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Steve Bee: Is this the best we can do on pensions?

Steve Bee

Most of us working in the UK these days are heading for a period of great worry and uncertainty later in life when we become pensioners.

Despite the fact we have had a thriving pensions industry for more than 60 years, and a state pension system for over a century, the nation seems unable to provide any real peace of mind for its citizens as they leave the workforce and enter the last phase of their lives.

At the most basic level, our attempts to provide our older citizens with financial and emotional security have failed. Old age should not be a time when people are wracked with worry.

Our state pension system has been in turmoil for as long as I can remember. Now, what was certain yesterday is no longer certain today, and will be completely unlikely tomorrow.

There are just two certainties we can count on with our state pension. First, we are never likely
to know how much it will be.

Second, we will not know for sure when, or even if, we will get it. It seems its provision will always be tied to the political winds blowing at any time.

Our company pension schemes that have sustained the hopes of almost half the UK work-
force for over half a century are now crumbling in slow motion. And all we can do is stand by and watch.

The financial and political storms raging around them mean we can no longer count on such schemes living as long as we are likely to. We are already being conditioned to expect lower pensions or lower compensation as the flagship defined benefit schemes of the past founder on the rocks of today’s fiscal realities.

That those new realities – which have fundamentally changed the nature of the promise made between the Government, employers and employees – are restricted to the private sector and the provision of the state pension, and do not seem to affect the generous bargain struck between the government and its employees, is bizarre.

Surely the winds of change will soon have to be felt by our massive unfunded public sector schemes too?

For the half of the workforce that has never had access to a company pension scheme, the  Government’s ill-conceived 1960s experiment of providing a second earnings-related state pension has proved to be a real disaster.

The dismantling of that system and its replacement with enforced savings through automatic enrolment is unlikely to provide much in the way of financial security for the millions excluded from the process (and little enough even for those who are included).

As the spread of private pension coverage goes wider it seems set to become ever more shallow as a consequence, leaving more of us ill-prepared for the trying times we will encounter as our lives draw to a close.

It speaks badly of us all – but, in particular, those in the pensions industry and the Government –
that this is the best we can do.

Steve Bee is director at Jargonfree Benefits

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. Whilst Steve speaks the truth, it is at least 30 years old. Politicians wax lyrically but only in 3 to 5 year cycles. A man with a glass eye could see the problems unfolding because of increased bureaucracy, lack of education and understanding and political short thermism.

    Add to that the newly discovered issue of the baby boomers (after only 70 years) and increased longevity and boy, do we have a problem. Old spread sheet Phil may have a 2 year plan but it won’t solve the problem. Oh and buying property isn’t the answer.

  2. What came out of re-invention of pensions in 2006 on the Isle of Man, which worked out so well has now been destroyed by the major Isle of Man assurance companies and over Regulation both in the UK and the IOM, along with Governments interfering with constant changes in tax rules and limits to how much you can invest and capping the amount that is allowed in your pension.
    Destroying the profession and severely limiting choice, for the majority of people living or moving to the Isle of Man.

  3. Trevor Harrington 31st March 2017 at 12:09 pm

    Good morning Steve,

    Absolutely agree ….
    But we must all shout it louder and in unison.

    The fact that the basic state pensions has utterly failed in it’s original endeavour is a disgrace to our so called modern and caring society, and the blame for it can be squarely and totally laid at successive Government’s doors, who have repeatedly chosen to spend our money elsewhere.

    The fact that they continue to try and blame the outright lie of “increasing age expectancy”, when their own ONS figures prove the utter fallacy of that statement, is an insult to the public’s intelligence.

    There is a way through this mess, as in simple terms there is more than enough money coming into the treasury which can enable all our expectations in health, welfare, infrastructure and state pensions, and I would even say that, with the correct planning, the state pension age can eventually be reduced again to age 60 for all. It is just that successive Governments have spent our money in the wrong places.

    It would be useful if the Insurance industry would put together a working party of Actuaries, and look at the Public Sector overspend in pensions in excess of £40,000 per annum, and then scheduled that back into the state pension payment at £200 per week for all from age 60.

    Then it would also be interesting to put the £200 per week state pension for the over 60s into a fiscal model of the UK economy, and see how tax revenues and corporate profitability within the changed UK GDP is effected.

    I suspect …. problem resolved, but a slightly angry higher management within the Public Sector … and I m not entirely sure we should be worried about that !

  4. Why don’t we have a cull of old people? Every 3rd person over the age of 70 starting in Alphabetical order (temporary embargo on name changes by deed poll).

    If its good enough for the cows and badgers.

    There would be a huge economic boost from all the inheritances and we would solve the housing crisis in one fell swoop. It would also clear hospital waiting lists, AE waiting times to under 30 minutes. Remove some of the worst drivers on the road and save us all from the incessant “back in my day” comments. I think it’s a winner!

    Of course I would be exempt because it was my idea.

