'Glut of savings the fundamental cause..'

Gers

... of pension problems.

People starting a job in their 20s today should expect to work until they are 75, argues the former chief economic adviser to the Confederation of British Industry.

He will say: "To retire at close to the standard of living that they have previously enjoyed, they will have to extend their working life and cut their number of years of retirement by working till they are much older. Workers could save more. But they are unlikely to do so and if they did so around the world, they would only add to the glut of savings that is a fundamental cause of the problem."

It's from an article in The [Glasgow] Herald
http://www.heraldscotland.com/news/home-news/workers-facing-retirement-at-75-x.20374515

I don't know much about the savings and investments markets as I'm new to both really but this statement is astounding.

Do I buy a large box and stick my money in that? (just a rhetorical question).

atush

There isn't a glut of savings here in the UK (and I suspect the developed world).

There is a glut of cheap money in the markets due to QE and funding for lending.

Improve your reading choices?

Save 6-12 months spending in cash, and invest the rest for growth. Use your ISA allowances, open a pension.

Radiantsoul

It may very well be the case that as an aggregate we cannot save our way out of this crisis. The reason for this is because an increase in savings reduces the demand that firms face and so they are less likely to expand. Low investment at the moment is probably a result of weak and uncertain demand as much as poor availability of credit.

An individual can increase their savings as they might represent only a billionth of demand for marketable goods(I have assumed here in blighty we have about 7 or 8 times the average worldwide income).

Arthurian

People in their twenties, expecting to work until they are in their seventies, must realise that the latter half of their career will have to be provided by themselves. Employers tend to get rid of the over fifties.

Radiantsoul

Arthurian wrote: »

People in their twenties, expecting to work until they are in their seventies, must realise that the latter half of their career will have to be provided by themselves. Employers tend to get rid of the over fifties.

This is an interesting point, but I suppose 70 years ago a similar argument might have been made about women. At some point there may be a cultural tipping point where greybeards are more accepted in the office.

kidmugsy

I've always assumed that there's a glut of savings in the UK, as the baby boomers have been saving for retirement, many of them still with defined benefits pensions. Now, of course, we are presumably entering an era when they (or their pension funds) are presumably selling equities to fund pensions/annuities. There presumably is also selling pressure on equities as the old-fashioned endowment mortgages come to maturity. Perhaps people will be selling from ISAs to bridge the gap between occupational retirement and starting a State Pension.

These demographic pressures seem unlikely to support a booming stock market. Anyway, whether or not there's a UK glut, there is a global glut which can have much the same consequences. So I don't think that McWilliams' statement is remotely astounding.

grey_gym_sock

with higher LE, and an unchanged retirement age, the ratio of years working to years retired would fall from 3:1 to 2:1 to ...

the basic options, if you don't want to be much poorer in retirement (and apart from getting somebody else to pay for the shortfall - which can't work for everybody), are to lower the ratio by working longer, or to save a higher proportion of your earnings for retirement.

either of those 2 options can OK work for an individual.

at the collective level, it might well cause problems if everybody saves more for retirement, because it will reduce short- and medium-term demand. 1 might hope that money could instead be invested in ways which will meet longer-term demand. but there may be limits to that.

e.g. part of the long-term demand will be in caring for all these old ppl. this is labour-intensive. somebody will have to work longer to cover it. so higher savings may not work on the collective level. though they will for individuals who can save/invest enough.

atush

I've always assumed that there's a glut of savings in the UK, as the baby boomers have been saving for retirement, many of them still with defined benefits pensions.

This seems to be a widely held belief, but I have also seen reports that the average pension pot for those approaching retirement is something like 30K. Which does not a comfortable retirement make.

The UK as a whole has not saved enough in recent decades, so for individuals saving mroe is the best option.

but I agree that if everyone saved instead of spent, the economy would suffer greatly. which is why in the USA as a stimulus, they gave every taxpayer a $500 cheque, which they used to buy things which boosted the economy.

We just seem to print money, and lend cheap money to banks.

Gers

atush wrote: »

Improve your reading choices?

Harsh and unfounded.

Neverland

Gers wrote: »

... of pension problems.



It's from an article in The [Glasgow] Herald
http://www.heraldscotland.com/news/home-news/workers-facing-retirement-at-75-x.20374515

I don't know much about the savings and investments markets as I'm new to both really but this statement is astounding.

Do I buy a large box and stick my money in that? (just a rhetorical question).

I think it was largely that way in the past, retirement is really only a post WWII phenomenon as the NHS improved lifespans

In the past it was generally start work at 16-18 and collect a pension at 60-65, die in 70s

Thats 45-50 year working life

If people are going to live to their 90s a fifty year working life starting at 21 after uni seems pretty inevitable

You don't like it? s

Save more or marry money :rotfl:

rochja

The CBI would rather you spend your money than save it. Hardly an unbiased source. A couple retiring on full NIC contributions are likely to have a State pension income of at least £12K pa. If one then dies young there is likely to be an assurance payout to the other. If they have lived according to my granny's mantra of living within your means then when they retire they should be mortgage free and have few fixed outgoings. If they have full State pensions they are also likely to have work pensions of some sort especially as legislation makes it easier to opt in to contributing rather than opt out. Add in factors like dowwnsizing and their should not be a problem achieving a comfortable level of disposable income. This argument starts with the presumption that anybody examining it is able to consider the relative merits of different investment strategies. There are millions who are not and boy do I feel sorry for them.