134- What Can We Learn From The WASPI Campaign?

It was in the news last month. 

Women Against State Pension Inequality. 

Women who argue they were not fairly notified about a rise in the State Pension age will not be paid compensation. 

But what can we learn from this when it comes to our own financial plans and our own retirement planning? 

Nobody else has your back, and so the onus to create a dignified and comfortable retirement is very much on you. 

Join Benjamin Mitchell (themoneyscot), serial hater of financial jargon, as he helps make your finances clearer and ensures you never make another financial mistake.

Getting on top of your personal finances doesn't need to be complicated or scary. Arm yourself with the only knowledge you need to transform yourself from money novice to money nerd! 

Take my 5 minute retirement assessment (can you already afford to retire?) 🚀


Disclaimer - please note that nothing in this podcast can be relied upon as financial advice and the content is provided purely for information and guidance purposes. Please seek independent, regulated financial advice relevant to your situation.

Transcript

SPEAKER_00 0:10

Hello money nerds and welcome again to Heads Up on Money. I hope you're all well. Hope you've all had a decent week, and Personal Finance Friday has rolled around. Here we are, episode 134 of Heads Up on Money. I don't know about you, Money Nerds, it feels like we just hit the 100 milestone with Heads Up on Money, and I can't believe here we are racing towards very much the end of February, getting into the stressful month for me of March when I do all the stressful end-of-year tax planning stuff for clients. It's a busy time of year for me with annual planning meetings with clients and just getting end of tax year affairs in a good place. So I'm going to be breathing a big sigh of relief in a few weeks' time when we do once again end the current tax year and get into the next tax year because it never ends. Anyway, in this episode, I wanted to do a little bit of a topical item. Something which came up back in January was many of you may have read about this, was the outcome of the Women Against State Pension Inequality Group. You've probably heard it referred to as the WASPY group. So the summary of that, and I'm not going to go into the details in this podcast because we're here for the personal finance takeaways and the learns from this, but it has been a topical issue. And the summary is a group of women who contended that the increase to the state pension age from 60 to 65 for some women was not addressed in a transparent way, they were not given enough notice, and they've argued for years that certain group of women, typically those born in the 1950s, they were not effectively notified about the Pensions Act of 1995 that increases state pension age, and therefore women who had their hopes pinned on a notional state pension age of 60 suddenly had the goalposts moved back to 65. And it's been in the news last month because the compensation that they were seeking has been knocked back by the government, or certainly at the time of recording, there has not been any compensation offered. So the debate no doubt will continue, but why am I talking about it in this personal finance Friday? Why am I talking about it to you, money nerds? What can we take away? Well, I've mentioned in the podcast numerous times before that the backdrop of any successful retirement journey will no doubt involve the state pension. It is a massive asset to many a retiree. It's the bedrock of an income strategy within your financial plan, and for many people it is not an insignificant amount. Again, at the time of recording, the state pension is due to increase in April by 4.8%, in line with the triple lock guarantee that Touchwood still does continue. So it's going to be£241.30 a week, which is an interesting dynamic for the real money nerds out there because on an annual basis this would come out round about$12,548, which means state pensioners who are only in receipt of their state pension with no other form of taxable income, no other private pension income, no rental income, no taxable investment income, no interest income, let's assume it's nice and clean, someone who's just in receipt of the state pension will be in danger of breaching their personal allowance. So it's an interesting dynamic that the government are no doubt toying with at the moment because it's very much topical in personal finance news if you're a nerd like me. But the idea is that the tax freebie that most people have, the personal allowance, is in danger of actually becoming less than the state pension, which brings in a whole complex dynamic about how do pensioners who are only in receipt of the state pension have tax taken from their state pension, because at the moment tax is not taken from the state pension per se, tax is collected from other income sources you have, and the tax that is due on your state pension will be collected in a greater amount from other pension income sources, for example. So that's an interesting one to keep a watch over. But anyway, as often in this podcast I digress, what I'm talking about in this episode is this idea that the state pension is