Archive for April, 2015

The looming generational pension crisis

It’s been a constant feature of the various online financial press in recent months and even years – at least as long as I’ve had an elevated interest in this sort of thing – but given the pace of change in the financial services market and in particular, with regards to pensions, I am increasingly concerned about the looming generational pension crisis that many are going to be facing.

What do I mean by a “generational pension crisis”? Well, if you think that the majority of us – at least those outside gold-plated civil service and public sector pensions – are now no longer on final salary pension schemes and therefore have an increased responsibility to save for our own retirement, then the question has to be whether individuals have actually done the sums required to understand what their financial situation will be at retirement. My guess is many haven’t and a majority of recent generations are relying on guesswork and assumptions, rather than making responsible provisions for what is arguably one of the main stages of life and one that many won’t be able to enjoy as they expect to (or see their parents and grandparents enjoying now).

What is enough?

This is Money featured an article last week, with a headline of: “Young people expect to retire with £95,000 pension pot – but most haven’t started saving yet”. The article raises some very valid points and for me, I find it both personally disturbing and largely worrying when I think of the looming crisis or ticking pensions timebomb as others term it.

Even having the aspiration of building a pension pot worth £95,000 – although apparently better than many others will achieve – is still going to lead to some harsh wake-up calls come retirement. At current annuity rates, this might secure an annual income of around £5,000 for a 65 year old male. That’s just over £400 per month! I appreciate spending habits might be reduced as we enter old age, but if you want to enjoy your old age, you’re surely going to want to have more disposable income available. Even the new flat rate state pension – again, assuming it’s still here and available to you when you come to retire – will ‘only’ add a further £8,000 per year to your income. So, a total £13,000 annual income isn’t that bad – but it’s hardly going to fund the lifestyle we see our parents and grandparents enjoying now, with holidays, cruises, new cars, buy-to-lets and other luxuries they have in their golden years.

Everyone’s retirement aspirations are going to be different, based on lifestyle now and individual financial situations. Given this is one of the main stages in life and the decisions made now will not really affect you for many years – but when they do, you’ll potentially have 10, 20, 30+ years during which you’re going to have to live with those choices you made in your earlier years. So making the right choices now, maybe saving more, or at the very least looking more closely at what you’re saving, whether it’s in the right plan or investment vehicle and whether it’s sufficient to give you what you want in retirement – is an essential activity I’d recommend everyone undertake. The Money Advice Service offer a helpful Pension Calculator that it would be worth using to give you an initial insight.

Compound interest

The effect of compound interest shouldn’t be ignored either. I wrote about it an article a while back, quoting Einstein as saying he considered it the 8th wonder of the world. As a father, I’m making sure my son is going to start off in a better position than I did by making pension contributions for him from the day he was born. I would argue that all parents interested in the long term financial security of their own offspring should do this – and any amount, invested now, will be hugely important 70+ years hence when he comes to retire (as the state pension age – if there even is a state pension still – will surely be in excess of 70 years).

Pension freedoms

I’ve read with interest the changes George Osborne has brought in to the pensions sector in the UK and think the decisions have led to progressive change that have made the situation at retirement much fairer and more easily influenced by the powers of the open market. But again, I wonder whether many will be relying on assumptions too much here and in reading about the pension freedoms and the ability to access your money, such as using it in flexible drawdown (assuming your provider permits it), or not investing in annuity – most articles overlook the fact that the freedom to do something with your pension only truly becomes a worthwhile change, if there’s a sufficient pension pot available to do something with in the first place. 

The answer

So, what’s the answer? Right now, I feel that everyone of working age needs to take a long hard look at their saving plans and really work out what they’re saving, what that could total at their future target retirement date and figure out whether that’s an acceptable level for them. I’m confident many won’t have done this, otherwise we wouldn’t be seeing articles like the one in This is Money. 

I think we also should see an increase in saving more – and the auto-enrollment for pension saving (Nest) is a helpful starting point, but is it enough? Is the general population being lulled into a false sense of security and thinking that just because they have the Nest and the state pension in place, that they don’t need to think about this sort of thing? I’d argue yes. I’d also argue that Nest needs to ramp up its contribution percentages – from all three parties involved: employers, employees and the government. An extra 1% even, from each, could make a significant difference to the financial situations of many.

I also believe that child benefit should have a mandatory pension element for all children up to the age of 18. Even at at £25 per month, for 18 years at 5% compound growth (after charges), the pot would be £106,701.70. The government needs to do more in this instance, particularly if they don’t want the state pension to become increasingly unfeasible, or a bigger burden on the UK economy.

Overall, the message is simple. Don’t rely on assumptions. Do your sums. Plan ahead. And save more!

As always, these are just my personal opinions and should only be used as guidance. Where financial situations are concerned, please do your own research and in many instances taking professional advice is definitely advised. 

How to easily create your own font

I’d often wondered how easy it would be to create my own font and having seen various pixel based, graphical editors always placed it in the too-complicated or too-hard camp. But I came across this tool called MyScriptFont the other day which promises to make the process significantly easier.

First of all, there’s no on-screen editing. You simply download a template grid and then using a medium thickness black felt tip, write in the alphabet in uppercase and lower case, along with the main numbers and punctuation. Additional symbols are optional, which in the interest of speed and testing it all, I opted against. Then it’s simply a case of scanning your grid in to your PC and uploading it to the MyScriptFont website.

Once it’s online, the site does its thing and provides you with either a True Type Font (TTF) or OTF which you can download and then easily install into your own machine.

I created mine in about 5 minutes – which you can view or install from here, if you like. It’s not perfect, as I accidentally crossed some of the guide lines so the loops on some of my letters have been cut off during the scanning process, but it was so easy to do, I just felt it worth sharing on here. I’ll shortly be revisiting the site and taking more time on my grid so I can have a perfect font!

