I read with interest Richard Gillingham's letter (Money Marketing, November 13) in response to Lorna Bourke's article on pensions.
The article referred to calculations carried out by actuaries at Mercer Human Resources which indicated that a pension fund of £180,000 needed to be accumulated by the age of 65 to provide the equivalent to the current level of minimum state benefits, including pension credit plus related housing support and council tax benefits.
A great deal of the comment has implied that unless an individual can accumulate a fund of £180,000 there is no point in making any provision for retirement.
I believe there has been some muddled thinking on this subject. Everyone currently working is accumulating an entitlement to a basic old age pension as long as a sufficient number of years of National Insurance contributions has been paid.
That underlying entitlement is incorporated into the fund of £180,000, therefore someone retiring would receive the basic old age pension entitlement (currently £77.45 a week) on top of whatever pension they buy from their £180,000 fund.
The resulting benefit would be well in excess of the levels under which any pension credit or other related benefits would be paid.
Therefore, any press comment which, on the face of it, would discourage anyone saving to buy a pension unless they can save more than £180,000 is misleading.
The threshold that would result in pension just offsetting supplementary state benefits on top of the basic state pension would be considerably lower than £180,000.
I would think a figure of £50,000 is more like the equivalent, although no doubt actuaries can calculate this. The figure of £50,000 mentioned in the September issue of MoneyFacts was not particularly referring to this calculation, just the fact that £50,000 is the average fund that holders of personal pensions have accumulated at retirement.
Chartered insurance practitioner,
O'Halloran & Co,