PENSION CRISIS SHOULD COME AS NO SURPRISE

The Daily Mail seems to be surprised by the fact that research has reveal that one in three people in their 50s has saved nothing for their future. This means that millions of people will spend an old age of financial misery living on only a state pension. Frankly I find it less surprising. The Daily Mail, it seems, is out of touch with how ordinary people live.

The failure to put something away has been put down to a “spend rather than save” culture over the last few decades. But I would suggest that it could be put down to the fact that at the bottom of the income scale there is simply no money left at the end of the week/month for savings. There is always something to use the money on.

And it isn’t going to get any better. With many people taking pay freezes whilst inflation (real inflation, not the government’s invented figure) is soaring. Electricity, gas, petrol, food and clothes are all increasing in price at a rate far above the “official” inflation figures, and bus and rail fares are set to increase, along with a hike in VAT.

This will leave working people with even less disposable income.

It is all very well for the government to say that they need to increase the amount that people save for retirement, but with all the demands that there are for the meagre incomes that some people have, together with the fact that interest rates in banks mean that money deposited is actually reduced in value over the year, it is a tall order to ask people to save.

Company final salary pension schemes which used to take care of people’s needs in retirement have all but disappeared and, many have failed and people no longer trust them. It’s hard to believe that we once had the best pensions in the world...until Gordon Brown got his hands on them!

Private pensions, it seems to me, are hardly worth having. They depend entirely upon the value of the stock market at the time of retrial, and if you have no choice about when you are going to retire, you can end up with a terrible deal.

And, at the bottom end of the market, if you can only save a small amount, you are better off having nothing and taking advantage of the safety net which will take you from £5000 a year state pension, to £7,000 (still less than half what is regarded as the poverty rate in the UK). In other words, if you are likely to have private pension of around £40 a week, you would be better not to bother saving, because you will receive this amount in benefits.

The current government hopes to scrap this system by the end of the parliament, and replace it with a pension of around £140 a week for everyone, which will take away one of the disincentives for the poorest to save. However, this is an aspiration rather than a concrete policy, and I have doubts whether they will be able to do it.

They also want to force companies to enrol employees on to a pension scheme, although who will fund this is not clear at present.

One thing for sure, there are many people looking forward to the bleakest of futures on a miserable pittance.