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
News
ebooksAn unforgettable anthology of contemporary reportage
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.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Guru Careers: Communications Exec / PR Exec

£25 - £30K: Guru Careers: We are seeking a highly-motivated and ambitious Comm...

Day In a Page

On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral