-Caveat Lector- [No such worries Stateside. How nice. ]
http://www.observer.co.uk/cash/story/0,6903,651342,00.html Retirement's no joke We don't want to scare you, but... Britain's pension system is in a mess, leaving millions to face an unhappy retirement. Maria Scott reports Sunday February 17, 2002 The Observer Britain's pension system is in crisis. The closure of blue-chip company schemes to existing employees is just the latest assault on a rickety mechanism of Heath Robinson complexity. Today, we launch a campaign aimed at persuading politicians and industry leaders to engage in a renewed debate about retirement provision. There are problems in practically every area of the pension system: @ The basic state scheme is being reshaped to rely on means testing and there is to be a new top-up state scheme of mind-boggling complexity. @ The Government's stakeholder scheme has failed to attract its target audience @ Increased longevity is coinciding with shorter working lives @ Stock market returns are falling just as individuals are being steered towards investment to provide for retirement @ Confidence in the private sector has been undermined by the Equitable Life disaster and by high charges and poor returns @ Employers are pulling back from high quality pension provision and in some cases reducing contributions. Abbey National became the latest to announce last week that it was to close its final salary scheme to new members @ The private and state schemes are constantly subjected to change. One calculation suggests there are now more than 20 different kinds of private pension schemes @ Public sector schemes are facing funding crises that will put council tax bills under pressure. Until now, much debate about pensions has concentrated on the need for individuals to save more money for old age. But the sums demanded will be impossible for many people to achieve unless there are radical changes in lifestyles - which would curb consumer spending -or there is a stock market boom of unimaginable ferocity. A pension fund worth nearly 300000 pounds is now required to buy a 60-year-old man a pension of about 22,000 a year. This assumes no inflation proofing, and no pension for a spouse. Including these frills roughly doubles the cost. Conventional wisdom in the pensions industry suggests that, as a rough guide, you should be saving a sum equivalent to half your age in order to build a decent pension: for example, 40-year-olds should be saving 20 per cent of their salary to provide a retirement income equivalent to at least half and preferably two-thirds of earnings at retirement. For a 40-year-old on national average earnings of around 30,000 pounds this implies a monthly saving of 500 pounds. Any contributions made by an employer can count towards this cost and tax relief on contributions assist. Even so, most people look on such sums with horror. There is palpable concern in the population about pension provision. Certainly letters to Cash reflect anxiety about providing for retirement, but also a sense of helplessness, anger and frustration in the face of investment industry scandals (see below). Many young people now put pensions at the top of their list of financial planning issues even though they should first be paying off debt accumulated at university. But many people are unaware of how their saving is failing to keep up with their increasing life expectancy. A Mori survey of company scheme members last year for actuary Towers Perrin showed that 88 per cent of employees expected a secure, stable retirement, or better. They thought that a pension of half their salary at retirement would be sufficient to live on but Towers Perrin says that fewer than half are saving enough to achieve this goal. Robert Ivey, its head of financial planning, says:'People have to adjust their expectations. We have much higher expectations of standards of living in retirement than previous generations.' The result will be longer working lives and the Government has been warned that it must raise the statepension age from 65 to 67. Ivey says: 'It seems to be pretty well accepted that retiring at 60 is for the favoured few. At some point the Government has to address this. One of the things that would have come along if the Government wasn't diverted by the NHS is that they would be thinking more seriously about compulsory contributions to stakeholder pensions.' Last week there was speculation that the Government was prepared to rebuild state provision from scratch although this was denied by the Department for Work and Pensions. But former Pensions Minister Frank Field says that the Government 'should be panicking' about pensions. Over these six pages we look at the crisis in company pensions, outline the disenchantment with the private sector, review the options for providing for retirement yourself and reveal the complexity of the new state second pension. Next week: What should be done Guardian Unlimited › Guardian Newspapers Limited 2002 __ <A HREF="http://www.ctrl.org/";>www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance—not soap-boxing—please! These are sordid matters and 'conspiracy theory'—with its many half-truths, mis- directions and outright frauds—is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. That being said, CTRLgives no endorsement to the validity of posts, and always suggests to readers; be wary of what you read. CTRL gives no credence to Holocaust denial and nazi's need not apply. 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