By VICKI OWEN, FINANCIAL MAIL ON SUNDAY
19 October 2014
Speaking out: Ros Altmann iscalling for an end to ageism in the workplace
The pensions revolution being driven by Chancellor George Osborne has been hailed as giving new freedoms to people over their own money. But it has also been met with a rash of criticism, most notably that giving people access to their pension pots will encourage imprudent spending and expose them to the danger of being mis-sold financial plans.
Ros Altmann, former director-general of Saga and the Government’s Business Champion for Older Workers, laughs when asked about these risks.
Altmann, a career woman of 58, is herself slap bang in the age group for which she has become Britain’s de facto spokeswoman. She is adamant that the reforms are good news and implies that sceptics are showing a lack of respect for ordinary people.
‘There is a risk that people will be enticed to spend their pension, but I trust that people are responsible enough to keep the fund until they need it, rather than just falling for a con person with a get-rich-quick scheme,’ she says.
The concerns over the pension reforms (see box, below) have been widely voiced in the City. Tom McPhail, head of pensions research at leading financial services company Hargreaves Lansdown, said: ‘The Chancellor appears to be creating the perfect environment for a mis-selling scandal.’
Altmann, speaking after a meeting with the Treasury to discuss the reforms, insists they are a response to mis-selling, rather than a likely cause of more.
‘People forget mis-selling has already been happening and it’s widespread. The pensions industry has been selling people inappropriate products for a long time. People had not been educated enough to understand what they were doing when they bought annuities,’ she said.
The sale of annuities, in which the buyer exchanges their pot of money for guaranteed annual income for life, has led to a raft of scandals.Many pensioners are thought to have been sold poor rates of income.
Altmann’s talks with the Treasury have focused on the guidance and advice that will be made available alongside the new freedoms and she is confident they will get it right. ‘The Government is putting a system in place to educate people, and this guidance is not being driven by people trying to sell something,’ she says.
Meanwhile, as an adviser on the over-50s, she is trying to promote the idea that continuing to work is better than retirement. She says: ‘The retirement dream is about stopping one day, waking up and having no work. For many people that ends up as a nightmare, but it’s too late.’
And she warns that ageism in the workplace will spell economic decline. Her contention that workers are being ‘written off’ as soon as they reach their 50s comes after figures revealed that record-breaking numbers of older workers were fuelling the self-employment boom.
The number of self-employed people aged 65 and over has doubled to 428,000, in the past five years, while the income of self-employed workers has fallen to an average £207 a week, compared with £300 a week ten years ago.
Frances O’Grady, general secretary of the Trades Union Congress, has said: ‘The figures nail the myth perpetuated by Ministers that the UK’s new self-employed workers are all young entrepreneurs. In fact, almost half are over 50.’
Altmann says: ‘Recruitment agencies don’t take you seriously, employers don’t take you seriously. If you’re in your 50s, job centres are saying, “Well, at your age, love, maybe you should retire”. They’re busy focusing on the young.
‘All across the western world, given the demographics, this is a recipe for economic decline. We’ve got an economic boost that we’re not using.
‘What is so in need of reform is that, for most people, how and when you retire isn’t a personal choice. It is something that happens to you because of other circumstances.
‘We can do better than that. Even if people want to keep on or get back into work, very often they can’t. That’s a waste. There’s still so much ageism in the workplace. The anecdotal evidence is that as soon as you reach your 50s you are considered “past it”.
‘I think it’s a carry-over from the olden days in the 1950s, 1960s even, maybe, the 1970s, when the predominant work was quite heavy manual labour. Most people in their 50s and 60s were brought up with the idea that 60 or 65 was the magic age and you didn’t work after that. It’s only as they get there that they realise that isn’t how it needs to be.
‘Employment has always been geared to that, pensions have been geared to that, and therefore employment attitudes are also geared for that.
‘Most human resources people are quite young and if they are told that someone in their 50s or 60s is old and that we need to focus on hiring the bright young things, that is who is valued, irrespective of your talent.
‘There is also a concern, which is a hangover from the final-salary pension-scheme days, that you’re much more expensive to employ. Now there’s a different mind set. People don’t mind taking less if they’re working less, or if they’re doing a different job that gives them better work-life balance.
Altmann also debunks the myth that if an older worker keeps their job, a younger one cannot get work. ‘That is an economic nonsense,’ she says. ‘I’ve got studies that show that a higher employment rate for older people is associated with a higher rate for younger people.
‘It makes sense that if there are more older than younger people and they are not working, and haven’t got huge incomes, they can’t spend that much any more. Over time, that means both young people and older people lose out.’
Altmann, who has three children and lives in North London, began her career in banking and has worked at the former US Group Chase Manhattan, Rothschild and NatWest, before Saga.
Naturally, she has no plans to retire yet and could be talking about herself when she says: ‘If you’re relatively healthy and relatively fit and don’t want to stop work, why would you expect someone to just write themselves off?’
How sweeping reforms hand freedom back to savers
Chancellor George Osborne announced sweeping reforms to the way Britons can take private pensions in his April Budget this year.
For the first time all savers will no longer need to buy an annuity with their pension pots.
