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Recession delays retirement for 1.85 million people
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While the economic downturn has left most of us concerned about the immediate future, it’s more important than ever to look further ahead and plan for your retirement
Billions of pounds have been wiped off the value of UK pension schemes in recent months as the credit crunch continues to rumble on and share prices have plummeted. The Pension Protection Fund (PPF) estimated last month that the UK’s final-salary pension schemes are in deficit to a total of £158.1bn compared to £18.8bn the previous year.
That shrinking feeling
As pensions shrink in value and other investments feel the pinch, many of us are having to rethink our retirement plans. Recent research from retirement income specialist MGM Advantage has revealed that around 1.85 million people aged 55 and over are now resigned to working longer than anticipated, to top up pension pots still waiting for the stock market to recover and deliver a better return on investments.
earn more interest
Many over-55s who are not already retired are being forced to take extreme measures in order to top up their pension pots, with figures from MGM Advantage revealing that nearly one in 10 (9.3%) are considering releasing some of the equity from their properties either by downsizing or taking out equity release schemes.
“One of the worrying consequences of the economic turmoil is the knock-on effect for those approaching retirement,” says Craig Fazzini-Jones, director at MGM Advantage. “Millions of people nearing the end of their working life have been forced to slog it out for a few more years to see if their pension pots will make any kind of recovery. For many it’s not a choice, but a necessity.”
More worrying however, is the amount of people who don’t believe they’re saving enough for their retirement. A recent survey by independent consulting and actuarial business Hymans Robertson showed that seven out of 10 of those polled believed they weren’t saving enough for retirement, with a staggering 83% of 16-24 year olds agreeing compared to 65% of those aged 55 and over.
The Hymans Robertson survey also revealed that 87% of Brits believe that the Government is not doing enough to encourage people to save for their retirement. So, let’s go back to basics and make sense of the pension conundrum.
What’s a pension?
Simply, a pension is a form of saving for retirement, with certain cash advantages on contributions. When you retire, or reach a certain age, a pension scheme pays you a regular income for life. As with most savings, you should use the principle of compound interest to your advantage.
The golden rule is the sooner you start paying into a pension, the higher your income in retirement is likely to be. There are three main types of pension: state, personal and company (or occupational).
by Tom Murphy and Emma Lunn, last updated 28 August 2009
