For many young workers it will be a case of lose out now and put more money in their pensions fund or lose out later and work for longer. As stated by the study The Death of Retirement, young workers will be forced to work non-stop from the age of twenty-two into their late seventies if they wish to contribute the statutory minimum of 8% (The minimum auto-enrolment requirement from April 2019) and aim to achieve the same level of pension as their parents.
The report found that an individual who earned the national wage of around £27,600 and contributed the statutory minimum, would need to work until they are 77 if they wanted to enjoy the ‘gold standard’ of 67% of pre-retirement income. For an index-linked pension with no survivor benefits, an individual would need to work to at-least 76 years old. Disregarding the benefits of inflation protection and provision for spouses, the individual would still need to work until the age of 73. If an individual wants to live on the ‘silver standard’ of 50% of pre-retirement income, they will need to work until the age of 71 for an index-linked pension with and without survivor benefits.
The retirement age is 67 for a level pension. If an individual was to start contributing at the age of 35, they would need to work until the age of 79 for a gold standard pension. Furthermore, if an individual was to wait until 45 to start contributing, they would be working well into their eighties. For an individual who waits until they are 35 to start contributing, the retirement age goes beyond the national life expectancy by a considerable distance. The other option is of course to save. It was estimated by Royal London that those aiming for a gold standard pension with protection against inflation through retirement would need to contribute around 20% of their gross pay throughout their working life.
Where Defined Benefits (DB) was the leading form of workplace pension in previous generations, the growing cost of such a scheme, the rise in longevity, the increase in regulatory burden and the reduced investment return has resulted in the decline of the DB’s popularity (According to Royal London). It was added that while DB pensions were not superior to Defined Contributions (DC) pensions, the switch to DC involved moving to a scheme where the total amount being contributed was substantially lower than in the past. When asked for his opinion, one professional involved with Intelligent Pensions said that previous generations had it good with Defined Benefits but didn’t realise how much of a perk it was because it was common practice to adopt a DB pension scheme. He went on to say that auto-enrolment was ‘a drop in the ocean’ but it is better than nothing.
When the statutory minimum does rise in 2019, it is abundantly clear that people will have to save considerably more money, compared to earlier generations, if they want to share the same luxuries when they retire.
For many young workers it will be a case of lose out now and put more money in their pensions fund or lose out later and work for longer. As stated by the study The Death of Retirement, young workers will be forced to work non-stop from the age of twenty-two into their late seventies if they wish to contribute the statutory minimum of 8% (The minimum auto-enrolment requirement from April 2019) and aim to achieve the same level of pension as their parents.
The report found that an individual who earned the national wage of around £27,600 and contributed the statutory minimum, would need to work until they are 77 if they wanted to enjoy the ‘gold standard’ of 67% of pre-retirement income. For an index-linked pension with no survivor benefits, an individual would need to work to at-least 76 years old. Disregarding the benefits of inflation protection and provision for spouses, the individual would still need to work until the age of 73. If an individual wants to live on the ‘silver standard’ of 50% of pre-retirement income, they will need to work until the age of 71 for an index-linked pension with and without survivor benefits.
The retirement age is 67 for a level pension. If an individual was to start contributing at the age of 35, they would need to work until the age of 79 for a gold standard pension. Furthermore, if an individual was to wait until 45 to start contributing, they would be working well into their eighties. For an individual who waits until they are 35 to start contributing, the retirement age goes beyond the national life expectancy by a considerable distance. The other option is of course to save. It was estimated by Royal London that those aiming for a gold standard pension with protection against inflation through retirement would need to contribute around 20% of their gross pay throughout their working life.
Where Defined Benefits (DB) was the leading form of workplace pension in previous generations, the growing cost of such a scheme, the rise in longevity, the increase in regulatory burden and the reduced investment return has resulted in the decline of the DB’s popularity (According to Royal London). It was added that while DB pensions were not superior to Defined Contributions (DC) pensions, the switch to DC involved moving to a scheme where the total amount being contributed was substantially lower than in the past. When asked for his opinion, one professional involved with Intelligent Pensions said that previous generations had it good with Defined Benefits but didn’t realise how much of a perk it was because it was common practice to adopt a DB pension scheme. He went on to say that auto-enrolment was ‘a drop in the ocean’ but it is better than nothing.
When the statutory minimum does rise in 2019, it is abundantly clear that people will have to save considerably more money, compared to earlier generations, if they want to share the same luxuries when they retire.
Tom Brown