Recently I read with some interest figures showing that different generations of women are witnessing an altering pension’s landscape, with many of today’s young adults not saving enough for their retirement. Tell us something we don’t know! As most of us do know, the earlier they start, the better off they could be. However, by turning their backs on saving for a pension young people are increasing their chances of facing poverty in old age.Official figures also show that the number of women aged 22 to 29 in the UK who are signing up for a workplace pension has fallen for four years in a row, marking the most rapid decline of any age group.
It is apparent that people are often waiting for decades after starting work before they consider how to pay for retirement. It has since emerged that experts are now warning that a new scheme to ensure employees get into the savings habit will be insufficient and offer workers a false sense of security.
Latest figures from the Office for National Statistics show that currently more than half of the UK’s single pensioners have a pension income of less than £10,000 per annum, and the UK has an ageing population. By 2034, 23% of the population is projected to be aged 65 and over, up from 15% in 1984. An estimated eight million workers have no pension provision and face having to rely on the state pension and benefits to pay for 20 years or so of retirement.
The Survey shows that less than 40% of men and women aged 22 to 29 contributing to a scheme offered by their employer. These workers are missing out on a pension provision that is generally the most generous of pension policies, compared to a personal pension plan where there is often no employer contribution.
For today’s 20-somethings, pensions have fallen down the priority list as they face up to more pressing financial concerns. In the past the pension system assumed that women did not need a pension, they needed a husband!! One woman in particular was quoted in the Press as saying, ‘I am struggling to pay off my debt and so at the moment every penny of my monthly salary is needed for rent, living and debt. After my debts are cleared I think the focus at my age is to start saving to invest in property. This seems more relevant and urgent than a pension at this point in my life.
Is it the case that the only people in their 20s who think about pensions are those who sell them? Pensions Minister Steve Webb expressed his concern that complications, as well as poor awareness of the pension system, has turned many young people away from thinking about how they will fund for old age. Most young people starting in a job do not get around to thinking about pensions for years because when young you think you will live forever and a pension is something for your granny. Other people assume that their home will be their pension.
No-one is expecting 20-somethings to become pension geeks, but what we do want is to demystify it, make it simple and ask the question, what sort of standard of living do you want when you are old?. A new system that will automatically enrol people into a workplace pension scheme will get young people into a savings habit and it will also tackle the dividing line between pension provisions depending on people’s choice of career. At present, workplace pension scheme take-up is more than 90% in public sector jobs such as public administration, defence and social security, compared with just 6% in shorter-term accommodation and catering work.
Some people argue that an entire change of culture is needed to make pensions affordable. We are all expected to live longer, not such a great prospect if we are all going to be poorer. It doesn’t need to be that way but people do need to rethink the way they approach later life. Perhaps this could mean working part-time during pension years? Who knows, but one thing for sure is that without adequate savings many people may no longer have the choice other than to stay at work.