a significant income source. It's a guaranteed income, which means it's payable from your state pension age. Appreciate the WASPY campaign and everything that goes around that is there's contention around when the state pension age was increased and people obviously planning for a date that was pushed back. But parking all of that, your state pension gets paid from your state pension age until you die. So it's a guaranteed income source. And in many is the same way that defined benefit pension is extremely valuable, so too is the state pension. And yes, it's important to build up an investment portfolio to diversify, to have private pensions, to have ISAs, to have perhaps other types of investments such as investment bonds, if you've got a sizable amount of invested wealth. All of this is really important for your retirement plan. But at the end of the day, that is all pretty invaluable in comparison to the state pension. Because the state pension is guaranteed, whereas the investment portfolio you build up, the onus is very much on you to make that last throughout retirement. Now, yes, you're a money nerd, yes, you're doing things diligently, you're not falling foul to all of the mistakes that many a retiree make. You're better than that by now, money nerds. But the state pension and final salary pensions really are the absolute creme de la creme of financial planning. So the state pension is a huge element of that. Now, what the purpose of this podcast is, is to educate you, money nerds, is that the state pension is very much unlikely to be enough in retirement. If you are planning for your retirement just to be your state pension, then that is laced with danger and laced with too much variation in the outcomes. And it's evidenced by the fact that it's very much in the news at the moment the whole Waspie campaign is women who were perhaps planning solely for their state pension at a certain age, had the goalposts moved back, and I'm not going to comment on the political pros and cons or whether that was right or wrong, or whether it was a good thing or a bad thing for the government to do it, but anyway, the goalposts were moved, and because these individuals, or many of them, may have had their retirement plans built largely around their state pension, as they should do, by pushing the goalposts back, suddenly the financial plan that they may have had becomes dislodged, and it can mean things like pushing retirement back to the state pension age. If you are very dependent upon the state pension, then your state pension age will be your retirement age. And so many people who perhaps do have a bit of wealth behind them forget that the state pension age is just an arbitrary age as to when your state pension can be paid. Typically, you can access private pension wealth ten years preceding that. Again, seek advice depending on your own situation and when you're born. But the education here is that we do not have to just be at the beck and call of the government. We do not have to just rely on the state pension. And the women who have been affected by this outcome and the lack of compensation offered to them, well their retirement plans could have been dislodged in a significant manner, perhaps because they were dependent on the state pension. But you money nerds, you don't make this mistake. You should be recognising that the state pension is just one element of a successful retirement plan. And indeed, for many people, the idea of continuing to work until state pension age is not palatable in the slightest. Most of my clients perhaps retire a number of years before state pension. And during that window, there can be a point in time which is typically, I see with my clients, maybe five to seven years, potentially longer, of gap between conventional work ending, let's say your salary stopping and your state pension commencing. And you've got that opportunistic window where you have to use private wealth to sustain yourself during that time frame. And the onus is on you, money nerds, to build up a suitable level of private wealth to meet that gap. And the same goes not just with state pension, but perhaps if you've got defined benefit pensions, for instance, let's say you are in the NHS 2015 pension scheme, the typical retirement date on that, if you ignore things like early retirement factors and all that jazz that goes with it. Let's say that comes in at 67 also because it's tied to your state pension age. Well, many doctors, for example, some of which I have as clients, they don't want to keep working to that point. They want to retire earlier. And again, this means you need to have the private wealth, the private investments, be that ISAs, pensions, investment bonds, general accounts, again, it will depend upon your own circumstances. But the private wealth needs to be there to meet the gap. And if you are just hoping that the state will have your back, if you are just hoping that you're going to get a decent state pension at the date you've been promised, well things change money and urge, as evidenced by the changes brought in by the Pensions Act and when state pension age was pushed up for individuals. You can't be planning, certainly over a long period of time, for this