    Anyone with me?

  5. Anybody seen the film Logan’s Run with Jenny Aggutter?

    Everybody got ‘reborn’ aged 30! No old age worries, everybody could plan ahead. Sorted!

  6. It speaks badly of us all – but, in particular, those in the pensions industry and the Government –
    that this is the best THEY can do.

    There is plenty of expertise and common sense available to solve this. Sadly, though, not within the Government

  7. I have saved into my pension for 34 years. I am 52 this June. I have 2013 protection . I cannot pay anymore in as a consequence. I cannot invest in assets I know would do well. I am at the mercy of markets charges and the government changing the rules 3 years from when I can take my pension. I have met steve Bee many times in the past, he is well versed and respected. His voice lands on deaf ears , my voice will never be heard along with a million others. The pension freedom means nothin unless a real time account is created allowing the beneficiary to make their own decisions. I want to take a pension at 55. I have no intention of working longer. The rules which should be changed are ignored. Why do we have a system that limits investment ( I know the answer) but puts limits on maximum fund value? There is no such limit on a Civil service pension or our MPs who do not even have a pot. Coming out of future taxation to the tune of a trillion pounds. My god . Who is listening.

  8. Mark – you are free to invest in whatever you like. What you cannot do is get (presumably at least) 40% tax relief on doing so. I’m not sure that Steve’s article is intended to highlight people that already have a substantial pot that the taxpayer has helped them build up. He’s surely talking about joe public’s struggles to try to get near to the magical 2/3rds retirement income as the sands shift under them on state pension ages and the like. I’m sure you will be OK.

  9. Trevor Harrington 31st March 2017 at 6:12 pm

    As I have already alluded to above, and in many other posts like this one :-

    There is no possible justification for public sector pensions, or private employer funded pensions for that matter, exceeding £40,000 per annum.
    £40,000 pa x 20 = Lifetime allowance of £800,000.
    If they have put an addition £200,000 aside in private pensions as well, then good for them.
    Don’t forget they will also get their £7,500 pa state pension on top of these figures.
    Overall total pension = approximately £40,000 pa plus £10,000 pa plus £7,500 pa = £57,500 pa.

    If they cannot live very well on £57,500 pa pension, plus investment income, then that is a very poor tale indeed, especially when you consider that Public Sector employees do tend to marry Public Sector Employees, which would put a couple’s pension at well over £100,000 per annum !

    Therefore I say again :-
    Any Public Sector Employee (including the police) should have no expectation of taking their tax funded occupational pension benefits before age 60.
    The state pension should be planned back down to age 60 for all.
    AND the money needed to do such a thing can come quite easily form a super tax on private or public sector pensions that are in payment, where the super tax is at least 25% on any pension income exceeding £40,000 per annum (not including the state pension).

    Don’t forget that it is mostly the employer who has paid the massive contributions necessary to accumulate these huge pensions, and it is the public (you and me) who are the employers, along with the huge tax breaks that these pension funds and benefits have been given along the way.

    Enough is enough …
    We must get the ordinary public back down to a standard retirement age of 60.
    Any political party with a proper plan to achieve this (as above) would be assured of a landslide election victory.

    • My father-in-law, now aged 90 and still going strong, passed an interesting milestone a couple of years ago. Starting work after his military service at age 22, he put in 33 years of service for his local authority employer and took early retirement on full index-linked final salary pension at age 55. A year or two ago, he passed the point where his retirement had lasted longer than his working life, and of course the balance is continuing to tilt with each passing year.

      I can’t believe that any pension system – DB, DC, compulsory, auto-enrolled, voluntary, funded, unfunded, whatever – can cope with this sort of experience. I’m no expert, but it seems to me we’re in a state of collective denial about all this.

    • Turkesy don’t vote for Christmas. Pensions apartheid is alove and well in th UK. The millioinaire public sector wins at the exopense of the private sector. Go near their opesnions and it’s ‘everuybody out’. They’re alright Jack – keep your hands of their stack!-

  10. Julian Stevens 2nd April 2017 at 4:30 pm

    I recently attended a seminar by a provider of VCT’s and EIS’s and their view is that these are the types of product towards which the government is keen to push those whose pension funds are up against the LTA.

  11. Sorry guys, all this hand-wringing and blaming is ridiculous.
    Advances in medical technology and the stranglehold the pharmaceuiticals have over the NHS has exacerbated the “fix me up doc” mentality because no-one knows or cares what pays for it.
    But keeping people alive who have not taken responsibility for their physical and financial well being will break us.
    Putting financial advice beyond the pocket of many after vilifying advisers who took commission has enslaved many into ignorance and into the arms – no, jaws – of the smiling crocodiles that are banks and the ruling classes.
    All engineered by their media puppets.
    Once there is nothing much more they can squeeze out of working people it might then change, but not until then.
    And no, we don’t know when that will be either.

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