UK pensions among Europe's lowest


Next year, in April 2016, will see the introduction of new and higher state pensions.

From that date, the single pension will increase from £113 to nearly £150 – but only 45 per cent of pensioners will receive this amount. Some lobbying groups are saying it is a disgrace and it should be nearer £180.

Although we are in the top ten out of 195 wealthiest countries in the world, we are still paid the lowest pension in all Europe.

We know each country's systems and taxes are worked out differently, with Spain and Germany the most generous – paying weekly approximately £500.

France's is approx £300 and even Ireland comes in at £210.

So, with our ranking in the world it makes you think. Although I'm not one of the lucky ones it's nice to at last see a large increase – hopefully not the last.

New free pensions guidance service unveiled


The government has unveiled its new free pensions guidance service, which will help retirees take advantage of the new pensions rules which come into force in April.

'Pension wise: Your money. Your Choice' will provide free and impartial information and guidance to people with defined contribution pensions approaching retirement.

In the April 2014 Budget, chancellor George Osborne announced that from this April, retirees will be able to use their pension savings as they wish. In order to help savers make the most of the new freedoms he pledged that every retiree should have access to some financial guidance.

The service will be provided by The Pensions Advisory Service (which is recruiting around 35 specialist "guiders" and will provide guidance online and over the phone), and the Citizen's Advice Bureaux, which will cater for retirees seeking face-to-face guidance. The guidance is expected to last around 45 minutes, with a list of defined questions that "guiders" will have to cover.

Afterwards, consumers will be provided with a summary document of their session "so that they can proceed confidently".

Informed choices

Andrea Leadsom, economic secretary to the Treasury, said: "People who have worked hard and saved all their lives will be free to choose what they do with their money from next April. We want people to be empowered to make informed and confident choices.

"'Pension wise' will be a first port of call for people with a defined contribution pension who are approaching retirement. It is a distinctive brand, making it easy for consumers to know where to go for help and guidance."

Initially, the government had chosen the Money Advice Service (MAS) to also deliver the guidance, but after concerns were raised by retirement experts about its capacity to do so, the MAS was removed from the equation, though it is understood it will support some areas of online guidance.

Financial advisers, however, remain concerned that the guidance will not meet the needs of consumers with more complex retirement planning demands, who would be better off seeking qualified independent financial advice.

Nevertheless, Dr Ros Altmann, the government's business champion for older workers, welcomed the announcement, saying: "It is absolutely right that we invest in helping people make the best decisions from their retirement savings. Until now there has been no help with the complex decisions people face when they reach retirement age and at last there is an independent source of help to point people in the right direction."

Government figures suggest that more than 300,000 savers in defined contribution schemes a year will be retiring. From the age of 55 they will be able to access their pensions as they wish.

The government is to make it illegal for anyone to imitate the 'Pension wise' service, which it says will help "protect consumers" and "ensure the guidance brand is trusted". It means anyone seeking to pass themselves off as the service could face prosecution.

There is no official start date for the launch of Pension wise, although the Treasury had quietly hoped to launch it by the Easter weekend. In the meantime, anyone with a defined contribution pension who is approaching retirement can register to take part in the government's pilot scheme for Pension wise by visiting

European ageing report published


Rome (ZENIT) -- In 2012, the European Council asked the Economic Policy Committee for an update on the age-related expenditure projections by the autumn of 2014, to take into account new population projections by Eurostat, the statistics agency of the European Union.

The projections are meant to provide an indication of the timing and scale of the economic effects of the ageing population of Europe.

The 2015 Ageing Report said that “the age structure of the EU population is projected to dramatically change in the coming decades due to the dynamics of fertility, life expectancy and migration rates.”

In what may seem a contradiction the population is projected to be larger by 2060, but it will also be much older than it is now. The EU population is expected to increase by almost 4% (from 507 million in 2013 up to 2050), when it will peak (at 526 million) and will thereafter decline slowly (to 523 million in 2060).

In 2013 in the European Union the states with the largest population were: Germany (81million), France (66 million), the United Kingdom (64 million), Italy (60 million) and Spain (47 million).

According to Eurostat's projections, the UK would become the most populous EU country in 2060 (80 million), followed by France (76 million), Germany (71 million), Italy (66 million) and Spain (46 million).

These projections have led to speculation in the press that the surge in the UK population could make it the largest economy in the EU and that this would lead to a change in the balance of power, with the UK taking over from Germany as the most influential country.

Another important finding of the report is the economic impact of ageing on the pension arrangements.

