While an excellent discussion of how to improve the income people get from saving for a pension was taking place with Jonathan Stapleton, a range of commentators were lining up to bemoan the ignorance of the public.
The Pensions UK report gave licence to financial reporters to run stories about the impending crisis facing most of us
There will of course be a few Times readers staring at the picture above and smiling with the couple. The numbers have been advertised on this blog this week, but here they are again
A comfortable lifestyle is even harder to achieve, with just 9 per cent of savers on track for the £45,400 a year post-tax income required, according to Pensions UK said. This figure was up from £43,900 last year. A couple would need £62,700, up from £60,600.
The comfortable income would allow £78 a week for food, £22 a week for takeaways, a three-year-old small car replaced every five years, and a two-week four-star holiday in the Mediterranean, as well as three long weekends within the UK.
Someone hoping for this level of retirement would need a pension pot of £845,000, assuming they used it to buy an annuity, combined with the state pension.
The article I kicked off with is from Holly Roach of Professional Pensions and contains laments over our lack of saving from the Work and Pensions Select Committee’s Debbie Abrahams. I hope she will look closely at how our saving could be more efficient. The Department of Work and Pensions last autumn claimed that CDC could push pension income up by up to 60%. What with the positive impact of the triple lock, the Government’s story is positive.
You wouldn’t think it reading what follows from WTW and LCP – (pension consultants) or from insurers including Standard Life, Legal & General and Royal London. Lawyers Travers Smith point out that the forthcoming Pensions Dashboard will make the state of our retirement finances only too obvious. The Times finishes with comments from the insurer Fidelity.
Why aren’t we all pension millionaires?
As well as the annuity to buy us a lifetime income of £44K , we need the state pension (worth at least £250,000 as its price to buy through an annuity broker). So the pension millionaire will be comfortable with a 4 star holiday, a small car and a couple of breaks in the UK to while away retirement.
We aren’t all pension millionaires because – unlike countries like the Netherlands where replacement income in retirement is 80% of working pay, we don’t take pensions seriously.
We think that DC pots can substitute for a lifetime real pensions (“real” meaning inflation protected).
Despite the plethora of brains on display in these two articles there is no admission that the reason we’ll be skint in retirement is the fault of the people quoted. It is obvious to the general public that those who have been tasked to do the best with the money we give them , have failed to turn their contributions to pensions.
The reality is not as the pension adverts show us. Those two folks smiling as they look at the laptop are not representative of those reaching pension age, well not the ones I know.
So long as we blame savers for their lack of foresight, we ignore the harsh reality that we’re selling pots as pensions. So long as we let people think their pot is their pension, many of us will continue to be deluded into thinking that the adverts are right.
