We'll live to regret it

There was doom and gloom all over the place last week. If you are reading this it suggests that, despite Nostradamus's prediction, the world didn't end. But surviving a global conflagration means we could live for a very long time to come. The problem with that? Most of us are going to have to stretch very little money over very many years.

Among the more pessimistic predictions I read last week was the suggestion that 75 per cent of today's working adults are not going to have a comfortable retirement. Hardly cause for celebration, especially when you consider that a "comfortable" retirement is defined as an income of pounds 192 a week.

The figures come from actuaries Bacon & Woodrow, and take into account the likely impact of the Government's new, low-cost stakeholder pension schemes.

But saving a token amount of cash in a stakeholder, "money purchase" company pension or personal pension is almost pointless. Why? We live in a low-interest, low-inflation world and even the new pension reforms don't take account of that fact. A person buying a retirement income (an annuity) now will get 65 per cent less than someone who saved the same amount of cash and retired in 1990. To make any serious money you now have to invest large sums, adventurously and successfully, throughout your working life.

As with so many of our financial plans, the existing pension system is still set up to fit in with the lifestyle and economic climate of our parents and grandparents.

It doesn't work anymore. One pension expert told me last week that we are less than two years away from a situation where a man retiring at 60 will get an income of pounds 5,000 a year for each pounds 100,000 saved in his pension fund.

The easiest long-term solution is to abolish the need for people to buy an annuity when they retire. We would then have to manage our pension fund like any other investment. But we would also end up at serious risk from stock market falls.

It seems crazy for the Government to have spent so much time and effort sorting out the stakeholder pension scheme - which will be finalised in September - but to have ignored the income blight they perpetuate for our pensioners.

Until more (vociferous) people retire with very little cash, and the Government takes notice, calamitous annuity rates will continue to ruin the lives of older people and the expectations of many of us hoping for a long and prosperous retirement.

n i.berwick@independent.co.uk

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement