UK Pensions Crisis Makes Growing Old Expensive
It is the crisis that everyone knows about but nobody really wants to talk about as the UK pensions disaster gets worse and worse.We keep getting told that the population is getting older and will live longer, but few of Britainís policy makers or politicians much of an idea on how the country will live happily ever after in retirement.
Population Increases Putting Pressure On Pensions
By 2050, Britainís population is set to exceed 75 million and while much of this growth, from the current level of 60 million, will be driven by immigration, a large slice will come from increased longevity amongst the existing population.
We are all living longer – in 1995 less than two per cent of the British population was aged over 70 but as this segment of society has grown retirement incomes have remained virtually the same.
The situation isnít helped by the rapidly accelerating death of the final salary pension scheme. In recent years even the largest most profitable companies have begun shutting these schemes which are far more expensive to administer than alternatives such as defined contribution policies.
Instead of receiving a percentage of your final salary employees are now increasingly having to rely on defined contribution whereby both employee and employers make monthly contributions but the final pension is dependent on how well or badly the stock market is doing.
It sounds complex but based on average salaries, the difference between the two types of pension can be as much as £38,000 – a very significant sum.
Pensions Call To Action
Concerned that Britain is sleepwalking into an era of pensioner poverty in which the cost of living far outstrips income, pension companies are calling on the Government to appoint a cabinet minister tasked with finding solutions to this slow moving but serious problem.
They believe that the issue requires innovative thinking which will allow flexible retirement solutions such as the ability to work part time into old age or further incentives for retirement savings.
While the Government may require dedicated retirement ministers to consider the problem, pension providers believe there is also a need to educate people about how much is required to retire comfortably. Few people have a clear idea about how much income the state pension will provide or even if they will be eligible for one.
Britain faces some tough questions as to how it deals with its ageing population and how these people will be cared for.
Government budgets are likely to be tight for the foreseeable future but those with the ability to make changes to the system will need to start acting soon before the problem escalates.
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