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It is Santa’s busiest time of year – but as he gears up for the big day his thoughts may well be turning to when he can finally put his feet up and retire.
Advising Santa presents a number of interesting challenges.
I’ve known him for over 50 years now and he shows no sign of slowing down. If anything he seems more in demand thanever, so it is difficult to determine when he might need to access his pension. Like any of us, before he finally hangs up his stocking he needs to weigh up what income he can expect from his pension pot and his aspirations for retirement living in the North Pole.
The Department of Work and Pensions suggests that for a basic lifestyle, with no car (or sleigh), he needs an annual income of £12,000. For a more comfortable lifestyle, including running at least one car (sleigh) he would need almost £26,000, and, if he wants all the trappings of a wealthy Santa lifestyle, he would need just over £40,000 a year.
Yet, many people, perhaps even Santa, are facing a pension shortfall, and the added impact of Brexit is something everyone needs to consider.
A recent survey* suggested the Brexit vote could affect millions of pension schemes, with 75% of British workers expected to have a retirement income below the government’s recommended level.
Whilst we all know that Santa works extremely hard delivering presents every year, he must make sure his pension provision will meet his lifestyle expectations, especially given the extra implications an exit from Europe could bring.
The prospect of early retirement for Santa isn’t likely either.
The state pension is going through a significant period of change and further change is yet to come. By October 2020,the state pension age for men and women will be 66, with further increases to 67 and 68 already scheduled.
The rising state pension age and the scrapping of the compulsory default retirement age, has also reduced the numbers retiring under 65, prompting insurer Aviva** to predict that by 2029 early retirement "would be relegated to the dustbin of history".
Santa could be working for many more Christmases before retirement so the tendency might be to say to him, keep funding your pension while you can. However, he does need to be cognisant of the reduced lifetime allowance.
In April the Government reduced the lifetime allowance from £1.25m to £1m, and introduced a taper to the annual allowance, reducing it by 50p for every £1 of income between £150,000 and £210,000, to a minimum of £10,000.
Santa may well reach these thresholds, especially if he gets extra income throughout the year, perhaps renting out his sleighs and reindeers or having his elves take part in summer pantomimes, which could count towards his income and face a hefty and unwanted tax bill if he is not careful.
Were he to hang up his reins, I think he would be wise to at least consider an enhanced or impaired life annuity, an option which is ideal for individuals that have a reduced life expectancy. This is not something he will wish to hear, but his job has no doubt had an impact on his health and he may need to start prepping the next Santa Claus to take over.
His waistline bears all the signs of a busy international traveller, with meals and snacks eaten on the go. What’s more, I know he’s regularly plied with alcohol wherever he goes. We also know that the pressure of a deadline takes its toll, and no one has a more pressurised deadline than Santa, so his blood pressure could be as sky high as he often is.
Given these factors, he could present quite an interesting case for the underwriters at Just Retirement.
As for his position as an employer, he needs to be careful that he doesn’t fall foul of auto-enrolment legislation. Under the Pensions Act 2008 every employer in the UK must put certain staff into a pension scheme and contribute to it. This has applied to larger employers since 2012 and will apply to all employers by 2018.
Santa may well be taking the view that his elves do not work or ordinarily work in the UK but he might be wise to check this position with a firm of employment lawyers – I’m sure there’s a few based in Snow Hill. That’s EC1 not the North Pole.
Written by Alan Morahan
Managing Director, DC Consulting