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The outgoing Governor of the Bank of England, Mark Carney, has said that thousands of UK pension schemes could be at risk of becoming worthless due to the challenges of climate change.

Speaking during an interview with Radio 4’s Today programme, Carney said that every investor should be considering their plan when it came to climate change and how it could affect their assets and savings.

The Governor was invited on to a special show guest edited by Greta Thunberg, who asked whether pension funds should stop investing in fossil fuels even if the returns were attractive.

In response Mark Carney said: “Well that hasn’t been the case but they could make that argument. They need to make the argument, to be clear about why is that going to be the case if a substantial proportion of those assets are going to be worthless.”

There are growing fears generally that too many pension schemes are too tied to fossil fuel industries and that in the event of a rapid change to the economy to meet carbon targets many people could end up with worthless investments when they come to retire, despite fossil fuel backed investments proving historically to be relatively safe.

Mr Carney described climate change as a “tragedy on the horizon” and said there would be “more extreme weather events”, but that “by the time that the extreme events become so prevalent and so obvious it will be too late to do anything about it. We look to political leaders to start addressing future problems today.”

Mr Carney’s wife, Diana, is a prominent environmental campaigner and in September he addressed the United Nations’ Global Climate Action Summit in New York on risks to financial stability.

He will step down from his role at the Bank in March to take up a role as the UN’s special envoy on climate change, where he is expected to help financial markets deal with the challenges that climate change may bring.

Link: Pension fund investments held by millions could be rendered worthless by climate change crisis, warns Mark Carney

As the UK state pension age continues to increase, a new study has found that many savers are looking to retire at least three years before they reach the official threshold – living instead for several years on private pensions.

Currently the state pension age is 65 for women and 66 for men, but the state pension age is rising at the same rate for both men and women and is set to reach 66 for both sexes by October 2020 ahead of further increases to 67 and then 68 in the following decade.

Despite the rise in state pension age, the new study from Canada Life has suggested a complex picture emerging of the average UK worker planning to access their private pensions before retiring from work and reaching state pension age.

It found that adults under the age of 55 believe early retirement might be too ambitious in terms of achieving their financial goals, but many still hope to retire at the age of 63, having received their private pensions at 62.

For many this may mean that they have a gap of three to four years where they are entirely reliant on their own savings.

Meanwhile, those who have already reached their 55th birthday plan to wait until they are 63 to access their savings, and not retire from work until age 67.

Andrew Tully, Technical Director at Canada Life, said: “Working till you drop clearly doesn’t appeal to the average UK worker who has plans to slow down in their early 60s, typically retiring from work three years before their expected state pension age.

“This ambition is helped by an expectation that they will begin to access their private pensions before they retire, at age 62. This creates a clear financial planning issue and people need to take positive steps early to mind the pension’s gap.”

Last year the Pensions and Lifetime Savings Association (PLSA) launched new Retirement Living Standards, designed to help people picture the lifestyle they want when they retire.

It found that 51 per cent of people focus on their current needs and wants at the expense of providing for the future and only 23 per cent of people are confident they know how much they need to save.

Link: Workers plan to retire years before state pension age

The latest data from banking trade body UK Finance has shown that the British public has more than £870 billion in savings within major high street banks.

Savings increased by 2.6 per cent in November 2019 compared to the previous year thanks to higher wages and lower consumer spending.

UK Finance said that despite this, greater political and economic uncertainty had made consumers more cautious about spending and saving, with Brexit having dampened consumer confidence.

The most common kind of account is either an easy-access current or savings account, with more than three-quarters of the total £870.4 billion held in such accounts.

It is thought that uncertainty over short-term household finances is behind the trend in easy-access accounts, which has led to a 1.4 per cent annual decline in funds stored in more restricted but more lucrative long-term accounts.

UK Finance said: “While low investment returns play a part, quick access to disposable income in uncertain economic times is the driving force for individuals when managing household budgets.”

The latest UK Finance data also showed that credit card spending dropped by 3.3 per cent year-on-year to £10.9 billion in November 2019, while overdraft borrowing also decreased by 0.8 per cent.

Link:  Household Finance Review

New data obtained from HM Revenue & Customs (HMRC) has shown that Lifetime Isa (LISA) savers have been charged more than £9 million in penalties for accessing their accounts since 2018.

According to a Freedom of Information Request, withdrawal charges were first applied in 2018/19 and a total of £4.35 million was paid to HMRC in that year alone.

In the following year, the charges increased and HMRC recovered £4.69 million in penalties over the first seven months of 2019/20.

Introduced in April 2017, LISAs allow those under 40 to deposit up to £4,000 a year towards a home deposit or retirement savings with a Government bonus of 25 per cent added to the amount deposited.

If savers attempt to access their money either before they buy their first home or they reach the age of 60 they will lose the government bonus and face a 25 per cent penalty charge. Savers can also access their funds without penalty if they are terminally ill, with less than 12 months to live.

As an example, if you were to deposit £4,000 in a year you would receive the Government bonus of £1,000 for that year if you used the funds for one of the agreed reasons.

However, if you withdraw the money for any other reason you would lose £1,000 from the money saved in penalty charges and it would lead to the loss of the bonus.

Following the closure of the Help to Buy ISA last year, the LISA is now the only Government-backed savings product designed to help people save for a home deposit and so it remains popular, but savers should be aware of the penalties they face. 

Link: Lifetime ISA