The old-age dependency ratio (people aged 65 or above relative to those aged 15-64) is projected to increase from 27.8% to 50.1% in the EU. This means that the EU would move from having about four working-age people for every person aged over 65 years to two working-age people.

The decline in births among the European-born population is expected to take place with an increase in migration to the EU, which over the entire period up to 2060 is expected to number 55 million.

The immigrants are expected to be concentrated in a few countries: Italy (15.5 million), the UK (9.2 million), Germany (7.0 million) and Spain (6.5 million).

The report did note that these are only projections and that changes in the coming years could well mean that the forecasts will be proved wrong.

“Germany may well conclude that the best way to counter its declining influence would be to invite in more foreigners, and thereby grow more swiftly than now seems likely,” a report from the London Telegraph commented.

Nevertheless, the EU report observed that: “Indeed, the population of working age is projected to decline substantially in the coming decades, as large cohorts of people retire and are replaced by smaller ones of younger workers.”

The consequences of these changes for economic growth are significant. “In the EU as a whole, the annual average potential GDP growth rate in the baseline scenario is projected to remain quite stable over the long-term, albeit much lower than in previous decades,” the report said.

Lower growth

The danger, the report added, is that if fertility rates are lower than expected, then growth rates could be much reduced.

One of the conclusions of the report is that even if there is large-scale immigration into the European countries the world population share of the current EU Member States halved from 14.7% in 1950 to 7.2% in 2010, and it is expected to drop close to 5.0% in 2060, despite the projected net migration flows,

World population shares of Japan, China and the US have also declined in recent decades. By contrast Africa's world population share is projected to increase at the fastest rate of all continents to over 28% in 2060. In Asia, a slight decline is expected though it is projected to still account to over 50% of the world population in 2060.

Europe, the report noted, is currently the oldest continent with the highest old age dependency ratio, and will remain so in 2060. Other parts of the world are however also experiencing a dramatic ageing of their populations, with old-age dependency ratios climbing to levels clearly above the ones in Europe now on all continents except Africa. The demographic change is pronounced in particular in China, where the old age dependency ratio is at similar levels to the European one at around 50% in 2060.

Instead of focusing in short-term fluctuations in the stock market it may well be more wise to look at the longer-term demographic changes.

EU report points to a new European order


Over at the UK Telegraph, Jeremy Warner has looked at the latest projections by the European Commission in a very interesting blogpost. According to an extrapolation from current figures, Britain will be Europe’s biggest economy within 45 years, with France in second position and Germany in third. This of course is a change from today where Germany is the preponderant European economic power.

So what accounts for this shift? Largely, demography. Due to Britain’s higher fertility growth and high numbers of immigrants, Britain is projected to grow its population from 64million to 80million by 2060. France is projected to grow from 66m to76m over the same period and Germany is projected to shrink from 81m to 71m.  As Warner comments:

“…these relative gains in population would in the commission’s view add around 0.3pc per annum to the UK’s productive potential. By contrast, Germany’s relative loss of population would reduce its productive potential by a similar amount. All other things being equal, British and German positions in Europe would switch.”

If such a switch came to pass, then this would have profound implications for Britain and the European Union.  The UK would have to get used to having 25% more people and the EU would have to get used to a new economic leader.

“In order to cope, the UK would have to invest massively in new housing, schools, hospitals and other public services. The centre of gravity in Europe would also shift decisively away from Germany to Britain, transforming the UK’s position in the EU and her relationship with the rest of the world. Other members of the European Union would find it more difficult to “gang up” on the UK, which would naturally assume the position of disproportionate influence now occupied by Germany.”

Now of course, these are only extrapolations from current data – a drawing of the line forward into the future on the assumption that nothing changes.  It is unlikely that current levels of immigration to the UK will continue for 45 years, especially when all three main political parties “are now signed up to in some way restricting…[the] free movement of labour [within the EU]”.  Further, the current numbers may be too backward focussed and haven’t taken into account the fact that Germany is now the second most popular destination in the world for migrants, after the USA.  However, the report is useful to show us where things are headed at the present point of time if nothing changes.

The report also comments on the EU’s population growth as a whole. It is predicted to rise by 3% by 2060 to 523 million people.  What is interesting is that due to low fertility rates, the indigenous populations will decline quite steeply but will be made up for by an assumed growth of 55 million people in net migration.  Thus, the EU is destined to continue to change in its composition as more and more of its residents come from elsewhere. Assuming nothing changes of course…

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