Simon Read: Don't delay, heed the Government's pension warning
Saturday 26 June 2010
Changes to the state pension regime announced by the Work and Pensions Secretary, Ian Duncan Smith, on Thursday are bad news. He's planning to raise the pension age to 66 by 2016 – 10 years earlier than the previous Labour government planned – and then raise it to 70 within a few decades.
Depending on how old you are, your reaction to the news may simply be: "So what?" If you're five years away from reaching 65, it won't affect you. And, let's face it, anyone further away from retirement than that is forgiven for thinking it's still too far away to worry about, especially if you're in your 20s or 30s. But, forgetting about the thought of having to work for an extra year or five, the key thing to ask yourself is why this is happening.
There's a simple answer: demographics. There will soon be more older people than younger people. Compared with today, the number of people over 65 will increase by 50 per cent by 2030, and will double by 2060, according to the DWP. And every one of them will be due a payout from the state pension scheme.
The problem is that there won't be enough money to pay out to them. The state pension is little more than a Ponzi scheme which relies on people paying in to raise the cash to make payouts to members. And like all Ponzi schemes the UK's state pension will implode when the number of people expecting payouts gets larger than the number of people paying in.
The Government has recognised that, which is why it is taking action now. But its unpopular move should be ringing alarm bells for anyone under retirement age. The Government is desperately trying to ensure it can meet its future commitments under the state pension scheme. But we should all be doing what we can to ensure that our own retirement pot has enough cash in it. The estimated two-thirds of people who are planning to rely on the state pension when they retire need to think again.
"Everyone needs to ask themselves whether they are doing enough to save for their retirement," suggests Tom McPhail, a pensions expert from the advisers Hargreaves Lansdown. I don't agree eye-to-eye with everything Tom believes, but he's spot on about this issue.
Anyone who is not thinking about ways to improve the amount of cash they have to spend in retirement is facing a frugal future. And they'll only have themselves to blame after warnings like the one from the Government this week.
What can you do? Are you in a company pension scheme? Or have you set up your own personal pension? If you've done neither then it's time to do so. If your employer has a company scheme then ask about joining it. It's likely to have benefits – not least company contributions – that make it worthwhile.
If your company has no pension scheme, then set up your own. Bear in mind that all you're actually doing is starting a savings scheme with the single aim of providing you with enough cash to give yourself a decent standard of living when you retire. You don't even have to put money into a pension scheme. You could simply save into an Individual Savings Account or other scheme, but you would miss out on the government's contribution – at your income tax rate – to your pension scheme. That's right, the government wants to give you cash to encourage you to save into a pension. Do you really want to turn that down?
If the whole subject leaves you confused about what's best to do, get expert help. A independent financial adviser will help you work out how much you need to save to achieve the retirement income you seek. Or the adviser will explain to you why it won't be possible to get a big enough pension pot and what your actual expectations should be. Either way, it will be a step on the path to carefree golden years rather than painful pension penury.
Fuel poverty could kill 100,000 vulnerable people over the next 15 years, charity warns
Phoenix Life: Chance of a refund for overcharged policyholders has risen
Simon Read: You're guilty until proven innocent when HMRC sends in the tax credit detectives
Simon Read: That's right, BT, they'd rather pay for a free service
Bank-beating exchange rates on your international payments
- 1 Forget 'The Dress': Here are five of the biggest news stories you might have missed
- 2 The black and blue dress: Makers considering a white and gold version
- 3 Prince Harry leaving the armed forced to pursue conservation projects in Africa
- 4 PornHub turns masturbation into energy in bid to save the planet
New theory could prove how life began and disprove God
Half of Ukip voters say they are prejudiced against people of other races
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
This is what it's like to be dead, according to a guy who died for a bit
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Aqsa Mahmood branded a 'disgrace' by her parents after claims she recruited three UK girls flying to Middle East
iJobs Money & Business
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...
Day In a Page
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads