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Saving for Retirement via Pensions关于养老金退休储蓄论文代写

时间:2016-06-30 21:35来源:未知 作者:admin 点击:
这是一篇关于saving for retirement论文代写的范文,随着不断提高的生活成本,制定长期的退休金储蓄计划是非常有意义也是非常有必要的。本文为了研究英国养老金现状从crisis、benifits and suggestion等三个方面讨论saving for retirement的重要性。以下是saving for retirement via pensions论文代写的全文。
Table of contents
Introduction..................................................................................................... 2
1.0 Current state of pension industry in UK.................................................................... 2
1.1 Pension regulations........................................................................................... 2
1.2 Pension crisis............................................................................................. 4
2.0 Changes in UK’s pension industry......................................................................... 7
2.1 Auto-enrollment............................................................................................ 7
2.2 Budget 2014.................................................................................................. 8
2.3 Shift from DB to DC........................................................................................ 10
2.4 Diversity and flexibility of personal pension schemes................................................... 11
3.0 Sources of help, Benefits and Alternatives................................................................. 12
3.1 Sources of help and information............................................................................ 12
3.2 Benefits for saving for retirement........................................................................ 13
3.3 Alternatives to saving for retirement via pensions........................................................ 15
Conclusions..................................................................................................... 16
Bibliography.................................................................................................... 16
Introduction
With the constant changes and increasing living costs, it is necessary and vital to make a long-term saving plan for retirement. Pensions with increasingly improved regulations and schemes serve as an attractive option. The article aims to analyze the pension industry in UK with its current state, pension crisis, changes and promote the benefits of joining pension schemes. Firstly, it discusses the current state of pension industry in UK. Secondly, it analyzes the major changes in the industry with reasons and benefits. Thirdly, it presents sources of help, suggests the benefits of saving for retirement via pensions as well as its alternatives.
1.0 Current state of pension industry in UK
1.1 Pension regulations
With regulatory efforts, the pension industry in UK has evolved into a well-developed system consisting of state pension, occupational and personal pension schemes. In terms of state pension, there are flat-rate Basic State Pension and earnings-related State Second Pension (Oehler and Werner 2008, p.270). However, through state pensions it is hard to provide for comfortable life for retirement. The full basic State Pension only provides £113.10 a week (The Money Advice Service 2015). Unlike state pension, a pension scheme is a long-term saving plan, generating income for one’s later life or in retirement. According to current legislation related in UK, when one starts to enjoy the pension, one could choose to take a tax-free lump sum or to receive a regular income (Pension Schemes Act 2015). The occupational pension schemes can be classified into defined benefits (DB) pension schemes and defined contribution (DC) pension schemes. Defined benefits pension schemes will deliver a specified income when the participants reach the scheme’s retirement age. The income value will be calculated using a formula taking into account such factors as salary and length of service for the employer (Matthes, 1992, p.7). Examples of DB pension schemes include final salary schemes and career average revalued earnings (CARE) schemes. Defined contribution pension schemes, also be known as money purchase schemes, allows the investor to build up his or her own pot of money to fund their retirement. The amount of pension will be based on the contributions one or one’s employer pay each month, the performance of the investment using the contributions, and the related charges (Matthes, 1992, p.7). Cash balance plans, also known as hybrid schemes, consist of part of both defined benefit and defined contribution pension schemes (Oehler and Werner 2008, p. 260). Personal pension schemes are schemes based on individual’s choice in investment with arrangements with a pension provider (such as insurance companies). 
Personal pension schemes are increasingly diverse and flexible and regulatory efforts are intensified to protect the interests of scheme participants. Stakeholder pension and group personal pension schemes could be used by employers as a cost-effective way to provide employee pension coverage (Johnson, 2014).With self-invested personal pension plans, individuals will make investment through insurance companies and other pension providers on their own. According to the Pension Schemes Act 2015, defined ambition pension schemes are introduced as a separate category from DB and DC schemes. Under defined ambition pension schemes, there is certain pension promise but without going as far as defined benefits scheme (Pension Schemes Act 2015). In collective defined contribution (CDC) schemes, employers and employees pay fixed contributions but share risks together (Masons, 2015). In terms of regulatory conditions, there are Pension Protection Fund (PPF) and the pension regulators (Annual Report & Accounts 2013/14). PPF is to compensate those in DB schemes whose employer becomes insolvent or fail to pay their pensions. The pension regulators including Department for Work and Pensions (DWP), the Pensions Regulator (TPR), and the Personal Accounts Delivery Authority (PADA) will perform their duty to investigate risks, identify problems and supervise employers’ compliance with their obligations.
1.2 Pension crisis
Due to demographic changes, public’s reluctance and mis-selling scandals, pension crisis arises in the pension industry. Pension crisis means the predicted difficulty in paying state, occupational or personal pensions or the falling confidence in pension systems (MONETOS, 2015). According to government projections, public spending on the basic state pension will soar from £66bn in 2015/16 to $276bn in 2060/61 (RMP Property, 2012). The government recommended retirement income is £16,200 and 56% of the population has no adequate pension provision (Croucher, 2014). An index linked annuity of £100,000 will pay around £5000 per year, the amount of just heating bills, which justifies the severe pension crisis (RMP Property, 2012). According to the research from Pension Protection Fund - “the safety net for underfunded pension schemes at insolvent employers” , the deficit of all schemes totaled 196.4bn by the end of September 2014, from 117.5bn at the end of August (Cohen, 2011). All the alarming facts and numbers indicate UK’s pension crisis is looming.
Firstly, increased Life expectancy and shortage of adequate workforce led to pension crisis. As the UK enters into an aging population, there is not adequate number of working people to support the increasing number of retirees. As the figure 1 displays, people’s longevity improves significantly, which causes a huge burden for the nation (RMP Property, 2013). Secondly, people’s perception and inertia towards saving for retirement makes the pension fund not adequate to support the current aging retirees. According to a report by think-tank Policy Exchange, 11 million people in UK are at the edge of “pension poverty" in retirement because they have not adequate saving in advance (Silvera, 2013). According to the Future of Retirement report with a survey of 1,050 respondents in the UK, 40% of retired respondents said that they had not prepared adequately or at all for a comfortable retirement (Silvera, 2013). Their response testifies the inertia of people to pension plan in their later life. Since 2008 20% of people have stopped paying into their pension altogether. The pension funds are from current investors, so when the current employees are reluctant to invest in pension schemes, the pension burden will be increased for the current increasing retirees. Thirdly, the mis-selling scandals make pension crisis even worse, especially due to the pension liberation, ignorance and greed of personal investors and pension sales representatives. The commission-hungry sales representatives persuade those employees already in occupational schemes to opt out and join the personal schemes, resulting in worse returns than in their previous company schemes (MONETOS, 2015). All the three reasons combined lead to the falling confidence in pension systems, causing pension crisis in UK. Remedies such as increasing state pension age and auto-enrollment are made to address the situation. The changes relevant in the pension industry will be discussed later.
2.0 Changes in UK’s pension industry
2.1 Auto-enrollment
Automatic enrollment benefits the employees as well as the nation as a whole. The rationale of this strategy is to reduce the amounts of people without adequate retirement incomes, and in return to encourage savings for retirement. The research of Department of Work and Pensions (2009) also suggested positive effect of turning on the inertia of low savings under the current tax and benefit system. But deeper reasons for the reform of pension system come from the increasing pressure of economic inequality and the debt crisis in Eurozone (Van Vliet et al, 2012). That is to say, the reform of adopting automatic enrollment is also the political tool to narrow the gap of retirement incomes and in the meantime, increasing the savings for the purpose of avoiding large debt risks like the Eurozones.
The Pension Act 2008 reforms workplace pension provision, introducing automatic enrollment to make saving for retirement the norm. According to Pensions Act 2008, from October 2012, the automatic enrollment takes effect, which means employers have the obligation to enroll all the eligible employees into the workplace pension scheme unless the employees decide to opt out. Employers could choose to use the Personal Accounts Scheme which is a type of low cost, independent workplace pension scheme aimed at those on low to middle incomes (Pensions Act 2008). Auto-enrollment facilitates to enlarge the pension coverage by making it compulsory for employers to enroll the eligible employees into a workplace pension scheme. Employees will enjoy the advantages of employer’s contribution and tax relief. Employers have the obligations to make a minimum contribution of 3% of a band of earning. employees’ contribution will be reduced from pre-tax salary, generating the income tax exemption on the contribution part (Pensions Act 2008). The total contribution will reach 8% of that band of earnings taking account into employer contributions, worker contributions and tax relief (Pensions Act 2008). The employer contribution and tax relief makes saving for retirement an attractive investment option. For the nation with a huge pension burden, compulsory pension plans will facilitate to reduce the burden and redress the current pension crisis.
2.2 Budget 2014
The Budget 2014 creates more flexibility and benefits for members of DC schemes when they access their pensions. In March 2014, the Chancellor George Osborne announced that individuals are not required to purchase an annuity and instead are given unlimited access to their pension pots (HM Treasury, 2014). Most retiring pensioners were forced to buy an annuity in return for guaranteed incomes. However, the annuity rates are closer to 5% a year due to falling interest rates and Government gilt yields (Croucher, 2014). With Osborne’s announcement, the tax advantage of up to 25% of tax-free lump sum still remains available. The “trivial commutation” increased to £30,000, which will allow more people to have modest pension pots with more returns in cask lump sum, as opposed to turning them into small incomes at low annuity rates (HM Treasury, 2014). The minimum income requirement for flexible drawdown reduced from £20,000 to £12,000; and the maximum drawdown limit increases from 120% to 150% (HM Treasury, 2014). All these measures will make the benefits of DC schemes accessible to more people. In this way, members of DC schemes will have a full control of their pension investment instead of being subject to previous forced annuity. The flexibility creates more possibility for higher income than the original annuity option. The reduction of minimum income requirement for drawdown and increase of drawdown limit means enlarged coverage for the eligible public. In short, the measures deliver more personal control over pension investment while addressing the current pension crisis for the nation as a whole.
2.3 Shift from DB to DC 
Another major change in the pension industry in UK is the popularity shift from defined benefits schemes to defined contribution schemes. According to Komp and Beland (2012), the aging population of UK has become a burden for fiscal expenditure, which of course more drastically harmed the social welfare system. Based on the data and estimation of UK HM Treasury (2013), there were over 14 million people aged over 60 in 2012, consisting of 22.7% of the population. What is more, there were also 12 million people eligible for the pensions making up to 19% of the total population, and to the estimation, the number would reach 21%. And the connection between aging population and the shift from DB to DC has also been established by Wang et al (2014). The actuarial confusion, subsided inflation in 1980s and unfunded liabilities led to the decline of DB schemes (Ezra, 2015, p. 57).The increasingly mobile and diverse workforce and simple cost structure make the DC more popular. From the perspective of employees, the defined benefits plans based on the years of service and salary is ineffective to the job-hoppers, for their years of service is relatively shortened unlike previous “lifetime employment” (Dent and Sloss, 1996, p. 24). From the perspective of employers, the administrative and actuarial costs of DC will be less than that of DB, since the costs of former one could be calculated in advance and the cost structure is simpler. In addition, the investment risk is transferred from employers to employees with DC schemes, as employees decides how to invest their contributions instead of employers as with DB plans (Murray, 1999, p.17). The benefits of DC are obvious. For participants, DC schemes give them more control about investment; moreover, they are more portable with shorter vesting periods and an easily defined transfer value. More importantly, the returns based on performance investment under DC plans rather than the years of service are advantageous for the mobile workforce. In addition, DC plans are easy to adapt to other purposes, such as employee savings plan, company bonus plan, and company stock ownership plan. All in all, defined contribution pension schemes are more convenient, flexible, portable and effective for the mobile workforce despite the investment risks.  
2.4 Diversity and flexibility of personal pension schemes
Although there are risks of mis-selling issues caused by pension liberation, the diverse forms of pension schemes will create more opportunities for participants to invest as well as to have more possibility of gaining higher income based on investment performance. The commission-driven sales promote the personal pension plans regardless of the real effects of joining it to employees. Combined with the ignorance and greed of investors, it is easier to led employees to suffer unnecessary loss. However, the pension regulators are trying their best to supervise the pension providers’ duty and identify potential problems timely to avoid the occurrence of such unethical issue. The advantages outweigh the potential risk of mis-selling. For instance, under defined ambition pension schemes, there is certain pension promise though without going as far as defined benefits scheme (Pension Schemes Act 2015). In CDC schemes, employers and employees pay fixed contributions but share risks together (Masons, 2015). With CDC, individual pension contributions are collected to form “mega-fund” for investment with higher certainty in income than a standard DC scheme. The diversity and flexibility also intensify the competition in the pension industry especially in private sector (Johnson, 2014). From 2015, UK retirees will no longer put their retirement savings into annuity contracts with insurance company and have freedom to choose the way they access savings. Such wider pension liberation policy will make the pension market to compete more intensely, delivering more products with inflation protection and low volatility as well as a regular income. In short, despite the investment risks, the diverse personal pension plans will deliver significant benefits for participants.
