Is there a general lethargy regarding workplace and State pensions in the UK? Yes, change is long overdue and here’s why, says the ageing IE Editor;
Most people know that the UK State pension is not enough to live on, but the cost of living is so high that unless you are earning over 50K a year there is no way you can set aside enough into a private scheme to allow for inflation over 30 years. Even then you cannot pay a mortgage and make £200-£350 a month into a pension scheme, you have to make a hard choice. There are also scandals like Mirror Group and Equitable Life, which show how insecure your money is when placed in the hands of some employers, or pension scheme managers.
Then we have the brutal reality of the public sector apartheid pension system, where State employees get higher, index linked pensions, based on roughly the same earnings per annum. Plus, in the case of teachers and lecturers, 3 months holiday per year. Frankly it adds insult to injury. The penny dropped long ago, public sector pensions are funded by today’s taxpayers, not contributions.
The depressing admission that the UK government might raise the State pension age to 71 shows how unstable and fundamentally unfair any pension benefit is at heart. It’s no longer based on NI contributions, it is a kind of lottery, where being born prior to 1951 can mean a desperately poor old age on a Basic State Pension, worth £40 a week LESS. It’s almost like a crime has been committed by older people and they are being docked a fine for the rest of their lives – disgusting age discrimination by UK governments, of all parties.
The entire system is in dire need of reform and insurers need to offer realistic long term savings plans that actually deliver a return ABOVE long term inflation. Currently the only asset that does that is housing, and that is houses in nice areas not apartments. Everyone knows the stock market cannot deliver long term profits for the ordinary person, it only works for the already rich and politically connected. So where does that leave the very concept of pensions?
FUTURE THINKING
Maybe we should abolish State pensions, simply replace it with Universal Basic Income at 12K per year, and level that benefit at age 65, regardless of gender or contributions? Those who have worked in the private sector should get an NI Credit on top of UBI at 65, as they haven’t simply plodded along in the public sector being paid by taxpayers their entire working lives. That would be contribution based – so if you worked 45 years you get six grand a year, 30 years means four grand etc. More hard work equals greater reward, sounds fair?
Fairness has to be at heart of any private pensions scheme offered by an insurance brand. Control over investment choices has be in the hands of the potential retiree, not the `expert’ on commission. FCA regs have to be tighter than the gasket seal on an EV battery pack, goal posts cannot be shifted as climate fear politicians decide they want a slice of those private pension contributions for their pet projects – the cash HAS to be ring fenced.
GROWING APATHY
According to research, one in six UK employees with a workplace pension have never checked how much is saved in it, says My Pension Expert. The UK retirement adviser commissioned an independent survey of 2,000 UK adults. It found that a quarter (27%) of people with a workplace pension have either not checked it in the past year (11%) or have never checked it (16%).
Less than one in five (19%) UK adults with a workplace pension have checked it in the last month, and only a combined 54% have checked it in the past six months. When it comes to contributions, 38% contribute between 8% and 10% of their monthly salary into their workplace pension (when combining theirs and their employer’s contributions). Just 8% of employees contribute more than 15%.
Notably, around one-in-eight (12%) of people don’t know whether they have a workplace pension or how much they contribute to it. That is perhaps the most shocking stat of all, that 8% simply do not care – it’s because they don’t expect any significant return on that pension investment, plus they have other more pressing issues, like trying to get by on 22K salaries or less.
EXPECTATIONS VS REALITY
Most people don’t lead a life of luxury, with four holidays a year, new cars and a lovely detached 5 bedroom house. They won’t get that life in retirement either, especially under the current two-tier system which favours public sector employees. But a system where hard work and private sector NI contributions is rewarded is long overdue. The self-starters who found businesses need a secure private scheme where their NI contribs also mean something after age 65, a defined benefit.
Politicians who fail to deliver, insurers who fail, will pay a heavy price if pensions cannot provide a decent existence in old age. Social contracts matter, they are the glue that holds functioning societies together and we should all aim for age and gender equality, inflation adjustment fairness on payouts after 35 years, and rewards for actual private and NI contributions made.
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