to come good on the promises that have been made to you. You have to pick up the tab yourself. You have to be diligent yourself, because nobody is going to have your back here, money nerds. Not even me. I'm here every Friday to give you the education and the confidence that you need to actually grab this and do this yourself and recognise that taking control of your personal finances, although it seems dull and hellishly boring, it's actually a massive, massive weight off your shoulders because you have done what many people do not do, money nerds. So I'm on my soapbox for this episode, episode 134, but it's a really important one because the topical news that's happening at the moment around the Waspy campaign and the things I'm reading very much reinforces this ethos that too many people have all their eggs in the basket of thinking the state will just cover me. And for some people, that might be okay, but for most, I would not encourage it. And even if you do think the state will have your back, question is a full state pension, if indeed you are in line to receive the full state pension, is that going to be enough? Very, very unlikely. I talked in previous episodes of the podcast about retirement living standards, and if I reference this again, it says that the actual minimum minimum standard of basic retirement would be 13,400 for a one-person household, and that would cover all your needs with some tiny amounts left over for fun.$13,400, that's what they estimate a very basic standard of retirement to be. And let's be honest, none of us are aspiring for that goal. We are aspiring and targeting a much better standard of retirement than that. A moderate standard of retirement would be$31,700 a year, and a comfortable retirement$43,900. So these figures absolutely eclipse the small amount of the basic state pension. Now, don't get me wrong, state pension is a phenomenal, phenomenal element and ingredient of your financial plan. I'm not discrediting it, but you need to plan beyond it. You cannot be living and planning for your retirement, assuming that the state pension is going to be enough. So this money nerds is the shakeup that many people need. I hope you heed my warning. On a wider, more macroeconomic basis, I think we are walking into a retirement crisis or perhaps sleepwalking is the better turn of phrase here because I think many people were totally oblivious to it. And suddenly people are earning decent amounts in their careers, a good standard of living, suddenly the income tap gets switched off and they're in for a massive shock and a massive adjustment to their standard of living in retirement. If they carry on, just assuming that the state pension is going to have their back. And of course, it extends to way beyond just the state pension, but things like auto enrolment and your workplace pension, if you're paying your minimum contributions, if you're investing in the fund that your employer has thrown you into when you joined the employer or the pension scheme, and assuming that is all going to be enough, that is all going to take care of itself, and it will all be alright on the night when you hit 67 or whatever the state pension age is for you. You need to open your eyes, money nerds. And hopefully, this episode of Heads Up on Money was the first step and the first kick up the butt that you needed. Right, that was one of those episodes I know that is me on my soapbox, but I do hope there is some valuable takeaways there from this episode, Money Nerds, because you have to do this yourself, and I know the fact that you tune into my horrific tone every Friday, coming back for more financial education, suggests to me that you are in the minority here, Money Nerds. Most people are not thinking about this stuff. So give yourself a pat on the back for being attuned to these risks in the first place. Now it's down to you to put something in place with your financial planning, to do all the great things we talk about in other episodes of the podcast, investing regularly, controlling what you can control, and not stressing about market short-term performance, but instead just letting your investment compounding do the heavy lifting, investing in the right asset classes, and before you know it, it really is as simple as that. You will have the financial infrastructure around you so that you are immune to the state pension. And of course, I'm not saying that every woman that has been affected by the WASPY campaign judgment is suddenly going to be in a retirement that is minimum standards of living rather than a comfortable standard of living, but in the extreme example we can extrapolate that if they were solely dependent on the state pension, then the outcome will have derailed their retirement plans. Don't make that mistake. Also, money nerds. So there we have it. Let's wrap it up. I will catch you next Friday. I hope you have a nice weekend. In the meantime, I'll see you in March. One month to go until the tax year end. Ring, ring, ring, ring, ring, ring, ring. That's the bell ringing. This is your official notice to start tidying up your tax affairs as you near the end of the 25 26 tax year. See you next Friday. Have a great weekend. Goodbye for now, money nerds.