Pensions need a new image
CII Retirement Savings Report highlights inadequacy of current retirement system
Millions of future pensioners will be in poverty – and have no money for care!
Ros Altmann says let’s rename pensions and offer lottery prizes
by Dr. Ros Altmann
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Heading for another crisis – pensions inadequacy followed by soaring care costs, we must face reality: The UK is heading for yet another crisis, as a result of failing to prepare for the needs of its rapidly ageing population. The current pensions crisis means most people will not have enough pension to provide a decent retirement income in the early years of their retirement. This will be followed by even greater income needs to pay for care and no money is set aside for that. When the Welfare State was designed, this was not a problem. The big issues were healthcare and pensions. But society has moved on, while we are still stuck with the old system.
At least one in four people now aged 65 will need care costing over £50,000 each – no money has been set aside for this!: 1 in 3 women and 1 in 5 men currently aged 65 will need to go into a care home for on average 2 years. This will cost well over £50,000. But the average pension fund is only £30,000 – and that is for the entire retirement, without any provision for care needs at all!
Dr. Ros Altmann, writing in the newly released CII Retirement Savings Report, calls for an image makeover for pensions. She says: ‘It is absolutely vital that we reinvigorate long-term savings. People have lost faith in pensions and many have put no money aside for retirement, never mind for long-term care. We cannot go on like this. Saving more is important – perhaps we can re-name private pensions and have lottery prizes to help increase the attractiveness of retirement saving. But people will have to work longer as well. We have been ignoring reality for far too long’.
Must revive long-term savings: abolish the word ‘pension’ and introduce lottery prizes!: I have written a Chapter in the newly released CII Retirement Savings Report calling for private pensions to be renamed. ‘Pension’ has become a negative word and it should be used only for the money paid to you by the State. The rest is your own savings for your own future and should be called something else. I believe it could also help enormously to give better incentives – such as a lottery perhaps – to be offered with retirement savings. Everyone contributing to a pension could be entered for a draw to win £1million each month – the cost relative to current spending on pensions marketing would be small, but offering savers the potential of something in it for them today, not just in the future, could be more attractive. People are reluctant to save and we need to rediscover our once-strong retirement savings ethic. But this must include planning for care funding too.
Number of people aged over 90 will treble in next 20 years and then keep on rising! We must think quickly and clearly about what is going to happen. The number of people over 90 will treble in the next 20 years. That itself will put strain on our health and care resources, but the numbers of older people will keep on growing further after that too.
Demographic realities have been ignored, more old people, fewer young ones: As the first baby boomer hits 65 this year, who will pay for their pensions and care as employers and state cut spending and individual savings have dwindled? We know that people are not saving enough to provide themselves with a decent pension – and that the state cannot afford to be very generous to increasing numbers of older citizens, as the number of younger taxpayers will be falling once the baby boomers retire. Employers have also cut back their retirement provision. We also know that a significant number of people will need expensive care in future – with the health service unlikely to be able to provide this.
We all need to rethink our financial future: Therefore, individuals will have to rethink their financial futures. We can no longer rely on an employer, or the state, or the stock market to deliver ever-increasing pensions that will last for ever-lengthening retirement periods.
Just saving more will not be enough – must consider working longer: Part of the solution also has to come from part-time work in later life. This is already starting to happen and the more we can encourage older people to stay economically active, the better things will be for them, for their families and ultimately for all the rest of us too. Not only will they then keep adding to economic output, they will have more money to spend and be better able to cope with the financial demands of living longer. It is fantastic news that life expectancy is increasing so much, and it is the result of huge successes from medical and social care, but society has not adjusted its attitudes to the new realities.
For more information, call Dr. Ros Altmann, Director-General, Saga on 07799 404747.