The UK is heading face-on into a Pension Crisis, and it is going to affect us all, especially if you are above the age of 26. The problem is - a majority of us are relying on the state pension to provide us with an income that will allow us to live a comfortable lifestyle when we retire. Very few people take time to really think about the standard of retirement they want to achieve, or more importantly, the standard of retirement they are actually going to get.
- Spoiler Alert -
The state pension is not going to provide you with a comfortable lifestyle that will allow you to enjoy a basic retirement lifestyle
Think about the current state of the UK and our retired population. How many times do you see the media covering stories relating to elderly poverty? Older generations unable to afford basic costs such as heating their homes, or are forced to rely on food banks to feed themselves?
If we as a nation do not start talking about pensions and planning for our retirement, many of us will fall into this unfortunate group of pensioners when we reach what should be a well earned comfortable time in life. If this isn't enough to convince you to get smart now, think about how this will impact your children and loved ones? It is likely your children will be burdened with covering basic costs to support you when you retire, - and no one wants to put this on their loved ones.
So what Is the Pension Crisis?
In a nutshell, the pension crisis centres on how many of us will have inadequate retirement savings to provide us with enough income for a basic quality of life.
Many people are living longer, which increases the pressure on both state and private pension resources. But many are not paying enough attention to later in life and prefer living in the now moment. It is this conclusion that is leading us down a very large pension black hole that will lead to staggering numbers of future elderly populations living in poverty.
Born to Fail!
If you take a look back at the history of retirement planning, you will see there has never been a stable system that encourages or forces us to save and plan for our retirement. Its just not a very sexy and urgent issue that the government or general public seem to think of as a priority.
That said, since 2019, the government have now started to improve the chances for future generations of reaching a lifestyle that will provide them with a basic quality of life, but this is only going to help those younger generations who are starting out in their working life. Much more work is still required to ensure future generations are able to afford a better retirement, and for those of you that are in their early 20's ... taking action now will massively boost your retirement fund, and even provide you with a rather comfortable lifestyle.
The downside to anyone who is in their 30's or older is the impact of compounding. This is where time really does equal money. The longer you have to invest money, the longer the fund can grow through compounding and accumulation.
Those who are aged 26 years or older have fallen into a devastating pension void in which little provision was offered during our early working life. As a result, playing catch up is going to be a lot harder for us.
A report from the Institute for Fiscal Studies in 2021 noted that nearly 50% of individuals aged 45 and older are not saving enough to maintain their pre-retirement standard of living. This widening gap between longevity and savings creates significant fears for the future—many may find themselves unable to cover basic needs once they stop working.
As life expectancy rises and economic uncertainty looms, many people face tough financial futures. Note on the graph above, in 1900 - the average life expectancy was around 50 years of age. Forward to the year 2000, and the average life expectancy is now around 78 years of age. As life expectancy increases, so does our need to provide a reasonable income to provide us with a comfortable lifestyle that we can enjoy.
Females are at an even bigger disadvantage when it comes to retirement planning - read more here to find out why.
Is your pension portfolio worth at least £260,000?
Statistics show that a significant number of Brits do not save adequately for retirement. The average pension pot is around £50,000, which falls far short of the estimated £260,000 needed to sustain a comfortable lifestyle in retirement. Financial literacy plays a crucial role here—many people do not understand how much they should save or how to grow their savings effectively. This often leads to pension funds being left to the mercy of their employer and pension provider to decide how their pensions are invested!
Unfortunately these default schemes are often designed to be a one size fits all and will not give you the maximum return.
The good news is there are many actions you can grab hold of to improve your future potential and make some simple decisions to make your future retirement more comfortable.
DO NOT rely on the state pension to be your main source of retirement income
While the state pension serves as a safety net for many retirees, recent changes to eligibility and payment structures raise concerns. The state pension age has increased to 66 years old currently, and for many individuals, this means working longer before reaping the benefits of their contributions.
Moreover, the state pension may not provide sufficient funds to sustain even modest living standards. While the government aims to reform the system for sustainability, relying solely on state support can leave many pensioners in precarious situations.
Taking Ownership of Your Future
Understanding the UK pension crisis is vital for anyone interested in a secure and stable financial future. Although challenges are significant, individuals can tackle the situation head-on with informed actions. By learning about various pension options, and prioritizing savings, everyone can contribute to building a more stable retirement for themselves regardless of their age.
The pension crisis is a challenge, but it can be managed. With knowledge and action, individuals can prepare for a future that allows them to enjoy their retirement without financial worry. Every informed decision counts towards a secure financial outcome.
Now that you are aware of the seriousness behind this crisis, please feel free to use this website and learn about your pension health and what you can do to improve it.
That's why I made this website - to share the knowledge I have gained whilst myself learning to take control and manage my own future retirement. The aim of this website is not to tell you what you should do, or where to invest your portfolio, but to give you awareness over the important aspects of owning a pension, and what options you need to consider to maximise your return.
I do not receive any sponsorship income and will not promote any service for financial gain. I simply want to help raise awareness and empower everyone in the UK to improve their quality of life when they reach their well earned retirement age.
Please remember, this is not to be taken as financial advice as I am not a registered or trained financial planner. If you have any doubts over what you should do with your money, you should always consult a registered financial planner who is regulated with the FCA.
More information can be viewed on the .gov website here: https://www.gov.uk/government/publications/joint-service-housing-advice-office-leaflet-index/choosing-a-financial-advisor
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