in February, the lowest figure since November 2010, says the Office of National Statistics.

That figure does not tell the whole story, because the rate is averaged out for all age groups.

When the figures are adjusted, the over 50s are clearly paying a higher price for essentials than other age groups because they are more likely to pay more for utilities and food.

The over 75s spend almost 17% of their budgets on food, compared to less than 9% by the under 30s.

The sums were worked out by the Alliance Trust Economic Research Centre and show:

• Inflation for the 50 – 64 year old age group is 3.6%

• The 65 – 74 year-old age group pay 3.7%

• The over 75s pay 4.1%

Over 50s champion Dr Ros Altmann, chief executive of financial group Saga, said: “Price increases remain higher for older people than the average family faces and inflation is still eroding the value of fixed pensions and savings.

“These figures emphasise the importance of seeing measures in the 2012 Budget that will address the economic difficulties being faced by older people.”

Lloyds TSB has chipped in with some spending calculations that show most households are £45 a month worse off now than 12 months ago – and although inflation is falling, the gap between income and spending is still widening.

Interest rates and continuing quantitive easing are not helping – not only do most savings accounts and cash ISAs pay miserly returns that are wiped out by inflation, but rates are unlikely to change much in the coming months due to the fragile nature of the economy.

Raising income tax personal allowances in the Budget may ease money struggles for a few, but the over 50s should not expect the Chancellor to throw a financial lifeline.

According to figures published by the Office of National Statistics (ONS), the Cost Price Index (CPI) inflation rate has fallen again to 3.4% in February—down from 3.6% in January.  This means that the CPI is now sitting at its lowest rate since November 2010.

The Retail prices Index (RPI) inflation rate, which includes mortgage interest payments, also decreased from 3.9% to 3.7% in the same time period.    

The ONS have said that the fall was mainly due to the price cuts announced by the Big 6 fuel companies on gas and electricity bills in February, after they had increased during January.

Other items that had helped to bring down the CPI rate were digital cameras and less expensive air fares. It is thought that the rate would have dropped further but for the increase in alcohol prices.

However, city analysts had predicted the new CPI rate to be 3.3%. Chief Economist at Markit, Chris Williamson had an interview with the BBC where he said:  ”The Bank of England is hoping that it’s going to fall to 2% by the end of the year,”

“The fact it’s been a little bit sticker than we hoped this month really casts further doubt on the Bank’s projection.

“So this might be another case of the Bank being a little bit too optimistic of where inflation’s going to go.”

A reduction in inflation rate is seen as a key element to helping the UK recover financially.  Lower inflation rates should encourage people to spend more money, thus boosting the economy.

The British Chambers of Commerce gave a stark warning that the UK would be unlikely to witness many periods where the inflation rate dropped below the Bank of England’s target of 2%.  It warned that increases in world oil and food prices at the turn of the year would continue to keep the inflation rate higher.

The union, TUC, warned that there was still a huge gulf between the money people had to spend and the prices that were being charged on the High Street.

The financial information service, Moneyfacts, suggested that savers would continue to have a hard time.

To beat inflation the service said that someone who pays basic rate tax at 20% would have to find a savings account that paid 4.25% each year.  For someone who pays 40% tax, they would need to have their savings in an account that paid at least 5.66% interest.

A spokesperson for Moneyfacts said: “It’s just a bit too early for everyone to burst into a chorus of ‘don’t worry, be happy’ as today’s figures still mean that there are only 79 accounts out of 1,126 that negate both inflation and the taxman’s cut.

 

Retirement savers could double their pension incomes by triggering annuity guarantees hidden in the small print of their policy documents.

This overlooked boost to pensions is often not pointed out by pension firms with the result some over 55s are missing out on extra income in their retirement.

But who qualifies for a guaranteed annuity rate and how do they know if they have one?

Here are the answers to some frequently asked questions about guaranteed annuity rates:

What is a guaranteed annuity rate (GAR)?

