Saving for retirement – the biscuit tin approach

Hardly a day goes by now without another piece of depressing information about the state of the nation’s pensions. In the last few days alone we have seen more defined benefit schemes closing, more reports on the lack of savings that individuals are making particularly during the recession, and soaring bankruptcy numbers among pensioners. One report, highlighting the fact that many are now unable to foresee when they might retire or how they might have adequate savings to live on, has  coined the term “baby gloomers”  to describe the plight that people feel they are in.

The advice that comes from the financial industry is plentiful but very self-serving: “save more for a pension”; “release some equity from your home”; “tuck your money away in an ISA”; “invest in buy-to let”; and more. The government believes that the answer lies in personal accounts which everyone will flock to in a few years’ time – we will see.

Many people, knowing their savings are insufficient but not by how much, would like to work longer, certainly past 65. Yet the government is still dragging its heels in a most extraordinary fashion. This is despite the fact that change is inevitable. The state pension age will be increasing to 68 in the coming years but the default retirement age is currently 65. What are people going to do –starve for three years? One glimmer of hope that the recession is providing is that firms are beginning to see the futility of redundancy as an answer to their problems and are looking at more innovative ways of managing the current problems with flexible arrangements, part-time working, sabbaticals etc. all now featuring. These are also ideal tools for dealing with an ageing workforce.

However, the first problem that must be addressed is one of awareness. There is, in the country as a whole, an order of magnitude lack of understanding among people of all ages as to exactly what it takes in financial terms to retire in some form of comfort. A fundamental and far reaching “reality check” is needed to reconcile the aspirational dream of an interesting, financially secure retirement with the ongoing provision that individuals are making through their working lives.

Retirement financial planning involves running up a store of wealth, retiring, and then running it down again over the course of the rest of our life – as simple as that. Building up a retirement pot is very much like tucking money away in a biscuit tin each week to save for Christmas – except Christmas may last twenty years or more.

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Pension Reform and Personal Accounts after the Credit Crunch

Last Tuesday (24^th March) the International Longevity Centre-UK (ILC-UK) and the Actuarial Profession hosted a Joint Debate at the Institute of Actuaries in London on aspects of pension reform and personal accounts and the implications of the current credit crunch.

Chaired by Baroness Sally Greengross and introduced by a speech from Nigel Waterson MP, Shadow Pensions Minister and Shadow Minister for Older People, the 2-hour session was remarkably interesting (if you’re into that kind of thing) and was extremely well-attended, mostly by people from within the pensions, actuarial and financial services industry.

As this was a debate mainly consisting of people inside the industry “looking out” there was a substantial element of “preaching to the basically converted” and much of the debate was about the “how” of saving for one’s old age and whether this did the trick. There was, therefore, a lot of comment regarding what one might consider to be the technicalities of structuring and operating a pension scheme. Also, running through, was the (unsupported) hope that people would move away from property as the means to save and back towards pensions.

In this latter respect research by the Pensions Policy Institute, represented by Niki Cleal, was particularly revealing. Her comment was, in a nutshell, that those who saved probably saved across the board, that is pensions, property and ISAs etc., in contrast to those who probably had little of any. This is not a case of substitution and changing asset allocation.

Rather, we believe,  this is due to:-

1)       the lack of sufficient resources for people to be able to save at the current time, or possibly any time

2)       the phenomenal lack of understanding, generally, of what it will take to support oneself in old age in an appropriate style and over an extended and growing potential lifespan.

It is, therefore, the “why” people need to save that must also be addressed. There is an enormous educational task to be undertaken among the population in general and, until this is carried out, even the best designed schemes will have difficulty in succeeding. But all this is manageable given the will.

We are not talking deckchairs, shuffling, Titanic…yet.

Savings, sacrifices and retirement security

News today from Alliance and Leicester (see below for link) that 42% of “Silver Savers” have made sacrifices to help ensure they enjoy a comfortable retirement. The mind boggles.

Are there boomers out there in the dead of night slaughtering unsuspecting beasts and drinking their still-warm blood, shrieking, wailing, ripping off cardigans and comfy slippers and hurling them into bright bonfire flames? Are we selling grandchildren to the slave trade, or fleeing our homes to live in tents?

Probably not. I guess just like everybody else we’re not going out to dinner quite so much (so maybe we are slaughtering unsuspecting beasts…?), taking a rain check on yet another holiday and deciding that a score of shoes is more than enough for anyone. Irksome. But not exactly sacrificial.

Oh – and apparently ”the majority of people (58%) over 50 do not harbour any illusions of an extravagant retirement lifestyle”. Hardly surprising if we haven’t got one now – and a bit scary that 42% do.

http://www.alliance-leicester-group.co.uk/html/media/non-indexed/release.aspx?txtCode=PR2511081

Retirement planning in uncertain times

By all accounts retirement planning confidence is at an all-time low with about half (49%) of 30-50 year old “pre-retireds” feeling that they will not be able to enjoy a comfortable retirement. Unsurprisingly women are particularly concerned with almost half of them (49%) fearing they won’t be able to make sufficient provision for retirement compared to just over a third (36%) of  men (Source: Annual Retirement Confidence Index, Alliance Trust Savings).  A further report from GE Money maintains that only one in four adults are confident that their pension will see them through retirement, while analysis carried out by mortgage website, www.impartial.co.uk reveals that more than a million 65 year olds will still be paying mortgages when they retire.

If some or all of the above applies to you then the biggest comfort you might take is that however precarious your financial situation, you’re not alone. And with the scale of the problem so large, something, somehow will have to change. But of course, we don’t know what that might be or when it might happen, so the best strategy is to do what you can on an individual basis. Reading our new primer Retirement planning in uncertain times is a good place to start in terms of understanding the issues – particularly the fact that it’s never too late to do something to improve your future situation. And even if you’re one of the lucky ones with a great financial future – don’t ignore the issues and be too complacent. As they say, and as recent developments have graphically shown, the value of your investments can also go down.

‘Sandwich generation’ feel the squeeze as they spend £1.5bn a year to support children and parents

Couples with grown-up children and ageing parents are spending more than £1.5billion every year to help support them.

Figures revealed highlighted the growing costs to the so-called ’sandwich generation’, people who are squeezed between offspring and elderly relatives.
More than 250,000 Britons are currently paying for their grown-up children and at least one ageing parent, according to research by Unbiased.co.uk website, which searches for financial advisors.

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(Source: Mail Online)

Fifty ways to save money

The credit crunch has left most of us feeling the pinch, but there are plenty of simple measures that can help make your cash stretch further. Here Miss Pennypincher reveals her top 50 money-saving tips to help you weather the storm.

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(Source: Telegraph.co.uk)

Inflation rate facing the elderly hits a six-year high of 7.8%

Inflation rate facing the 75 year olds jumped to 7.8% in September, the highest level in Alliance Trust Research Centre’s six year study and 50% higher than the official rate of inflation of 5.2%.

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(Source: Alliance Trust)

NAPF annual pensions survey 2008 – stability now, but further change on the horizon

The 34th National Association of Pension Funds (NAPF) Annual Survey has revealed a picture of continuity and change in UK workplace pension provision in 2008. The comprehensive survey covering 502 pension schemes with over £460 billion in assets has been launched this morning (8 October) at the NAPF’s Annual Conference in Glasgow.
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(Source: politics.co.uk)