I’m tired of statements made about our generation facing a less secure future than those who have retired. This headline is a roundabout way of saying that flexibility is what our retirement saving’s pot should buy us.
We always think that we are less secure than previous generations. But we’ve got no proper gauge of this. 15 years ago, no one could have guessed they might be paying income tax on their state pension because the pension had increased so much
We all think we are the first generation to have tough decisions about retirement as if we had uniquely as generations go, inherited uncertainty while our parents had all the security. We actually have much more certainty about our retirement future, we know what’s going to happen and want a means to hit targets based on our current standard of living.
People live longer and healthier in old age. The long term care needed is because we live longer. There are demographic changes to do with our health that allow us to work longer and retire later. People understand this and accept that state pensions now get paid from 67 , not the 65 that they were promised if they set out as men last century. It is worse for women who could take state pension at 60 until recently.
People are living longer , have different needs in later life (typically healthcare needs) and most people want to have target dates set for them. I know this as I’m a few weeks from being 65 and so can speak with a certain amount of experience of thinking about work.
Standard Life’s Centre for the “Future for retirement” has a different view of retirement than my experience. In an article in the trade press they argue
Retirement planning often begins with an end destination. Most people have a target age, projected pot or annual income in mind. These benchmarks can make a distant future feel more real.
But they can also suggest a predictable route to get there, whereas real life is a lot less linear. Careers change; people take time out to care, retrain, become self-employed, reduce hours or retire gradually. The social maps inherited from parents and grandparents no longer match the terrain. A model built around one fixed endpoint risks giving people an outdated roadmap. Retirement support needs to reflect how people actually live, not how the system assumes they do.
I must push back on this. The options to be self-employed, retire gradually and take time out to help parents and children have been around since the second walk and I suspect were there before. What has changed is that we are now more self-sufficient because of the pension system, certainly more self-sufficient than old folk were before 1945 and the introduction of welfare as we know it today.
We are now far from the days when the security of knowing when you could retire was introduced to a point where we think we no longer want or need a pension. This may be true for certain people who drive around off road but most of us stick to the road on the map.
Of course we want to know that we can take detours, we can retire early with a lower pension, or later with a higher pension. We can take care of our family with our pension or live off someone else’s pension (so long as love remains). But we want to know what’s coming our way as a wage in retirement, both from the state and from work. That’s why absolute freedom that George Osborne promised us , has not worked out for people like me. I have the freedom of a pot but I don’t want it. I want the freedom to enjoy with a decent wage (and some tax-free cash) to pay the little and big bills. I still remember being told that my wage in retirement should be two thirds of my average wage before I stopped working.
Despite the craze for personal responsibility introduced in the 1980s with the personal pension, most of rely on a state pension and an occupational pension. We still expect a reasonable wage in retirement based on what the state pension offers and a second pension from work.
We still have our state pension age to look forward to. A retirement wage is a regular amount of money coming into our bank account each month , a wage increasing with inflation till we die.