Simon Read: The retirement plan that doesn't work

Does the idea of giving up work fill you with joy – or fear? Some can't wait until retirement, and have great plans to travel round the world or hone artistic skills – or even just spend the time relaxing or catching up with valued friends. But even these optimistic folk are having to accept they're facing a fearful future.

Research from pensions firm MetLife published on Wednesday revealed that a third of people who are five years from retirement are either unhappy with their pension or feel they wasted their money by investing.

They've got good reason to feel unhappy. The stock market crash has meant anyone planning to retire in the next few years will realise they've been taken for a sucker. The amount of money in their retirement fund has shrunk and the cost of buying an annuity – which pays retired people an income – has risen, both as a direct result of the credit crunch and world recession.

According to Dr Ros Altmann, a former pensions adviser to the Treasury, the blame for this lies with the UK pensions industry, which has for decades staked people's retirement cash on the stock market. In a report published this week, Dr Altmann claims that "nobody explained to workers that they were effectively gambling their future security on the stock market".

She points out that "most people want a measure of security and are not so worried about maximising investment returns. Essentially, the entire UK pension system has been based on a bet that equities would always do well enough over the long term to reliably deliver good pensions."

According to the MetLife survey, many people wish they had never bothered with a pension at all. Most now recognise they may have to work longer and their pension savings will not provide them with much in retirement as the stock market may not be a reliable long-term investment.

Dr Altmann is calling for new approaches to retirement planning, pointing out that pensions fulfil two functions. First, they need to provide security of income in old age. Second, they are long-term savings from which investors can try to obtain strong returns.

"We have to rethink our whole approach to pension saving and be honest with people so they can understand the need to differentiate between the minimum security aspects of pensions and aiming for high investment returns, to understand the difference between a pension 'fund' and pension 'income', and to know the vital questions they should ask themselves along the way," Dr Altmann says.

This issue isn't just going to be affecting those retiring soon – it will impact on all of us still in work. With the Government cutting state benefits, and the pensions industry failing to secure we're working towards a wealthy retirement, individuals are going to have to take responsibility for their own financial future.

Forget all the flim-flam or complexity about pensions. Just consider this: a pension is simply a savings scheme. It is effectively the name of an account where you stash money away until you need it, when you retire. If it was a holiday savings account you would check the money was safe and would cover the cost of your holiday. Treat your pension planning in the same way – with regular checks and adding to it when necessary – and you could yet avoid facing retiring in penury.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Software Developer / C# Developer

    £40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

    Neil Pavier: Management Accountant

    £45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

    Sheridan Maine: Commercial Accountant

    £45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

    Laura Norton: Project Accountant

    £50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

    Day In a Page

    Abuse - and the hell that came afterwards

    Abuse - and the hell that follows

    James Rhodes on the extraordinary legal battle to publish his memoir
    Why we need a 'tranquility map' of England, according to campaigners

    It's oh so quiet!

    The case for a 'tranquility map' of England
    'Timeless fashion': It may be a paradox, but the industry loves it

    'Timeless fashion'

    It may be a paradox, but the industry loves it
    If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

    Could have done with Osama bin Laden staying alive?

    Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
    New exhibition celebrates the evolution of swimwear

    Evolution of swimwear

    From bathing dresses in the twenties to modern bikinis
    Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

    Sun, sex and an anthropological study

    One academic’s summer of hell in Magaluf
    From Shakespeare to Rising Damp... to Vicious

    Frances de la Tour's 50-year triumph

    'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
    'That Whitsun, I was late getting away...'

    Ian McMillan on the Whitsun Weddings

    This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
    Kathryn Williams explores the works and influences of Sylvia Plath in a new light

    Songs from the bell jar

    Kathryn Williams explores the works and influences of Sylvia Plath
    How one man's day in high heels showed him that Cannes must change its 'no flats' policy

    One man's day in high heels

    ...showed him that Cannes must change its 'flats' policy
    Is a quiet crusade to reform executive pay bearing fruit?

    Is a quiet crusade to reform executive pay bearing fruit?

    Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
    The King David Hotel gives precious work to Palestinians - unless peace talks are on

    King David Hotel: Palestinians not included

    The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
    More people moving from Australia to New Zealand than in the other direction for first time in 24 years

    End of the Aussie brain drain

    More people moving from Australia to New Zealand than in the other direction for first time in 24 years
    Meditation is touted as a cure for mental instability but can it actually be bad for you?

    Can meditation be bad for you?

    Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
    Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

    Australia's first-ever Eurovision entrant

    Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine