Millions of over-50s 'sleepwalking' into old age as they face massive pensions shortfall

  • Economic forecaster will raise alarm about generation of workers who have inadequate personal pensions

By Becky Barrow

PUBLISHED: 19:40 EST, 29 November 2012 | UPDATED: 05:39 EST, 30 November 2012


Millions of over-50s are ‘sleepwalking’ into old age with little or no chance of retiring comfortably, Britain’s leading economic forecaster will warn today.

It raises the alarm about a generation of workers who have their own pension, but one that is woefully inadequate.

They have little idea how much is in the pension, how much it will pay them when they retire and how long they will need to live off the money, it is claimed.

Britain's leading economic forecaster raises the alarm about a generation of workers who have their own pension, but one that is woefully inadequate

Britain's leading economic forecaster raises the alarm about a generation of workers who have their own pension, but one that is woefully inadequate

On average, workers aged between 50 and 64 with a defined contribution scheme would need to increase their pension pot by nearly 80 per cent to retire with the income they say they hope to get.

A defined contribution pension makes no guarantees about how much money it will be worth, unlike a final salary scheme which pays a percentage of your earnings.

One in four in this age group would need to save more than £60,000 extra to get the retirement income that they hope to get.

The research, by the Institute for Fiscal Studies, raises fears that a third of those approaching retirement ‘find it impossible even to  hazard a guess’ at their future  private pension income.

 

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For example, women who are in their 50s think they will live until the age of 84. In fact, they are likely to live until the age of 88.

The National Association of Pension Funds, which co-funded the research with the Economic and Social Research Council, said this generation is ‘under-estimating’ their life expectancy and is ‘over-optimistic’ about their pension wealth.

Joanne Segars, association chief executive, said: ‘Fortunately people are going to live longer than they think. But they are not planning for it, so they might find their savings and pension do not stretch far enough.

Joanne Segars, association chief executive of the National Association of Pension Funds which co-funded the research with the Economic and Social Research Council

Joanne Segars, association chief executive of the National Association of Pension Funds which co-funded the research with the Economic and Social Research Council

‘Millions are within a decade of their state pension but have still not thought about how long their retirement might last.

‘It is worrying that so many over-50s are sleepwalking into their old age and are expecting to be better off than they might be.’

She said it is ‘a huge ask’ to expect somebody in this age group to increase the size of their pension  pot by 77 per cent in order to have the sort of retirement that they are expecting.

For many workers, their only strategy is to keep working into their late 60s, 70s or even 80s, although poor health may scupper these plans.

Gemma Tetlow of the IFS and co-author of the report, said the number of those who are clueless about their pension is worrying.

She said: ‘A remarkable number of people with a pension in their fifties and sixties appear to have little or no idea how much income they will receive.’

Around six in ten individuals have ‘never thought about how many years of retirement they might need to finance’, says the IFS report.

Earlier this week, retirement specialist LV predicted around 6.5million people now over 50 will work beyond the state pension age.

The finding highlights the social impact of the pensions crisis as schemes which pay for a comfortable old age approach extinction in the private sector.

From next month – under Government rules which force bosses to pay into a pension for their staff – up to 11million workers are being automatically signed up to a pension over the next five years if they are between the age of 22 and state pension age and earn more than £8,105 a year.

 

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Buy Gold. Dont let future governments steal your savings.

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I am one of this group of over 50's who has done the best I can to make sure i have the best pension possible. Even now at 58 yrs I only earn the sum of £20.000 p/a. So as you can see it isnt going to be a kings randsom. Although for the state pension I have to work as semi-retired untill i am 66 yrs and i am only able to do this due to my investments in work pension schemes. When I started paying in to these pensions in my early 30's freinds and relatives said''you must be earning a lot if you can afford to pay into that''....now those same people are saying ' well its alwright for you, you got the money to semi retire at 60yrs....!!....You cant win with some people can you.

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I paid £44 a month into a Provident Mutual policy for 20 years, a total of £10,560. When it matured it paid out £32,400. Half way through I took out a second policy paying £75 a month. After ten years the firm demutualised and we were told that our share of the company would be invested in our policies. After several new owners the company was taken over by Aviva which invested not one penny of the remaining premiums in the policy. When the policy matured I received for my £18K investment £22K, less than 2% compound interest and considerably less than inflation. Aviva spends millions on advertising and boasted daily about sponsoring the Olympics. I wonder how you can hope to remain in business when you pay out less money than is paid in.

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Relax......we pay our taxes....the Goverment will look after us.....lol

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"It is worrying that so many over-50s are sleepwalking into their old age and are expecting to be better off than they might be" Joanne...sweetie. You would be surprised to find out how many over-50s are quite aware of what really goes on in the pensions industry and how all governments view it as a cash cow. You would also be surprised as to how many take extreme offence at the derisory returns received after many years of "investing" with said "industry" I know this because i am one of them. You people are going to have to raise your game to stratospheric heights before you get a single extra penny out of me. Go find somebody else to take for a sucker.

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Dear DM, What you might like to do is look into the utter nonsense of compulsory pension schemes where low paid staff will be paying fund managers high bonuses. The panel that the previous government formed to look into compulsory pension schemes was almost entirely made up of -guess who?! the pension/actuary industry. If you want to help those who need to save for old age it makes far more sense to help them pay off their current debt such as mortgages it never makes sense to save when you have a debt. How on earth has DM managed to miss this scandal?? As an employer we will have to recruit less staff to pay into what is nothing less than a scandalous scheme.

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Millions of over 50s wouldn't have a problem if the Labout government had left our pension funds alone....shame on Gordon 'Prudence' Brown, who history will show was anything but!

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Seriously, if anyone wants to see where their pension funds go, pop down to the City of London and Canary Wharf around 4pm onwards, and you will see it being drunk, and eaten in expensive restaurants and bars. Look on the roads at the sports cars.. there goes your pension pot. This is why London has not been hit be the recession, with increasing house prices; it is creaming off 10/15% of the income of the rest of the UK and stuffing it in it's back pockets. .

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10 year ago we in this contry had accrued a pension pot of 67 trillion pounds, we were one of the big 3 in the world, American and Japan the other two, where is it now you should ask?, - maximustec , Birmingham, United Kingdom, 30/11/2012 16:12 +++++++++++++++ Stood in a Lottery Ticket que in a shell suit.

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Please don't say we slept walked into anything, the rules keep changing and the schemes which were once tax efficient, can have exorbitant fees. I've saved into pension pots for 30+ years - first there was a final salary scheme which was closed (but I'm lucky, I've still 10 years worth in that scheme). Then there was the advice to opt out of serps (which was going to give us a better deal, but some how seems to be worth less than I paid in). Then private pensions (if your employer didn't provide a pension), where the provider managed to take a cut, but my share seemed to be less each year. To be honest, its just as well the government have raised the pensionable age, because that way, if I wait long enough, maybe my pension will be worth something????

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