Will the retirement you get – be the retirement you want?


This morning I’m speaking on Radio Kent about why more people are working well into their late sixties, a fact established by some report which I assume has been offered the BBC (but not me – yet!).

It should come as no surprise to us. When the Pension Commission reported under Adair Turner in 2004 it predicted just this

The central thrust of the first report was to make it quite clear that the nation faced an unavoidable choice between four possible options: stick with the business as usual option and allow pensioners to become poorer relative to the rest of society; increase the amount of tax revenue devoted to pensions; increase private savings; or raise the average retirement age.

What has happened in the intervening 15 years is that a large number of people who would have been pensioners twenty years ago , are still working because they have gotten to know their pension and they haven’t considered it is enough.

Though the state pension has increased in real terms, it has not compensated for the reduction in defined benefit accrual and the gap has certainly not been filled by the increased coverage of defined contribution pensions.

Very specifically, defined contribution pensions are in a mess, with the annuity option having been dissed in 2015, people have no obvious alternative but to try and drawdown an income from under-sized pots. Fearful that these pots won’t last as long as they do they are buying caravans with the tax-free cash (eschewing the Lamborghini) and carrying on working.

Though the state retirement age is now kicking in at 66 (soon to be 67), few people are thinking that the £170 p.w .it offers is enough to live on. Instead they are looking a a patchwork quilt of solutions to provide them with comfort, most are problematic one way or another.

Equity release, buy to let and downsizing are all ways of exploiting a buoyant housing market, but there is nothing very buoyant about this housing market.

You have to have a defined benefit pension or a pension pot of at least £275,000 (about the value of the state pension) ,  to provide you with some certainty of doubling your state pension when you get to state retirement age. The average pension pot is around £35,000 (ONS) and the average pension arising from LGPS is around £4,500  (Unison).

The reality is that when people get to know their pension they aren’t very happy and that is one of the reasons why we have more elderly people in the workforce than ever before.

The retirement you get won’t be the retirement you want unless…

I’m told that there will be a sociologist on the programme with me, I hope he/she will point out that for many of us, the changes in work make it easier for us to work longer, many of us can do our work on a laptop from home , later life skills are increasingly valued in the workplace and we are of course healthier in our sixties and seventies than we have ever been before.

But these recent developments aren’t evenly spread. There are still millions of people in the UK who are tired out , unable to join the hi-tech workforce or in failing health who have no choice but to rely on their state pension and – if they have their own house – its capacity to turn bricks into sausages.

And for these people the prospect of more work is not the retirement they want. The prospect of grim old age with the caravan sitting redundant in the drive, is all that lies ahead.

For millions of us, the pension system has – as Turner predicted – let us down. Those reaching retirement today were in their prime in the Thatcher years and have worked the forty years since she came to power, in the hope of enjoying the fruits of a home owning , share owning prosperity that arose from the sweeping reforms of the eighties.

For people like me – retirement will be what I wanted it to be – a house, grandkids, a pension and cash in the bank. But people like me were entitled from day one. The dream of social mobility that was offered to Sid – has turned out to be the reality of a caravan on the drive and stacking shelves on Sainsburys.

Get to know your pension

The Government want us to engage with our pension , but many in the pensions industry know what this will mean. It will mean massive disappointment.

The retirement many will get will not be the retirement they want and it is only fair to people to tell them this truth.

Every conversation I have about telling people what they’ve got , involves this awkward truth. The more we tell them – the more risk is that they will feel cheesed off.

That is why we need to be honest – as Turner was honest – telling people that what they are doing today is not enough,

  • auto-enrolment is not enough,
  • relying on your house to turn bricks into sausages is not enough
  • buy to let is not enough

There needs to be a game plan for retirement based on real numbers and real actions – actions like committing to high levels of savings – along the lines of Aviva’s recommended 12% of total salary over a lifetime.

We need to find a way to keep people’s money growing for longer and not to rely on gilt yields or deposit rates to fund our long-term income requirements

Only then can we get to know our pension when we retire and shake it by its hand with the words “good job”.

Whether Radio Kent listeners are ready for this message at 8.20 this morning I doubt. So I may have to be a little less assertive, but you – dear readers – need to be under no doubt. If we want people to get to know their pensions, we should be expecting a great number of them to be in for a nasty surprise.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to Will the retirement you get – be the retirement you want?

  1. Richard Chilton says:

    There can be another nasty surprise for some of those still renting their home in retirement. They will find that their pension income scales back the Housing Benefit and Council Tax Relief they could have otherwise received. In the worst cases, that scaling back could exceed the amount they have paid into their pensions.

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