The Death of Retirement

woolly_wombat

The title of a report published by Royal London on 15 February 2016.

It warns that "today’s workers will be forced to work into their late seventies and beyond if they want to enjoy the same level of pension as their parents’ generation".

If workers only contribute at 8% of salary, the minimum required under ‘automatic enrolment’, then they will have to work into their 70s if they start saving at 22.

If they leave it until they are 35/45 then they could end up working into their 80s.

Quote from Steve Webb, former Minister of State for Pensions:

"Getting millions more people saving through automatic enrolment is a huge step forward, but many face a cruel disappointment if they think that current minimum contribution levels will deliver them the sort of retirement they are looking for. Without significant increases in contributions, we could be witnessing the death of retirement."

mark5

I think most will retire when the state pension kicks in no matter what.

dunstonh

It is the reality of a consumer spending generation that prefers to spend little on the future but more on bling today.

westv

I'm sure Government would be more than happy if we all kept working until we dropped dead.

woolly_wombat

Link to the Royal London Policy Paper
The Death of Retirement:

https://www.royallondon.com/Documents/PDFs/2016/Royal%20London%20Policy%20Paper%202%20-%20The%20Death%20of%20Retirement.pdf

kidmugsy

woolly_wombat wrote: »

It warns that "today’s workers will be forced to work into their late seventies and beyond if they want to enjoy the same level of pension as their parents’ generation".

Two objections:

(i) Nobody will be forced to do anything. No bayonets in the back, no beating up with knuckledusters: "force" will not be used. "Forced" is lazy journalistic piffle designed to appeal to people who are hard of thinking: shame on Royal London.

(ii) Talk of "pensions" on the assumption that there is no other means of saving for old age is designed to serve pension companies of which one is (stone the crows!) Royal London.

PensionTech

This paper was widely covered when released and made for some nice doomsayer headlines. It is however based on some pretty ridiculous expectations - a two-thirds index-linked joint-life pension? Is that really the most reasonable standard for an adequate retirement?

Whilst it's laudable to highlight the fact that people need to save more than they might think for retirement, over-egging the pudding is not helpful to anyone. A recent FT article proved this when it attracted the ire of young adults, after appearing to claim that they should save £800 a month into a pension but would rather spend it on holidays. This was met with some brilliant sarcasm, but more tellingly, also some despair. One comment was "Literally no point me contributing £100 a month if the base level I need to contribute is £800. May as well enjoy my youth."

Negative exaggerated headlines like this just convince people that there's no way they can afford to retire, so they lose the motivation to make any efforts to save whatsoever. I would rather see the hyperbole toned down and replaced with some well-publicised, constructive and above all, realistic advice about a) how to save a little more and b) manage your expectations.

saver861

dunstonh wrote: »

It is the reality of a consumer spending generation that prefers to spend little on the future but more on bling today.

Unfortunately this is the issue. The younger generation have a lot better chance of having adequate provision for their retirement than the current retirees.

There is much greater awareness of the need to prioritise etc that was not nearly as prominent in years gone past. However, too many want the best of today and the best of tomorrow.

That said, the smart ones will have their retirement when they choose.

Paul_Herring

woolly_wombat wrote: »

Link to the Royal London Policy Paper
The Death of Retirement:

https://www.royallondon.com/Documents/PDFs/2016/Royal%20London%20Policy%20Paper%202%20-%20The%20Death%20of%20Retirement.pdf

Someone on average earnings targeting the ‘gold standard’ of a total pension of two thirds of their
pre-retirement income, and securing inflation protection and provision for a widow/widower would
need to work to 77 if they only contribute at the statutory minimum level;

Yup - they pick the absolute worse case scenario (2/3rd final salary, inflation, spouse cover, minimum contributions,) and quelle surprise get silly numbers out of the other end.

Adjusting for at least one of those would reduce the age. Adjusting more than one more so:

- will you actually need 2/3rd of whatever your salary is when you retire?
- inflation; this is about the only one that can't be changed
- wouldn't your spouse have their own pension?
- minimum contributions - anyone who thinks 8% of income (£140/month on median £21,000) is sufficient needs more education

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PensionTech wrote: »

. A recent FT article proved this when it attracted the ire of young adults, after appearing to claim that they should save £800 a month into a pension but would rather spend it on holidays. This was met with some brilliant sarcasm, but more tellingly, also some despair. One comment was "Literally no point me contributing £100 a month if the base level I need to contribute is £800. May as well enjoy my youth."

Article.

Follow up.

Triumph13

The one valid point is that in the past many people could sleepwalk into a comfortable retirement simply by joining their company pension scheme with the 'standard' contributions. Anyone thinking they can do that now will get a nasty shock.
The real story behind it though is that people prefer to have more of their package as salary and less as pension. If that wasn't the case then employers would definitely be paying bigger pension contributions as it's cheaper for them than paying salary thanks to the NI saving. As a nation we have opted for inflated salaries at the expense of inadequate pensions. If you expect to then get 2/3rds of that inflated salary in retirement, dream on!

bigfreddiel

mark5 wrote: »

I think most will retire when the state pension kicks in no matter what.

Not necessarily, I get my state pension in July and I will keep on working because I enjoy it.

The only problem is that with my occupational pensions I may need to cut my already part time hours a bit to avoid becoming a higher rate tax payer. What a bother!

In fact there are three or four of us oldies still working and we are probably the highest paid people on site!

Cheers fj