Over 50s heading for retirement with no pension

The latest MetLife Europe survey evidence continues to point to a worsening of our pensions crisis.  Even among those closest to retirement, there is a lack of trust in pensions, as a third of workers are not saving in a pension.  People have clearly lost confidence in pensions and the situation is deteriorating. 

Saga’s recent Survey has shown that one in five over 50s are still in debt, with mortgages to pay off.  If they have no pension savings to fall back on, they will be heading for retirement poverty.  Together with those who have no pension savings, there is a serious risk that up to 3 million people will have nothing but the State Pension to survive on in retirement.

The Coalition Government says it wants to reinvigorate pensions and retirement.  There is clearly a long way to go.

Policy has failed to address this mounting crisis, despite an almost constant barrage of reforms.  Do policymakers really understand pensions?

Urgent radical reform of our state pension system is long overdue.  For the over-50s, saving in a pension scheme is often just not worthwhile, because they are caught in a trap with state benefits taking away their private pension.  The State Pension is so inadequate (a full Basic State Pension is just £97.65 a week) that nearly half of pensioners end up needing means-tested Pension Credit and other benefits in retirement.  However, if they claim these benefits, they will lose at least 40% and often 100% of their pension income.  That makes it very difficult to advise people to save in a pension, because they risk merely saving to replace benefits they would otherwise receive.

The Governments recent apparent proposal for a flat rate pension of at least £140 a week for all future pensioners with a full National Insurance record would remove this problem of means-testing and make it safe for the over 50s to save in a pension.  This kind of radical reform is essential.  Without it, we cannot hope to ensure private pensions work properly to deliver extra income for retirees.  

The proposals for automatically enrolling all workers into a modest company pension scheme will also not serve those closest to retirement well unless state pensions are radically reformed.  Policy must recognise that what matters is not just getting people to put money into a pension fund, but what they ultimately can get out of it.  Unless and until it becomes safe for everyone to save in a pension, we cannot hope to properly deal with the pensions crisis.

Source: Dr. Ros Altmann, Director-General, The Saga Group

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