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Steve Bee: Coping with the 21st century retirement crisis

The golden age of defined benefit company pension schemes is over. The golden generations of pensioners it spawned, in the private sector at least, have gone off into the sunset with their generous pots.

Towards the end of the last century, many of the largest employers in the UK used their pension schemes as the ultimate business management tool, able to pay off unwanted sectors of their workforces with offers no sane person could refuse.

We will all have examples of people from our own circle of family and friends who were given both redundancy payments and unreduced pensions in their early-50s as their employers set about restructuring and modernising their businesses.

These are the people the traditional pensioner television ads appear to be aimed at, travelling the world on cruise ships when they are not busy playing golf.

But that image of retirement is one we should discard of as we come to grips with the realities of what it will be like to grow old in the UK in the 21st century.

It is unlikely anybody now embarking on their career will have pension benefits equivalent to a lottery win showered on them in their early-50s. Indeed, our current legislation does not allow anybody to build up anything like the pension assets previous generations have been able to accrue. Nothing like it, in fact.

And no employers are ever likely to saddle themselves again with the pension liabilities common just two decades ago. Liabilities that seemed like nothing in a booming economy but can be business threatening in the cold light of today’s reality.

From here on in, while pensions will be more widely held, they will be less generous.

Our occupational pensions industry has been of great use to half the workforce in the UK – those working for the largest employers – but of little or no use to the other half who work for smaller firms.

We have always had pensions haves and have-nots, broadly defined by the sector they are employed in. We have never had a pension system that created pension wealth for all.

For many in the neglected half of the population, the state pension has been the light at the end of the employment tunnel. But this light has grown dimmer in recent years, as the state pension age has increased and its real value has fallen. We do not have a particularly generous state pension in the UK. No one retiring on it alone is likely to spend their last decades cruising the planet’s oceans with fellow golfers and bon viveurs.

It would be good for us to carefully consider just what it is we want from a 21st century pension system and whether it is possible to build one that will be capable of creating a realistic level of pension wealth for all. It would be better still if we could build such a system.

Steve Bee is director at Jargonfree Benefits



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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Andy Robertson-Fox 14th November 2017 at 11:29 am

    “For many in the neglected half of the population the state pension has been the light at the end of the employment tunnel. But this light has grown dimmer in recent years…..”
    And for the frozen pensioner who receives no index linking at all the dim light is now but a flickering candle.
    There is a 98 year old lady who retired on a full UK State pension of £17.00 per week and would now be entitled to £122.30 in the UK…..but she lives with her pensioner daughter in Australia a so gets that frozen figure of £17.00 where is the fairness justice and morality in that?
    Sadly, such is the contempt that successive UK governments have for just 4% of their elderly citizens.

  2. “The golden age of defined benefit company pension schemes is over. The golden generations of pensioners it spawned have gone off into the sunset with their generous pots.”

    Really, because defined benefit schemes started closing in large numbers in the early part of this century. It’s perfectly possible that someone with a good few years in such a scheme would only be in their 30s at that time, so it won’t be until the 2030s – 2040s when a private sector worker retiring with a defined benefit pension truly becomes a curiosity.

    “Indeed, our current legislation does not allow anybody to build up anything like the pension assets previous generations have been able to accrue.”

    This is utter nonsense, and dangerous nonsense to boot, because it encourages the “I may as well not bother” mindset which is the actual cause of people hitting retirement with no pension savings. (Not government action or inaction, and not the closure of DB schemes.)

    If someone pays into a defined contribution pension scheme equivalent contributions to what they would have needed to pay into a defined benefit scheme, they will end up with a very nice pot of pension assets indeed.

    Cheer up, Steve. It takes 68 muscles to type a doleful article about how everyone is going to be impoverished in retirement based on zero facts, and 2 to smile when someone is taking your byline photo.

  3. Unless you work in the public sector of course.

    Meanwhile those in the private sector are being squeezed on the amount they can build up in a pension scheme so that the state can continue to run public sector schemes.

  4. For far too long and without any real thought the politicians of the day have continued the frozen pension policy and tinkered to the point where the state pension is a joke in the pension world with just 4% of those that qualify being denied any indexation.
    This is not just a small reduction but a massive fraud when people like that which Andy Robertson-Fox mentioned are impoverished to the point where the family have to step in to support them.
    There is no valid reason for this blatant theft when the country generously doles out 13 billion + in Overseas Aid and just 1/20th of this figure would pay all of these frozen pensioners their rightful pension uprating.
    The Government admit that this is not a benefit but an entitlement but fail to address the inequality and immorality of their policy imposed by section 20 of the Pension Act.
    They stand alone in the list of OECD countries and not surprisingly the majority of pensioners affected are living in Commonwealth countries where the UK wish to increase trade after Brexit. The pensioners in those countries are advising their governments of this and it will not be plain sailing.
    In all honesty, it cannot be just the “Steve Bee’s” of this world that see injustice of this Frozen pension being defended by the use of false information and the abuse of a parliamentary Act not to mention their own Code of Conduct which clearly says that ” Members have a duty to uphold the law, including the general law against discrimination.”

  5. Andy Robertson-Fox and George Morley have eloquently put the case for the frozen 4% of state pensioners so I will just add that this injustice is a scandal. Shame on the government for not righting this wrong for decades and shame on all politicians who look the other way, in doing nothing they are all complicit in a deliberate policy of stealing money from the UK’s most vulnerable citizens. A deliberate policy of imposing poverty on pensioners. Shame on them all.

  6. The State Pension was, indeed, “the light at the end of the employment tunnel” while the Government was silently accepting mandatory, life-long NI contributions, but there was no warning that the tunnel would collapse if, on retirement, one should move to a Commonwealth country (and certain others). The UK Government has no shame about throwing more than half a million of its vulnerable pensioners into desperate financial poverty by denying them that “light” of receiving a fully-earned, fair pension. It has no conscience about “scamming” them – for that is exactly what it is doing to frozen pensioners, who never had cause to doubt that they would receive pensions on exactly the same terms as those who – rightly – enjoy full indexation. Parity of contributions earned parity of pension payments, a financial and moral justice the Government chooses not to understand!

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