Citywire for Financial Professionals
Share this page:
Stay connected:

Citywire printed articles sponsored by:


View the article online at http://citywire.co.uk/money/article/a619422

40% of Brits turn their backs on pension saving

As a nation we are not saving enough for our old age, and it's the younger generation who are falling furthest behind.

 

by Michelle McGagh on Sep 18, 2012 at 15:17

40% of Brits turn their backs on pension saving

Recession-hit Brits are turning their backs on pensions, with 40% failing to save for retirement, and it is the youngest in society who are finding it hardest to save.

According to insurer AXA’s Big Money Index, the number of consumers unable to save for their future has risen by 6% since December 2011.

The index surveys people who fall into eight different demographics:

  • The stretched: 20s to 30s, low income, with few financial assets.
  • Young professionals: mid-20s and 30s, no children, average income, likely to be taking out a first mortgage, low disposable income.
  • Nest builders: young families in their 30s to 40s, large mortgages.
  • Successful security: 40s to 50s, married, above average income, many with second homes.
  • Exclusive lifestyles: mid-50s to 60s, married with grown-up children, mortgage-free, high disposable income with considerable assets.
  • Modest middle years: mid-50s to 60s, older families with financial dependents, average income.
  • Prosperous later years: empty nesters over 60 gearing towards retirement, no mortgage, with average income but high net worth.
  • Under-funded seniors: retired people living in sheltered accommodation, low income and no savings, dependent on the state.

Overall, one in four is not saving for retirement, and 20% are not saving at all. The number of people saving into company pensions and personal pensions fell by 2%, and investment in self-invested pension plans (Sipps) fell 1%. AXA said this shows people are either selling existing assets to pay for retirement or adopting a ‘head in the sand’ approach to retirement income.

A total of 19% are relying on downsizing their home to pay for their retirement, and 20% have stopped putting money into savings at all, a 3% increase since December.

Sacrificing tomorrow for today

Those in the 'stretched’ demographic are struggling the most, with 59% not contributing to a pension and 27% having stopped saving completely, instead simply trying to survive the present.

Andy Zanelli, head of retirement planning at AXA Wealth, said: ‘It is alarming to see how many consumers are failing to invest in their future in favour of surviving the present, with fewer people than ever now contributing to a pension.

‘The current attitude to saving is unsustainable if we are serious about protecting our ageing population in years to come. Rising longevity means that, for many, retirement is likely to be longer than ever before, so planning ahead and taking control of their financial future as early as possible is vital if consumers want to be able to meet their ambitions in later life.’

20 comments so far. Why not have your say?

Codger

Sep 18, 2012 at 17:38

Not sure of the wisdom of relying on downsizing your home to pay for retirement. When you come to do it there may be a lot of people trying to do the same thing and so prices will be a lot lower than you hoped for.

report this

Michael Hellman

Sep 18, 2012 at 17:49

Its easy to down size as a paper exercise but from what I see a lot harder in reality.

report this

abbass hassan

Sep 18, 2012 at 17:52

Is there any choice , I do not trust any one any more , bankers are bonkers and

polticition are liars , best example is Tony ?

report this

A Sick SIPP Owner

Sep 18, 2012 at 18:00

Well, there is saving for your retirement, and there is putting money into a government controlled pension fund.

Government actions are the reason why I have the ARM investment problem - trying to 'manage' the fund within the overnment requirements, and avoiding rediculously high SIPP management charges!

I would reccomend everyone with 'spare' assets to consider their need for something to 'live-on' when they stop getting income from work.

I could not, with a clear conscience advise anyone not getting additional benefit from the 40% higher-rate tax allowance, or employers contributions, to put money into 'pension' fund where the government controls the use and access to those assets, as well as being able to, without prior discussion, take actions that reduce the amount you could take from the fund annually has recently dropped by about 30%, and increase the tax they will take from the fund when you die - it went from 35% ro 55%, so what is to stop it going up another 20% to 75% - or maybe even more!

report this

Garfield

Sep 18, 2012 at 18:16

I for one no longer believe in the traditional pension saving route. Too many rules and regulations and no access to dip in to the funds if you need to for an emergency.

Saving into ISA's maybe a good alternative route if you can afford to. Whilst there's no tax relief at least they are tax free when cashed in, unlike your pension.

It's a mine field out there with so much conflicting information it's a wonder anyone can make the best decision because knowing what that is,

is almost impossible!

report this

Hole Puncher

Sep 18, 2012 at 18:34

We turn our backs to daylight robbery under the name of pension

report this

tatonka

Sep 18, 2012 at 18:52

I'm sure if you explained to a Martian how our pension system works, they would fall about laughing.

European interference (is there still a job for actuaries), UK Government interference, no idea what your "pot" will be worth or what return you might get from it, so no chance of planning.The whole lot disappearing when you die.

Means testing so hard working savers don't get what their profligate neighbours do.

Forget it, spend it all and let the state look after you.

report this

an elder one

Sep 18, 2012 at 19:23

tatonka, bear in mind, we - that is, the proles - are the "state" thus you expect the next generation to look after you; what if they decline?

report this

tatonka

Sep 18, 2012 at 19:47

No, we're merely the mugs who are forced to pay for the "state". We and future generations are being sold down the river, but not by me. If they have an option to decline anything I can think of many things that might come before my welfare in old age.

report this

Anthony O' Grady

Sep 18, 2012 at 19:50

In the first analysis, I take the view that everyone should save for a pension.

For those people in career average schemes or more rare, final salary schemes, they are very fortunate, particularly those in the public sector.

For the remainder, it surely makes sense to try to put something away, and to use the tax breaks which are available, particularly for those paying at the higher rates. However, there are so many households in this country which are so laden with debt that they simply can't afford to pay into a retirement scheme.

As for the young, those who leave school at 16 will generally find themselves in low paying jobs, and given that UK house prices are still far too high (I feel a separate debate coming on) it is all they can do to save a deposit for a house, let alone save for a pension. And for those who went to University they are crippled with debt before they start. For the school leavers at 16, there will be the odd Duncan Bannatyne here and there, and those graduates who become high earners quickly should be able to get back on track fairly quickly. However for most of them they simply won't be able to afford to pay into a pension.

God knows what this country will look like in 50 years time. Worrying, isn't it?

report this

A Sick SIPP Owner

Sep 18, 2012 at 20:53

Save for a pension?

Save in a pension fund, or save outside of a pension fund, both, or neither, are the options!

In a fund - Government controlled, taxed, and you're only allowed a trickle feed from the fund - unless you have a very large fund.

But at least if you're unemployed, or sick, the government cannot insist you spend the savings before you get any benefits.

Outside of a pension fund - and you can take from the 'fund' as you wneed, or even just want. No income tax, No 55% death tax.

Career average - well you will have been 'required' to save a portion of your 'salary' so the pension you get is basically the proceeds of what you saved - less fees and tax etc.

Final Salary - great if you get substantial increments and qualifying bonus's in the last few years - with maybe a double promotion in the last year.

For most in the 'public' sector that is very unlikely - more probably a pay freeze, on the hourly rate, and fewer hours in the last year so the pension will be less than the Career average!

And - as a local government worker, my 'transfer out value' when my work was 'privatised' was less than I would have got doing that job in the private sector.

If you are a higher rate taxpayer, or can get your employers to match your payments into a fund, then it's possibly worth taking the government controlls and taxation on the pension payments.

If it's all your money, and you are a basic rate payer - well, you'll possibly get enough of an uplift to your pension to NOT qualify for benefits such as pension credits, and consequently not get any of the other benefits you would have been 'entitled' to on a basic OAP

House prices too high - well it took me over 15 years working - and no 'holidays' to get a 'deposit' for a 'fixer-up-er'!

Yup - I can now 'do' electrics, carpentry, brickying, plastering, roofing, painting and decorating - and again, no holidays away!

Then again, if someone is that 'poor' they probably couldn't afford the maintenance on a home of their own.

Better off getting housing benefit and all the associated benefits.

Starting work at 16 - well ask people like Sir Alan Sugar

Got a 'debt' from your degree course - well that's no worry until you are actually earning a reasonable wage - and then the repayments will be peanuts compared to a normal 'commercial' loan from a bank.

Consideringg the antics of the recent governments - Gordon taking 10% of the dividends allowing massive charges for 'management' of savings, having inefectual regulation, and not avoiding boom and bust, now this lot taking the pathway he made and 'improving' it into a 4 lane highway of taxation, as a 'pensioner' living on the proceeds of my own savings I don't have to wait 50 years to be worried.

