Baby boomers hampered by care cost worries

I was picking my way through one of the electronic newspapers which arrive on my desktop via the [Expletive deleted] non-stop email delivery service. Most articles can be skimmed but one did catch my eye concerning Care Home Costs.

Concerns about care costs are holding back baby boomers from spending in retirement, new research has warned. 

Analysis by Aegon showed nearly four in 10 baby boomers had expressed concerns that future care costs would hold them back from spending more in retirement.

The data also found that three in 10 were now ensuring they have enough money for care costs, which is important for them.

The research comes as the final members of the baby boomer generation turn 55 this year, which is the age that they can access their pension.

Steven Cameron, pensions director at Aegon, said: “The research shows that a large proportion of baby boomers are concerned about funding their future care costs, and with good reason.

“The cost of formal care can be immense and retirees often face selling their house and rapidly depleting their lifetime savings to pay for this, extinguishing any plans to pass on an inheritance to future generations.

“What makes it worse is that until the Government sets out clearly how much individuals will in future be expected to contribute, it’s almost impossible to plan ahead.

“Fear of being unable to ‘pay their way’ means some are spending less than they can afford to, stopping them fully enjoying their earlier retirement years.”

For those receiving residential care, assets include their home unless a qualifying relative, such as a spouse, is living there.

Latest figures show the average cost of staying in a residential care home in the UK is £32,344 per year and a typical hour rate for home care is around £20.

This means most people will need to use savings and assets to cover their care costs and may find these deplete very quickly.

The government announced it was to publish a Green Paper on a new approach to social care funding in its March 2017 Budget. 

But this has been repeatedly delayed. Social care funding did receive a mention in the Chancellor’s 2019 Spring Statement but only to say it will be considered as part of a comprehensive Summer spending review.

Mr Cameron added: “The crippling cost of formal care has led many to rely on relatives and friends to provide valuable but unpaid informal care.

“With more people living into their 90s and beyond, many baby boomers thinking ahead to their own care needs will have elderly parents to care for and may face having to opt to work part time or give up work entirely, which can have significant knock-on consequences for their own finances and retirement plans.

“Sadly, a new deal on social care funding has been one of the biggest casualties of a Government so absorbed by Brexit negotiations.

“A social care green paper was originally scheduled for summer 2017 but repeated delays have left millions in the dark regarding what they’ll be expected to pay should they need social care in later life. With more of us living longer, arriving at a clear and sustainable solution is fast becoming one of society’s greatest challenges.”

Thoughts on Investing Ethically.

The term ‘ethical’ is often used as a catch-all to describe funds managed with social, environmental, or other responsible criteria in mind.

Investing ethically offers the possibility of taking advantage of good performance whilst also benefiting society. And it’s becoming more and more popular with investors of all ages.

But of course, ethics are personal. An industry that seems abhorrent to one person might seem like a necessary evil to others. Take pharmaceuticals. Some investors would avoid the industry because of moral objections to animal testing. Others suggest the work of pharmaceutical companies contributes to the development of society.

That’s why you’ll need to make sure your investment is consistent with your moral views before you invest. When giving advice we look at the approaches taken by a selection of funds whilst taking into account how much risk you want to take just as you would with any other type of investment.

Striking a balance between investing morally and delivering strong performance is no easy task.

We are also strong advocates of diversified investment, and it seems to us this should also apply to Ethical Investing. The principle of diversification is well documented elsewhere is these posts and should be fundamental in portfolio choice in our opinion.

As with any investment, make sure it fits your objectives and you are comfortable with the risks before investing. And if you are unsure, seek advice.  Give us a call. We will be pleased to assist.

Women overtake men in workplace pensions

A higher proportion of women are now in workplace pensions than men according to Office for National Statistics figures published today.

New data on workplace pension scheme membership drawn from the latest Annual Survey of Hours and Earnings for 2018 shows where workplace pensions saving is heading.

It shows that among full-time and part-time workers, a higher proportion of women than men, are now members of workplace pension schemes.

This is partly driven by the fact that pension membership rates are much higher in the public sector where women make up a larger proportion of the workforce.

But this does not mean that women are anywhere near achieving pension equality according Royal London director of policy Steve Webb.

He says: “While it is great news that far more women are now members of workplace pensions than in the past, there remains a pension gulf between men and women.

“Being a member of a pension is a great start, but the size of your pension will depend on how much you earn and how much you and your employer contribute.

“On both of these fronts, inequalities in the jobs market mean that women are still lagging far behind men when it comes to building up decent pensions.  On current trends, women’s pension equality could still be decades away.”

The statistics also show how auto-enrolment has boosted workplace saving as 76 per cent of UK employees were members of a workplace pension scheme in 2018, up from 73 per cent in 2017.

This is a 29 percentage points increase compared with 2012, when auto-enrolment was introduced.

Markets Now Bored

Markets shrugged off news of a six-month delay to the UK’s deadline to depart from the European Union, with markets now “bored of the constant drama” associated with Brexit, although asset managers warn the country’s economy will continue to suffer as the process is dragged out.

