A recent report by the Workplace Retirement Income Commission, written by former Treasury Select Committee Chairman Lord McFall, has warned that the ‘golden generation’ of retirement schemes has come to an end. Workers retiring after 2020 should expect a ‘bleak old age’ with up to 14 million workers retiring with far smaller pensions than their parents.
Lord McFall said: “A golden sunset is giving way to a bleak dawn. Too many people are stuck in a complex, costly and inefficient system that relegates the consumer’s interest to second place. On top of that, they simply aren’t saving enough to secure a decent retirement.
“People need to get more bang for their buck, or they’re not going to bother with a pension. Instead, they’ll end up spending today, ignoring tomorrow, and scraping by in poverty on the state pension. We cannot stand by and let that happen.”
There has been increasing anger in recent years over suggestions that public sector pensions are much better than those for private sector workers. The report, funded by the National Association of Pension Funds, said almost three quarters of private sector staff would be unable to ‘adequately exist’ when they retire because they had not put enough into schemes and because the pensions system was far too complex.
The Pensions Minister, Stephen Webb, described the report as a ‘wake-up call’, saying that the report was a significant sign that the pension system had to change:
“We need to get people saving younger. If they don’t plan now, it will be a pretty meagre existence. It is a very serious warning. We need to get the state pension system right, so people have the basic minimum in old age, but also private pensions, as far too many people don’t have a private pension at all.
“Starting from next year, we’re going to bring 10 million people into the workplace pension saving system for the first time so that when they put money in, the firms will put money in.
“The taxpayer will contribute and that will get a lot of people into pension saving – and it’s vital that we do.”, he said. He stressed the importance of “getting the state pension system right because it is below the poverty line and that’s not a firm foundation to live on.”
He added that the introduction of automatic enrolment into workplace pension schemes from next year “will change how we think about pensions.” The question now is, will we all wake up and save for a long quality life in retirement?
If you want to find out more about pension saving, contact Matthew Walne on 0116 2355 733 who will be happy to help.