The Retirement Conundrum

If you watched last week’s two-part programme on Channel 5 ‘The Great Pensions Crisis‘ you might be wondering how on earth you’re going to make it through your working life let alone your retirement.

Financial experts reckon a family needs a pension pot of around £250-500,000 in order to have what it considers a ‘comfortable retirement’ taking projections and the rising cost of living into account.

Between 20-somethings scraping together their every last penny for the first time buyer mortgage, an apparent prerequisite for a happy life, and then saving every other spare penny into a pension you may or may not one day get to reap the rewards of, it makes you wonder what the point of it all is. Whilst you’re young, able and have your health you should be enjoying your life not be putting away every spare penny in fear.

If you have stunting your younger life squirrelling away every penny with the aim of retiring and travelling the world, you may be wasting your time. You have no guarantee you will reach pensionable age or have your health enough to enjoy the money you have. You may end up ploughing it all into a care home and a depressing end to your days.

For many of us, half a million is a pipedream that will never be. Who can afford to save that kind of money on average wages, even if you do land yourself a decent enough job straight out of education? And who says that all those years in employment will be spent happily? Most people would like to give up their jobs, or cut back on hours or at the very least be able to pursue a career they love rather than being a slave to the 9-5, in a company that keeps you well and truly under the thumb and in fear of redundancy. The fact is that doing what you really enjoy often doesn’t come with the price tag of a city job – if you can even afford to live in that city.

The truth is that in the next twenty years or so (the age I will reach a theoretical pensionable age), there is going to be a whole generation surviving primarily off the state pension. Thanks to the rise in self employment, voluntary national insurance contributions, taking a break from work to raise children and zero hours contracts, too many people having nothing left at the end of the month to save and will be left with the state pension (currently £733.11 per month at its cap) and many don’t have the contributions for even this.

Some of us earn less than the state pension as it is – topped up by a variety of in-work benefits to bolster unreliable or low incomes. The state pension could, at least, be a welcome release from the poverty of unpredictable earnings and allow those of us still healthy and active enough to carry on with side hustles as many pensioners already do. I don’t envision ever being able to retire, and I don’t mind that because I love what I do. But, of course, I am presuming that my health holds until the day I drop dead.  The back up plan if this goes wrong doesn’t bear thinking about, but I do think about it a lot.

That said, I am not panicking about not having enough savings for that £250,000 pot. A £17,000 a year pension for a single person is far more than I need given that I live a naturally frugal lifestyle. I calculate my retirement income on the state pension plus a top-up from the savings I have which I currently hold in various high-interest accounts (pitiful as those interest rates are). Hopefully, I can keep working and add to that. I am powerless to do anything else, so I am working with what I have.

The pension problem has meant the age of retirement has been addressed with predictions that the age of retirement could be as high as 75 by 2035. This is one solution to the problem of so many people taking the state pension, but with ill health so prevalent in older people and ageism in the workplace now including those in their forties, who says that all these pre-pensioners will even be able to find work? And if you can’t take your pension until you’re 75 you’ll need an alternative income as well as the job seekers allowance – if you’re even eligible. But this is not an issue that’s going to go away as ‘…by 2022 there will be 800,000 more older workers and 300,000 fewer 16-24 year olds entering the workplace.’

Some of the figures that were thrown about in the Channel 5 programme, as many people have noted, are scaremongering, and not realistic of many families or what they normally spend. Many described it as lazy tabloid journalism. We are all learning to be more frugal and to think twice before spending lavishly. The figures in this programme relied heavily on people having some fairly materialistic requirements to enjoy life – lavish holidays abroad, a bottle of wine on a Friday night, holiday home or timeshare. £14,000 adventure holidays. Many don’t need these things let alone yearn for them.

Of course, it’s never too late to do what you can. I have never had the luxury of a job with a workplace pension but I have been fortunate enough to have inherited small amounts of money that I have not spent. It isn’t enough for a pension, but it’s better than nothing.

 

 

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