THE traditional concept of the ideal retirement was that between the ages of 60 and 65 you would retire from your regular job, on a good pension, and with your savings you could afford to travel to exotic places, play golf and bridge, do a little gardening on fine days, watch sport on Sky television and enjoy the company of the grandchildren.
That pipedream is now out of date and in this article I want to discuss the main factors that have brought about this change.
Life expectancy
We are living longer and have a healthier life in old age. The average life expectancy at age 65 for women is 23 years and for men 21 years. This means that there is a growing old age population which will stay healthy and active in their late seventies and eighties.
For example, The Queen, The Pope, Lord Soulsby (and even President Mugabe) are all in their eighties and still working hard!
Loss of confidence in pensions
Many company final salary schemes have large fund deficits and have been closed to newcomers. These schemes guaranteed a defined benefit and were index linked and were particularly attractive for government employees. Now private companies are switching to “money purchase” schemes which have defined contributions but no benefit guarantees. This means that the pension member takes all the risks.
This overall loss of confidence in the pension system has been brought about by the following factors and events:
- Robert Maxwell stole company pension funds;
- the Chancellor abolished Pension Dividend Tax Credit;
- the collapse of Equitable Life due to poor management;
- poor returns from pension investment funds;
- improved life expectancy;
- annuity rates have dropped from 12% in 1990 to the current 7%.
Private pension schemes based on the performance of “with profits” pension and annuity policies have shown very disappointing returns and some people have switched to property and taken advantage of low cost “buy to let” mortgages as an alternative investment to taking out pensions. However, property values and rentals can fall, properties have to be maintained, tenants can be a nuisance and it is difficult to get your capital out quickly. It has never been wise to put all your eggs in one basket.
I still believe, however, that pensions are an attractive tax savings way of investment for your retirement but the lower returns may well mean that you can no longer afford to take early retirement. To maximise your company schemes, this will mean taking out extra Additional Voluntary Contributions (AVCs) to supplement your pension.
For the self-employed the best route could be by investing in a Self Invested Personal Pension (SIPP), where you retain control of your investments which can be a balanced mixture of property, blue chip equities and government fixed interest and index linked bonds.
Many other European countries have the same problem of an ageing population, low birth rate and a declining workforce, so that the retirement age for the State Pension will have to rise.
Financial insecurity
Many practitioners will rely on the sale of their veterinary practice or partnership share on their retirement. Goodwill valuations have been artificially boosted by competition between the new veterinary corporates which bid up values in order to acquire market share. However, with the demise of one of the first nonveterinary-owned corporates, which struggled to obtain good profitability, this bubble may have burst and in the future we should expect lower but more realistic goodwill valuations.
These newly retired practitioners, however, will be asset rich and income poor. They will have to undertake a careful audit and make a financial assessment of their future income and likely expenditure and also take into account the effects of inflation. Inflation at 5% over 20 years reduces the value of £1,000 to £358.
A realistic assessment should be given to your long-term future financial needs and this may well include downsizing and moving house. Do you still want to live in your old age in a five-bedroomed house with the upkeep of a large garden in a remote part of Devon, five miles away from the nearest village?
Moving house is stressful so if you decide to move, it is better to do this when you first retire rather than wait until you are well into your eighties.
You may decide after undertaking a financial audit of your assets and income requirements that in order to maintain a reasonable lifestyle you need some additional income to supplement your pension and will want to consider the various options available for part time working.
Part-time working
Veterinary options include: part time veterinary work in your previous practice; veterinary locums, TVI or Meat Hygiene; inspectors – zoo, RCVS accreditation, riding stables; consultancies and specialist; career in veterinary politics – RCVS, BVA, SPVS, BSAVA; pet insurance adviser or VDS claims officer; adviser to veterinary pharmaceutical manufacturer; director of veterinary wholesaler company.
It should be remembered that if your part-time veterinary work requires the use of your veterinary qualification, you will need to continue paying fees to the RCVS.
General work possibilities
These include: author – autobiography, novels and scientific books; journalism; media – TV, films and local radio; lecturing, talks and after-dinner speaking; small businesses start up; company directorships.
Charities
Animal charities, e.g. Society for the Protection of Animals Abroad (SPANA), Born Free Foundation, World Society for Protection of Animals (WSPA), Brooke Hospital for Animals, Greek Animal Welfare (GAWF), Guide Dogs for the Blind, VETAID and International Federation for Animal Welfare (IFAW).
For other veterinary opportunities contact Helena Cotton of the BVA Overseas Group: helenac@bva.co.uk.
Overseas organisations
Food & Agriculture Organisation (FAO), Voluntary Service Overseas (VSO), Save the Children, OXFAM, Overseas Development Administration (ODA), now called Department for International Development.
VSO used to send school leavers to work in other countries but today it is looking for skilled professionals and the average age of the volunteers is 38 years. Volunteers can be aged between 20 and 75 years old and must have a formal qualification and work experience.
Assignments can be long-term (two years) or short-term (two weeks to six months). VSO is currently working in 34 countries around the world. More details on the website, www.vso.org.uk.
Local community work
Consider: magistrate, Citizens Advice Bureau, School Governor, Parish or Town Council, Church Warden, local political worker, charity or village shop, hospital driver, Neighbourhood Watch, Meals on Wheels.
- continued next month