A GAR does what it says on the tin – in the small print of some pension contracts a clause specifies the pension provider will pay an annuity of no less than a set rate of around 10% – 12%, compared to the current average rate of less than 5%

How do you know if your pension includes a guaranteed annuity?

Check out the small print – if you are still not sure, ask your pension provider or financial adviser to confirm the details.

Do all private pensions include guaranteed annuities?

No. Typically, private pensions started before July 1, 1988 have a GAR, so retirement savers aged 42 years old or over are most likely to have a guarantee.

Will my pension provider still abide by the guarantee?

Yes. They must keep to the terms of the original contract unless you have agreed to any changes

Will my pension provider tell me I have a guaranteed annuity when I retire?

Probably not. They take the view that it’s up to you to find out. It’s a catch-22, in that if you ask they will tell you, but if you don’t they probably won’t.

What happens if I have an annuity below the guaranteed rate with my pension provider?

Talk to them and point out the discrepancy. If the matter is not resolved to your satisfaction, discuss the issue with the Financial Ombudsman.

The debt charity, the Consumer Credit Counselling Service (CCCS), has revealed that number of people aged 60 and over asking for financial advice has increased by 15% over the last three years.  The charity gives a stark warning that this is the start of a long-term trend.  

Lord Stevenson, Chairman of the CCCS, said: “Currently we counsel more 30-44 year olds than any other group but we think that in two years’ time, almost half the people in need of our help will be over 45.”

He continued: “Around 12 per cent of our clients aged over 55 have at least 30 per cent of their incomes tied up in debt repayments.

“Work carried out for us last year by the Financial Inclusion Centre showed that there is a persistent minority of older people trapped with extreme debt. It would appear that this minority is growing rapidly.”

A lot of the issues arise because pensioners are still clearing debts from earlier in their lives. However, they are hampered further because they are suffering a quicker rise in inflation than other age groups.

The charity Age UK compiles what it calls the Silver Retail Prices Index, which specifically measures the cost of living for those aged 55 and over.  This index has seen an 18% increase in the price of goods for the over-55s in the last 4 years, which is 5% higher than the general public.  The price of fuel was one of the most significant rises in price.

The insurance company LV published a report recently that showed the average pensioner in the UK spends up to £85.55 more each week over the average state pension amount of £102.15.

One of the biggest reasons for the rise in cost of living is utility bills; pensioners combined water, gas and electricity bills are on average £918 each year. Recreation and culture was the second largest amount of money that was spent by retirees, with an average of £1,337 spent per person each year.

According to the annual report, in 2011 approximately 370,000 people contacted the CCCS for advice for their debt issues.  With people struggling to manage their debt owing an average of £20,000, they had average living costs of £1,369 each month.

 

If you are turning 50, get ready to pay out for the most expensive time of your life, according to a new survey.

The over 50s need a take-home monthly income of at least £1,500 as they face paying for expensive mortgages as well as even more expensive teenage children.

Financial stress starts to pile up as children need someone to pay for university fees, cars, holidays and deposits for homes, show the findings of research by Benenden Healthcare Society.

Average mortgage repayments of £354 a month are the biggest expense for the over 50s, with another £292 for food and £185 for utility bills. Holidays average at £1,254, mainly because teenagers cost more travelling as adults rather than children.

Around 25% of over 50s pick up the tab for running a car for their children – while one in six buy the car as well.

More than a third of over 50s (37%) have handed their children a cash lump sum within the past 12 months.

The society’s Marc Bell said: “Reaching 50 is traditionally supposed to be the start of a new lease of life as kids grow older and couples find more time to themselves.

“The stark reality will prove an eye-opener as 50-somethings realise the truth is not so rose-tinted.

Debt rarely goes away as we get older and the rising costs of mortgages, motoring and raising children will paint a pessimistic outlook on life.

“On entering our 50s, more of us are paying for our children’s education and taking on more of their day-to-day costs such as mobile phone bills and going out – indicating that we’re letting our children become more financially dependent on us.”

“We’re also more like to provide financial help for our loved ones and family members – suggesting that whilst it’s the most expensive time of life, it’s also the time when we might be most giving and generous.”