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‘UK faces a pensions time-bomb’

World Economic Forum calls for the lifetime allowance to be scrapped and faster pension age rises to tackle a potential £25trn savings gap

Pensions-savings-retirement-piggy bank

The World Economic Forum has issued a dire warning which calls on the Government to impose faster pension age rises as it earmarks the UK as one of several countries facing a “pensions time-bomb”.

The Financial Times reports on analysis from the World Economic Forum which puts the UK pension savings gap at £25trn by 2050 if action is not taken soon.

The pension savings gap is defined as the shortfall between current retirement pots and the amount of money needed to maintain an income of 70 per cent of pre-retirement levels.

World Economic Forum head of financial and infrastructure systems Michael Drexler says: “The anticipated increase in longevity and resulting ageing populations is the financial equivalent of climate change.

“If increases in life expectancy were matched by corresponding increases in the retirement age, the challenge would be less acute.”

He added policymakers need to consider how to integrate 75 and 80 year olds into the workplace.

The analysis also calls for the £1m lifetime allowance to be scrapped, arguing it sends the “wrong signal” that there is a limit to pension contributions.

But Trades Union Congress policy officer Tim Sharp told the newspaper: “It’s clear the UK faces a huge challenge to ensure everyone has a chance of a good retirement, but it can be done.

“The way to tackle the UK’s retirement challenges is to build a consensus about a sensible way forward, not to produce alarmist reports.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Bhavikkumar V Shah 26th May 2017 at 8:46 pm

    The state pension needs to be modernised. Pension freedoms will create a gap with some people having insufficient guaranteed income in later life. This could be compounded by lack of guarantees in auto enrolment schemes. Bhavik Shah IFA.

  2. What a lovely thought for future generations. All the greedy filthy rich con artists and politicians continuing to bleed the poor plebs who watch them retiring at 45, while the great unwashed work till they drop at 85, with security and no free healthcare.
    Welcome to the future of Thatcherism and Maymadness.
    Bring on the revolution.

    • @ Patrick Schan

      Well I never knew you were a Trotskyist!

      The bigger bomb that will hit much sooner is the awful debt that the average citizen carries. This will make the pension time bomb look like a firework.

  3. Why is a figure of 70% of pre-retirement income used? What would the position be if 60% or 50% were used?

    And on what basis do they calculate the level of income possible from the available retirement pot? Annuity rates, or some other metric?

    Headlines and articles like this throw up more questions than answers.

  4. Finian Manson 2nd June 2017 at 3:34 pm

    Am I the only person to be astounded at the negative comments on removing the increasingly restrictive Lifetime Allowance that penalises good investment decisions.

    The one reality, that far too many people ignore, is that PAYG State Pensions are unsustainable as are any unfunded or part-funded Public Sector Pension Schemes.

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