Just a spreadsheet showing the probable future value/costs of current income and 'required' expenditure for the next 5 years would be enough to induce a panic attack - but not having private medical insurance (premiums taxed, staff salaries taxed, insurance and the caring organisations expenditure and profits taxed) I daren't sucumb to experience the care from the local NHS facility - anyhow I can probably get the painkillers I'd be prescribed cheaper off prescription.

report this

Roger Savage

Sep 18, 2012 at 22:05

When everything is geared towards easy credit and buying what you can't afford tomorrow today, is this any surprise to anyone?

report this

Anthony O' Grady

Sep 18, 2012 at 22:48

Fair comment Roger. To put it quite simply, many people, through a misplaced sense of entitlement, have been living lifestyles which in reality were well beyond them. So what made it possible- ah yes, mortgage equity withdrawal. Works well whilst asset prices are rising, but not so well after a major banking crisis. During the years of plenty, many people didn't give a flying f)£;:k about paying into a pension, they were too busy buying things that they didn't really need.

With regard to those youngsters who chose higher education, a simple observation. Over the last ten years we have been shunting off ever increasing numbers of eighteen year olds to University. Courses ranging from PPE at Oxford to Media Studies at Huddersfield Poly (as it used to be called). Thousands of these students are now either unemployed, or are working in low paid jobs that they could have got without the degree. Obviously this depends where one is on the scale, and presumably the PPE graduate fron Oxford has landed on his/her (don't forget diversity) feet.

The point is that we are creating a generation of young people with lots of debt at the start of their working lives, who find themselves in an economic environment which offers them nothing. Each year thousands more are coming off the conveyor belt. When these people ever get to the stage when they can save anything into a pension, lord only knows.

report this

Oddjob

Sep 18, 2012 at 23:21

That 40% of Brits turn their back on pensions saving is no surprise when you consider the absurd charges, taxes and low annuity rates associated with a money purchase scheme. Groups have been lobbying parliament for decades for a change in the legislation to allow a reasonable pension to be taken and possibly leave something in one's estate. However, the opposite happens and the financial services industry make more profit and, I guess, the politicians get bigger bungs. There is no way any sane person could recommend that a young person puts any savings they can make into a pension scheme. Save they must, but not into any 'official' scheme, that route will only lead to madness, extreme poverty and a death by starvation in the gutter.

report this

Anonymous 1 needed this 'off the record'

Sep 18, 2012 at 23:36

Crippling taxes and now a further disguised tax in the form of all in government pension sheme should take little understanding as to why the average man in the street cannot save for retirement.

Let the government look after you when you too old to work, you have paid it enough....

report this

ShareCrazy

Sep 19, 2012 at 08:38

I have placed a considerable sum into my pension and have worked in the private sector all my life with no employers contribution. With all the charges and poor performance I am on target to get £5k a year income, shocking and very depressing. A few years ago this was £10k per annum (still nothing great) - I have reduced my contributions and will stop contributing entirely shortly as this clearly does not work and I cannot recoup my losses.

Even the benefits of dividends were taken away by the last labour government, so I am afraid I believe no-one in saying this is the correct thing to do, you might as well just spend the money and claim off the state in future.

report this

Garfield

Sep 19, 2012 at 09:56

Is there anyone out there who has anything positive to say about pensions? Surely there must be some positive aspect to the pension route even though I can't think of one myself!

report this

abbass hassan

Sep 19, 2012 at 10:54

Yes , buy to let . get it cheap , rent it out and managed your self , you will and should get about 7% / 9% . Gold should be soon going up , rare whisky on the up , some farm land are as well very cheap , always keep cash on the side by buying premium bond , I won twice now and look forward to it every month , why not go to auctions or ebay and get some good bargains and sell them later on .

report this

Michael Hellman

Sep 19, 2012 at 11:08

@ abbass all that is great to do when young, but people I see who are older do not have the stamina for such enterprises, and so rely on the armchair approach to life, whether they are to be pitied or otherwise, it seems to be a fact of life and so need a later life income that does not give the impression that it is robbing one.

report this

abbass hassan

Sep 19, 2012 at 12:29

Hi , my father in law is 91 years and he still deal and wheel , retired at 65 but still kept buying and renting , retire but you can still be active , window cleaner ,

gardner , enjoying life no just sit and watch tv?

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

Sponsored By:

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add noreply@emails.citywire.co.uk to your safe senders list so we don't get junked.

Latest from Investment Basics

Read more...

Aviva agrees £5bn deal to buy rival Friends Life

by Daniel Grote on Nov 21, 2014 at 18:16

Sorry, this link is not
quite ready yet