Instead of being allowed to take just 25 per cent of the pot as a lump sum on retirement and purchase an ‘income for life’ with the remainder, from April next year they will be able to withdraw the entire sum at the age of 55 and do with it as they wish.
As is the case now 25 per cent can be taken tax-free, with the rest counting as taxable income.
The 55 per cent ‘death tax’ on pension pots has also been axed, allowing pensions to be passed on tax-free in some cases.
Osborne said: ‘People who have worked all their lives should be free to choose what they do with their money, and that freedom is central to our long-term economic plan.
‘From next year they’ll be able to access as much or as little of their defined contribution pension as they want and pass on their hard-earned pensions to their families tax-free.’
Pensions Minister Steve Webb has said: ‘If people do get a Lamborghini, and end up on the state pension, the state is much less concerned about that, and that is their choice.’
Simon Laight, of law firm Pinsent Masons, has said: ‘The Government wants the pensions industry to deliver low-cost flexibility.
‘For that you need scale. We will see a “land grab” as providers rush to develop new pensions and capture market share.’
A survey by Fidelity Worldwide Investment of 500 investors retiring in the first year of the new pension freedoms found nearly half had not begun to assess their options.
Read more: http://www.thisismoney.co.uk/money/news/article-2798404/pm-s-pension-guru-ros-altmann-backs-older-workers-gives-warning-retirement-turn-nightmare-let-work-want-to.html#ixzz3GXnzxWzV
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Australia’s ageing population presents a considerable challenge to Australia’s economy. After a generation of favourable demographics and a once-in-a-lifetime terms-of-trade boom, it will be old-fashioned hard work and Australian ingenuity that determines our economic future.
One of the least discussed causes of Australia’s economic success over the past half century has been our favourable demographics. Until recently, Australia had a relatively young population, flush with working age individuals and supported by rising labour force participation among women.
That period of unprecedented success is over and the labour market participation rate is now on the skids. That is set to continue over the next generation due to the retirement of the ‘baby boomers’ and relatively low fertility rates in Australia.
Reserve Bank of Australia assistant governor Chris Kent was in Adelaide today discussing some of the implications of an ageing population on Australia’s economy. Clearly this is an issue that is on the mind of the RBA’s top brass, and rightly so, with deputy governor Philip Lowe providing an excellent analysis back in March (Coming to terms with Australia’s stark economic reality, March 13).
The implications of this trend are vast and will fundamentally change the composition of Australia’s economy. The first concern is the number of workers, with the economy becoming increasingly reliant upon a smaller share of the population to drive growth and finance government services. The share of workers in health and aged care services is set to boom but the demand for teachers may ease.
More broadly domestic demand is expected to shift increasingly towards services. According to Kent, “services constitute a larger share of total consumption for older people than for the rest of the population.” The retail sector is set to be one of the biggest losers from Australia’s ageing (A new grey area for retailers, March 24).
Kent notes that “we can expect that ageing will lead to extra demand for services at the same time that it weighs on the supply of services.” That will inevitably push the price of services higher relative to goods. But we shouldn’t blame ageing entirely for this trend, productivity growth has been much higher in goods manufacturing than in services for a long time.
There are two other issues that warrant further discussion: government finances and risk-taking.
It’s widely accepted that an ageing population will narrow the tax base and weigh on tax revenues. At the same time it will increase the demand for government health and aged care services. The Productivity Commission estimates that an ageing population could increase aged care, aged pension and health care expenditures by around 7 percentage points of nominal GDP by 2059-60.
The aged pension will come under increasing pressure due to insufficient retirement savings. Superannuation has helped to some extent, but remains insufficient for many ‘baby boomers’. Unfortunately, the superannuation tax system largely favours the wealthy, offering tax concessions that accrue primarily to those who don’t need them.
Although as noted by RBA governor Glenn Stevens, there is also the risk that ‘baby boomers’ hold too much of their wealth in property and are particularly susceptible to a market correction (Have baby boomers made a big investment mistake? September 4).
Finally, Kent notes that older Australia’s have less tolerance for risk, “including those associated with new business ventures, developing new products and services, and pursuing innovation more generally.” None of that is a surprise but it suggests that an ageing population may create an impediment for productivity.
However, according to Kent an ageing population does provide some opportunities. But I’m not sure that longer working lives is what a lot of people have in mind when they think of opportunities.
Nevertheless, higher wages will encourage some older workers to either stay in the workforce or re-enter it. To some extent we are already seeing this process in action with the participation rate among older Australians increasing significantly over the past decade. That is a trend that should continue over the next generation.
Another important point is that a longer lifespan will necessitate a rise in national savings. That said, the performance of our superannuation industry — which charges exorbitant fees for subpar work — suggests that this may not be as beneficial as it first seems.
An ageing population presents a considerable challenge for the Australian economy. Innovation and productivity growth are the two keys to solving the riddle and they will ultimately determine our long-term standard of living.
The obvious issue though is that an ageing population tends to weigh on productivity and risk-taking. It also encourages greater consumption of services — a sector where productivity growth has historically been relatively low.
Nevertheless, we will have to boost investment and productivity growth if we hope to maintain our recent economic gains.
Source: Business Spectator