Can we really afford to retire?

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Gavin and Louise looking at holidays

That’s the question Michael Buerk has been asking those tuning into the second episode of Channel 5’s documentary on our retirement planning.

1.5m of us are working beyond the retirement age with 90% reliant on state benefits alone. One in five of us have no pension at all.

Gavin and Louise have no plans to be working beyond 60. Gavin would like to retire at 55 having been in the army since 1989. This would mean them retiring together.

They are “seizing the day” but they haven’t ever sat down to work out what their dream would cost.

Louise has £22,000 in a pension pot and a buy-to-let income of £400 pm. Gavin has a military pension of £12,000 a year and a lump sum to come.

They are hoping to spend 3 months a year travelling abroad. Having been taken to the travel agent it turns out one holiday in a lifetime in New Zealand would cost them £15,000. They want to spend £10,000 pa but their pension planning tells them their combined holiday budget would be £2,500 – one dream holiday every six years.


You can’t buy a sausage with a brick (the rent trap)

Nearly 4 million Brits plan to sell their properties to fund their retirement. But they will still need to find somewhere to live.

Denni and Graham moved into rented accommodation , having sold their property to buy a salon. They are trapped in the “rent-trap” meaning they are working for their landlord, not their retirement.

Renters are stuck paying more for their rent on falling (real) incomes. The number of older people in the private rented sector has doubled in the last ten years and the vast majority of them are people on low incomes renting in the private sector.


“Once the kids leave home”

For retiring sergeant- major Gavin White, what’s critical is getting another job when he leaves the army or face a drop in income of £17,500.

Far from retiring when the kids leave home, he is looking at living on subsistence levels – not exploring the joys of the new found freedom .

For Gavin and Louise to retire at 55 and 60 , they could also consider down-sizing.

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Felicity explains it how it is

At least Gavin and Louise have the option to compromise on the dream.


Juggling as a single parent

Single mother 44 Clare Craig splits her time three ways. There’s no money to save for a pension , no money for a holiday and she can’t see beyond the life she’s not properly living on now.

Two thirds of the people who rely on the state pension in retirement are women and most are single.

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Clare has no option to save

The retirement outcomes of single parents are half the comparables of those who spent an equivalent time in a stable relationship.


Can you afford your retirement- now?

Just over half a million of us are approaching their retirement age this year.

Ivor is one such fellow, at 59 he is still working the clubs on ever diminishing earnings. He’s washed-out by his own admission – what can he do but retire? But he’s too scared to do anything else , because he has nothing to fall back on.

For Gavin White, the option of earning after he leaves the army is now the only option if his and Louise’s comfortable retirement is to happen. Hostile environments not luxury holidays – it’s not what they wanted.

Carol May is a 64 year old cookery teacher who has worked out that there won’t be a time when she won’t go to work. Nowadays she works three days a week which exhausts her- she’s a Waspi Woman.

With 40 years national insurance behind her, she only have a roof over her head thanks to charity. She relies on food-banks.

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Carol is back at work at 64

The problem is partiularly acute to women like Carol – relying on benefits and low-paid work. It’s harder to find and keep a good job as they grow older

 


Big ideas – need big plans

Felicity Hannah points out that for people like Gavin and Louise, it’s not enough to just save for retirement, they need to plan for their retirement.

They don’t just need a pension pot – but a retirement plan – in financial terms an AgeWage.

Gavin and Louise have used the program to create a ten year plan which involves working longer and saving in a purposeful way so retirement expectations are met.

The grim message of the program was that Gavin and Louise appeared to be the only couple over two episodes who had done just this.


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A crisis created by a lack of planning?

So was this two part documentary worth it?

There’s a lot of talk on social media about it focussing on doom and gloom. But in the gloom the gold gathers the light about it.

I found the program has given me a kick up the backside to get back to what I should be doing – “converting pension pots into retirement plans”. So I’ll give the last word to Felicity Hannah

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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6 Responses to Can we really afford to retire?

  1. John Marher says:

    This is not a failure of advice but the folly of imagining that guidance would be a substitute for the sales process.

    Pensions history is littered with failed schemes trying to produce income beyond work for people who struggle to live on current wages and have no capacity to save. Half the population is one pay cheque away from insolvency.

    DB is evaporating as the miscalculations of the past and an obsession with liquidity constraining investment returns and politically motivated to supply the $250 trillion new bond market with victims

    Short term those that care about resolving the current situation might adopt a pensioner gifting the annual £3,000 pa IHT exemption to one pensioner to take them out of the food bank or off the street

    • henry tapper says:

      John, these are aspects of making the solution better, but at the root of the problem is a failure of people to face the need to do some proper planning. I think we can get people planning for themselves and that planning does not necessarily mean making financial plans.

      The advantages of retraining and co-habiting were two of the themes of the second program (for instance).

  2. George Kirrin says:

    I thought the programmes left me with more questions than answers.

    Why does Michael Buerk still have to work into his 70s, for example? What’s wrong with his gold-plated BBC pension?

    What assumptions was Hannah making? People in their 60s and 70s eat and drink a lot less than they do in their 40s, for instance, and cheap travel options open up when you have time and bus passes.

    Typical of media’s excess pessimism when it comes to describing how real people cope with what life throws at them.

    • henry tapper says:

      I take the point about coping; we have the resilience to face tough choices but these have to be laid in front of us. I thought the way that this program confronted couples was excellent and its empathy for those who are finding there is no easy answer was exemplary.

      We face some really tough decisions about saving and spending and this program brought them to the fore. My guess is that Michael Buerk is addicted to the limelight!

  3. Not sure if it’s helpful, but in Australia the Association of Superannuation Funds (ASFA) have defined a “modest” and a “comfortable” retirement standard.

    These are annual budgets for retirement spending, broken down into categories, and are based on research on how much actual retirees spend per year. https://www.superannuation.asn.au/resources/retirement-standard

    It’s referred to a lot in the retirement industry. People can then use that benchmark to figure out how to fund an income to meet their spending needs.

  4. Martin T says:

    Hi Jim

    The PLSA has recently published similar targets for the UK https://www.retirementlivingstandards.org.uk/
    Take care though. These exclude any housing costs and are based on costs outside London.

    Such targets for expenditure are a good starting point to get people thinking but it’s a long way from a spending target in the future, back to a saving target in the present. You have to adjust for housing and other needs, add something for tax, deduct a state or other existing pension, consider life expectancy and annuity rates… It’s too difficult for most people so many will simply ignore the problem.

    I think it would be really useful if there were some accepted rules of thumb that we were allowed to give people without it counting as advice. My saying to someone “If you saved 12% throughout your working life you should be ok in retirement” would be career limiting at present but if that was the publicised reasoning behind an increase in the auto-enrolment minimum contributions, or at least a government supported publicity campaign, then it would help a lot of people.

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