The UK has been set a 31 October deadline for its departure from the EU, after talks in Brussels on 10 April left the country on course to take part in May’s European elections or risk leaving with no deal on 1 June.

Brexit can happen earlier than either date if Parliament is able to ratify the withdrawal agreement, which has already been heavily defeated three times.

The FTSE 100 was down by just over 0.1% and the FTSE 250 was up by 0.5% at the end of the day following the agreement (11 April). Meanwhile sterling was flat against the dollar and the euro, as it moved up 0.4% against the Japanese yen.

Head of flexible bonds at Vontobel Asset Management Ludovic Colin said the limp reaction reflected the fact that “markets are bored of the constant drama and the fact that Brexit keeps getting pushed back via successive extensions”.

He added: “The price of insurance against a bad scenario has collapsed, meaning markets do not feel the need to protect themselves against an impending storm.

“The market has worried a lot on a hard Brexit, and now that solution has been removed in the short term, the sector may now focus its attention on other immediate risks.

However, Colin also warned that “the cost to the UK economy will continue [and] for businesses, this added period of uncertainty is very negative”, while “the direct impact on the UK economy and the fact the global environment is deteriorating will probably make investors very cautious about investing in UK assets over the coming months”.

Colin added that while predicting which assets are set to be most impacted over the coming months was “too hard”, an “even more aggressive political game in Westminster” will weigh on sterling and UK assets compared to the rest of the world”.

Schroders senior European economist and strategist Azad Zangana said the impact of the “ongoing uncertainty” could result in the Bank of England (BoE) keeping interest rates on hold until “November or beyond”.

Zangana explained: “The BoE has been keen to raise interest rates to more normal levels, only to be held back by Brexit-related downside risks to the economy. 

“There is now a possibility that, with a longer delay, the BoE decides to hike in May, but it is more likely to wait until after Brexit has been settled.

“This suggests that our forecast of a rise in August will now need to be pushed back further, potentially to November, or even later given our view of the possibility of yet another extension beyond October.”

UK economist at UBS Global Wealth Management Dean Turner said “sluggish economic growth is likely to continue until the [political] impasse is broken”, adding that removing the initial 12 April Brexit deadline “will be welcomed by the markets but any excitement is likely to be short-lived”.

A Word of Warning

Just a word of warning to all my readers. The Financial Conduct Authority has warned about high-risk innovative finance Isas (Ifisas) being advertised alongside cash ISAs. 

In a statement published on its website the regulator confirmed it had seen evidence the two products were being promoted together, and it warned  investments held in Ifisas were “high-risk”, with the money ultimately being invested in products such as mini-bonds or peer-to-peer investments.

The City watchdog warned these types of investments might not be covered by the Financial Services Compensation Scheme and investors might therefore struggle to reclaim any money lost. 

The FCA warned: “Anyone considering investing in an Ifisa should carefully consider where their money is being invested before purchasing an Ifisa.” 

Innovative finance Isas were introduced by former chancellor George Osborne in his 2015 Summer Budget to help investment in small businesses and to allow investors to hold P2P assets in a tax-free wrapper.

But they have not taken off in the same way as the lifetime Isa, which Mr Osborne announced in 2016 to help younger savers put money aside for a house deposit and retirement.

During 2017/18 only 31,000 Ifisas were subscribed to, compared to 166,000 Lisas, 2.8m stocks and shares Isas and 7.8m cash Isas.

Earlier this year mini-bond provider London Capital & Finance collapsed putting the funds of more than 14,000 bondholders at risk.

Because mini-bonds are unregulated investments the FSCS confirmed it would not accept any claims from LCF investors, with the company’s administrators instead hoping to recover funds on behalf of those affected. 

In the most recent update from administrators Smith & Williamson, they estimated bondholders would see as little as 20% of their investments returned to them. An investigation into LCF by the Serious Fraud Office remains ongoing. 

If you have any doubts or concerns, give us a ring and we’ll be pleased to have a chat with you.

Are You Really Listening?

Andy Bounds, the motivational speaker, comes up with these little gems from time to time. Here’s one I say recently.

Quick quiz: What’s wrong with this conversation?

Person #1: I had a bad day at work today. I argued with Sarah
Person #2: I hate it when I argue with people. I fell out with a friend last month
Person #1: I know. She didn’t like how I described her job in a meeting
Person #2: Exactly the same happened with me.  And the friendship hasn’t been the same since
Person #1 I don’t know what to do
Person #2: I don’t either. I used to really like him

So what’s wrong with this conversation?

The answer: It isn’t a conversation. 

Neither of them is listening to the other one. This is a good example of what Dr. Stephen Covey meant when he said ‘most people do not listen with the intent to understand. They listen with the intent to reply’

In my experience, everyone thinks they’re good at listening to other people. 

But conversations like this happen all-too-often.

So, next time someone says something to you, rather than saying “The same thing happened to me”, ask more about their situation:

  • “That sounds hard – what happened?”
  • “Really? Tell me more”

It’s an easy fix.

But it makes all the difference – to your chat, to the outcomes following it, and to how much you both enjoy it. 

So the Action Point is:

In your very next conversation, do your best to say “tell me more”. And guess what?  They’ll probably tell you more!