When you wake up on Christmas morning, the last thing you would ever expect to be gift wrapped under the Christmas tree would be a pension. Having said that, if over the coming years you didn’t fund towards a pension, then Christmases after retirement might be pretty much a non-event in terms of what lies beneath the tree not to mention the size of your turkey.
I guess the pension stigma still remains, in so much that funding for your retirement is way down the list of priorities. Many have yet to give any consideration to a pension, not to mention the on-going bad press surrounding the word ‘pension’.
With employers continuing to close their final-salary schemes, both to current members as well as new joiners, the prospects for our pensions seem to become poorer almost every day. The general level of inflation-proofing that both public and private schemes offer looks set to get weaker not to mention the fact that the government wants us to work longer, and save more, to finance our retirement as our longevity continues to increase.
Talking of working longer, you could include such individuals as Sir Alex Ferguson, Mick Jagger and Bruce Forsyth but to name a few. A slightly different scenario here of course!
Living longer does of course put extra pressure on pension assets to produce the necessary income in the future. Meanwhile, the prospects for healthy returns from investment in shares, bonds and commercial property look as volatile as ever. You therefore have to ask yourself where is the ‘joy’ in any of this?
Pensions do bring some positives and yes these words really can go together. Let’s not forget the Tax Incentives and the advent of Auto-Enrolment. Introduced as a new law by the Government, this makes it easier for people to save for their retirement with the requirement on all employers to enrol their workers into a qualifying workplace scheme if they are not already in one. A qualifying scheme can be a defined contribution (DC) scheme with a minimum contribution; or a defined benefit (DB) or hybrid scheme which meets certain conditions. At present, many workers fail to take up valuable pension benefits because they do not make an application to join their employer’s scheme. Automatic enrolment should overcome this.
According to the Office for National Statistics the average life expectancy at birth is now just over 78 years for men and 82 years for women.
Without a pension though, the picture would be much, much bleaker and despite being out of pocket in the early years, the rewards of having a decent pension in place will result in a tree and turkey every Christmas. Why not buy one less present this year and purchase a pension instead?