3.0 Sources of help, Benefits and Alternatives
3.1 Sources of help and information
There are multiple types of source of help and information in relation to pension investment. Firstly, almost each year UK government releases pension Acts to regulate the industry changes and address current pension crisis. On the UK government websites, the pensions related Acts could be accessed including the newly released Pension Schemes Act 2015. Secondly, there are some independent investment adviser organizations, such as The Money Advice Service, MONETOS, The Pensions Advisory Service and RMP Property. Each organization’s official websites provides the latest news and corresponding advice about pension investment. Specifically, the Pensions Advisory Service website provides the basics about pensions and related regulations as well as the investment advice. MONETOS is a comprehensive European research and information portal, providing independent advice and guidance on social systems and private financial sectors in Europe including UK. RMP Property is a company that helps clients to become knowledgeable investors, which allows them to a build a successful property portfolio. It is worth mentioning that although some independent adviser websites provide service for free, most the third party websites charges for their service. However, still large amount of news and comments in relation to pension industry could be accessed easily, which could give an insight into investment options.
3.2 Benefits for saving for retirement
There are significant advantages and benefits to join a pension scheme. Firstly, there are tax relief and tax advantage joining a pension plan. The contribution is taken from the salary before tax so that the tax income is less because the tax is only levied on what is left after the contribution. When the investor begins to enjoy the pension, up to 25% of the fund could be taken as a tax-free lump sum with the remaining as earned income (The Pensions Advisory Service, 2015). Secondly, the regulatory protections are ensured to protect the interests of pension investors. For instance, Pension Protection Fund (PPF) is established to protect the interests of defined benefits schemes investor. Within PPF, when the insolvent event occurs, the DB investors could claim compensation through PPF (The Pensions Advisory Service, 2015 ). In this way, their basic interests are not compromised by the insolvency of their employer. If an employee’s DB pension scheme is not covered by PPF, there is Financial Assistance Scheme (FAS). The pension regulators including Department for Work and Pensions (DWP), the Pensions Regulator (TPR), and the Personal Accounts Delivery Authority (PADA) will perform their duty to investigate risks, identify problems and supervise employers’ compliance with their obligations (Department for Work and Pensions, 2013). Thirdly, the intangible benefits are huge when you have a pension scheme. Although it could create financial expenditure in the short term, it could give you sense of certainty and security to combat against unexpected events in your later life. No one could ensure he or she could live a comfortable life without adequate saving, given the increasing living costs and constantly changing environment. According to the research from Standard Life, a man at age 30 could get a pension of £10,000 a year at age 68 through saving £149 a month, but if he start to save at age 40, he has to put £290 a month to receive the same income (Money Super Market, 2015). Therefore, the earlier you start to save, the easier you are to live comfortably in your later life.
3.3 Alternatives to saving for retirement via pensions
Three alternatives to saving for retirement via pensions are recommended:New ISAs, funds and Venture Capital Trusts (VCTs), and employer’s schemes. Firstly, in terms of NISAs, unlike standard savings accounts, they do not charge taxes on interests within an annual limit (Money Super Market,2015). For instance, income tax at 40% on any savings interest could be saved for higher-rate taxpayers. Stocks and shares NISAs are also exempted from income tax and capital gains tax. Without withdrawing the money, money invested in previous tax years between cash and stocks and shares can be transferred freely while the tax-free conditions remain. In short, NISAs serve as tax-effective alternative to pension schemes. Secondly, in terms of funds and VCTs, though there are higher risks investing funds and VCTs than pension plans, the risks are diversified and spread over a range of small high-risk projects. Venture Capital Trusts (VCT) provide income tax relief at 30% (Hyde, 2010) . Thirdly, in terms of employer’s schemes, many employers provide SAYE or 'Sharesave' schemes to employees. Employees are encouraged to save between £5 and £250 per month for three, five or seven years (Hyde, 2010). They will get a tax-free bonus if they complete the savings plan. Although you could have got more with the same investment elsewhere, the risks are minimized under the SAYE schemes.
Conclusions
The state pension, occupational and personal pension schemes constitute the pension systems in UK. Due to the increasing life expectancy and influence of mis-selling scandals, people’s confidence in the pension system is falling, causing pension crisis. However, governments made changes to remedy the situation. Major changes include the introduction of auto-enrollment, Budget 2014, shift trend from DB to DC and diversity of personal pension schemes, which enlarges the pension coverage and gives more control to the pension participants over the investment. The tax relief and regulatory protections as well as the sense of certainty and security make it attractive to join pension schemes. The earlier you start to save, the easier it is to lead a comfortable later life.  
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