Where the site might have a few drawbacks is in foreign language support, or for those instances where pixel perfect accuracy is required. It’s also quite tricky, as I found, to fill in the whole grid without making a mistake… so, unlike me, take your time and do it slowly! And make sure your felt tip pen doesn’t start fading half way through writing.

In terms of applications, there are a lot of paid font solutions out there that designers and organisations use and pay for, but this one is absolutely free – and pretty unique too. It’s not going to be suitable for every application, but the speed at which you can get your own custom handwriting based font is hard to complain about.

Do comparison sites cost us more?

They’re often heralded as consumer champions, giving individuals access to the whole (or a much larger proportion) of the market than they would have been able to access independently. But I wonder how much the presence of the comparison sites has actually inflated the costs we all pay as a result of the fees that they charge (to the insurers and other financial services companies).

The main comparison sites: Moneysupermarket.com, Compare the Market, Confused.com and Go Compare are all very profitable organisations in their own right. They must be making their money somewhere and since they don’t directly charge consumers for their custom, they must be making money from the insurers and other providers that they work with. And this cost must be funded somehow… so I believe this ‘cost of acquisition’ of a customer must be being passed on to the end user. It therefore has to be a false economy of some magnitude, arguably with inflated premiums for an end user to accommodate the extra costs the organisations are paying to the comparison sites. We may be getting access to a wider array of deals, so we can see the best rates in the market – but if the rates are all higher as a result, is that really benefiting anyone – other than the comparison sites?

To soften the impact of the inflated costs, there are different ways to benefit from the sales process that gives something back to the consumer. I’ve listed a couple of examples below that I’m aware of, where you’re additionally rewarded for using the services. I’ve used the cashback providers repeatedly and I’d highly recommend them.

The recently launched Meerkat Movies is a good example of one of the incentives these comparison sites offer to tempt consumers to use their services. On the surface, it seems like a great offer. Buy an insurance product after having compared through the comparison site Compare the Market and then you’re eligible to 2-for-1 cinema tickets every Tuesday and Wednesday for the following 12 months. It’s a better deal than the Orange 2-for-1 cinema deal that was only available on Wednesdays, and it’s valid for the whole year – but what’s the hidden cost? 

My car insurance recently came up for renewal and we all know the advice is to shop around for a better deal than the one your insurer offers you, as you’re typically able to better it on the open market. However, having seen the Meerkat Movies deal and thinking I’d like to take advantage of it – my search on the Compare the Market website returned a deal that was over 16% more expensive than the renewal deal offered by my existing insurer. I guess this is how they’re able to fund the Meerkat Movies deal!

Having said that – Hot UK Deals – a money saving / deals website where individuals report back on the best offers, savings and deals they find in the UK as they come across them – has reported a workaround for the Meerkat Movies, whereby you can simply purchase a one day insurance policy for as little as £1.37 and therefore be eligible for the Meerkat Movies offer. If this works, it’s a great piece of advice. Check out the link here.

Alternatively, to claw back some of the money the comparison sites make out of you, consider using one of the cashback sites, like TopCashback. Depending on the policy that you’re looking for, you could save a lot of money! At the time of writing, More Than insurance is offering £106.05 cashback on Landlords insurance, for example. Quidco is the other main cashback site in the UK – and they offer similar, although not always the same, cashback deals on insurers and other online retailers. So it’s always worth checking both of them to see where you can get the best deal. Through Quidco, for example, take out a life insurance policy via the comparison site Confused.com and at the time of writing, you’re able to claim up to £127 in cashback. It’s free money, so you might as well claim it. All you’re doing is sharing the commission the insurer would typically pay to any referring organisation.

It would seem the comparison sites are here to stay – for better or worse. Going to the insurers direct offers no better rates than through the comparison sites, and in many instances you’re missing out on exclusive deals or incentives that are offered through those referral sites. Couple those incentives with various cashback offers (from the cashback sites) and it can soften the deal somewhat, but I just can’t help but wonder if the presence of the comparison sites is actually just costing us all more in the long run.

List of online courses, free training and MOOCs

I’ve been impressed with the pace of development of MOOCs (Massive Open Online Courses) and have even signed up for and studied some subjects through various platforms. But what I wasn’t aware of until recently, was that there’s a handy MOOC aggregator that’s been developed which looks across all the available courses online and presents a single interface for searching across them.

This resource is called Class Central and includes courses from the following providers:

Through Class Central, I’ve been able to discover a wider range of courses and have signed up to future classes as a means of continuing my professional development.  Most are free, although Udacity seem to charge for a lot of their content. The other suppliers typically offer an unverified programme which doesn’t cost you anything, but you don’t get the certificate at the end to demonstrate you’ve studied. The certificate is less important than the learning for me, so I wasn’t too bothered by this.

Many of the world’s leading universities and centres of higher education have made a selection of their course materials available online. Live courses offer an interactive element with assessed coursework and tests, whereas archived courses are still accessible with self-study being achieved through the blended learning approach of text and video material. 

At least two of the MOOC providers listed above – Coursera and edX – offer iOS apps which I’ve found particularly good, not least because they allow you to download course material to the app so that you can watch videos and read documents offline when you don’t have an internet connection. 

So, if you haven’t explored the world of MOOC’s yet, I implore you to give them a go. Challenge yourself and learn something new!

PDF splitter free online tool

Occasionally I have to work with some huge documents, typically as PDFs, but I don’t always have my laptop with the full Acrobat package on it. When that happens, and I need to break the PDFs up, I use a free online PDF splitter tool called PDFSplit! – which is available here.

It can extract all pages in a PDF to individual PDFs, or just grab a certain section of a PDF and save it into a new file. It’s quick. It’s online. And it’s free.