Pensions Advice
It’s hard to believe, but many people believe the lie that the pension provided by the UK State will be enough to live on. You better wake up! Currently, the State Pension cannot be a sole source of income for a UK retiree. It would be prudent to receive some pension advice in the present, since the future – as close as 2015 – seems likely to be worse than even the state of things in 1980.
History: Initially, the UK State Pension paid out means-tested pensions back in 1908 even though there were no prior payers into the program. The system has always needed – and continues to need – new taxpayers to pay for current pensioners.
National Insurance was introduced by the Post-War Labour government. The original concept was that all citizens would pay for National Insurance so that everyone could get the standard United Kingdom Pension and live a reasonable standard of living in old age.
Presently what do you have….
Here are the increases in the State Pension in the last 30 years: In 1979 the pension amount was approximately £23 a week for an individual. Today it is £97.65. For a married couple, the amount was £152.30 in 1979. Today it is £156.15. Currently, the usual amount in a private pension fund is £24,335, but most annuity purchases are for below £20,000.
From these figures, £1,608 is about how much a 65 year old non-smoking man can expect annually. Together with the State Pension, a pensioner can look forward to a sum of £6,147 in annual income.
To call this enough money to live on is quite a stretch.
Forecasted according to inflation and earnings, the full State Pension for an individual may go up to £106 per week in 2012. This rate pales in comparison to the 1980′s, after which the Labour Government severed the connection between the State Pension and average earnings.
Demographic Timebomb: The UK population is experiencing both a period of rapid aging with a correlated decline in the working population as birth rates drop and life expectancy soars. Due to advancements in nutrition and medical care, combined with a reduction in intensive manual labor, life expectancy in the UK has increased dramatically in the last 70 years. At this point, an average 54 year old has at least 18 years of State Pension.
With these demographic changes will almost inevitably come changes in the funding of the UK’s pension and health care system. The dynamics of the “age” crisis facing the UK are attributable to the longer life expectancy of its citizens and its decreased birth rate, which is in turn responsible for a larger burden being placed on the individual citizen.
And things do not look like they are getting better anytime soon.
There is no way to look up the “State balance sheet” for pension liabilities. The reason for this is that politicians today like to present the falsehood that the state pension is not a benefit to which today’s pensioners and future pensioners are entitled.
Current payers into National Insurance instead pay for current pensioners. Future workers will only pay for future pensioners. The contributions you made to the National Insurance are not invested for you. Instead, they go towards pensioners currently in need of supplementation.
By comparison, the standard company pension plan sets aside a separate account that is intended to pay for pensions in the future. Rather, payment of State Pension comes out of ‘general taxation’.
It becomes difficult to distinguish the State Pension’s use of new taxpayers to pay for current State Pensioners from a Ponzi scheme.
So what happens next?
State pensions paid out to retirees are determined by the Chancellor. There is therefore no correlation between what you paid into the National Insurance system over time and what you receive.
Today, the state makes the “promise” that in exchange for your National Insurance payments, you can expect a pension of no more than £5,000 annually for an individual. That number is increased to £7,900 for couples.
If you wish to retire comfortably, you must look out for yourself and make your own investments, as the promises you have been made are by no means certain.
In Conclusion: Your hope of having a secure and comfortable retirement may fade as the perception that smaller groups of workers will be burdened by your needs in the future.
A worrisome possible reality is how the fixed retirement age may go the way of the dinosaurs. Retirement really means being able to afford living at a particular cost that you find ok. It is very likely to be a lot lower than what you are accustomed to.
Do something about this!
You should think about investing into your retirement and planning accordingly with good pension advice in order to avoid over-relying on a system that seems increasingly geared towards less and less aid for the elderly. Investment, not working becomes the way to prepare for retirement when you consider how little of your savings or employment income and how much of your investment income plays into your retirement earnings.
