Pensioners are relying on the state
07 July 2010
The Irish World
A recent survey makes frightening reading for those with no income provision, write KEVIN CLANCY
According to the ‘Office of National Statistics, a third of UK pensioners rely solely on the state for income during their retirement years. These pensioners had no provision other than the state pension and top ups through minimum income guarantee or pension credit.
These figures were from the ONS Social Trends survey for the period 2007-8 which have just been published.
Within these statistics, single women had to rely on state provision (42%) more than men (31%) or pension couples (19%).
The majority of people thought it the responsibility of the state to ensure that they are financially stable in retirement.
Herein lies the problem. Of the £136bn budget for the DWP, 60% goes on state retirement benefits; the remainder is for disability and child benefits.
This situation will only get worse as the percentage of the population aged over 65 rises.
The tax payer cannot carry this extra burden. It is therefore the responsibility of the individual to make provision for themselves and the government to only provide minimum support.
Rightly the government has recognised that employers have to bear some of the cost of retirement provision and that employees will be forced through their payroll to make pension provision. This will start to happen in 2012 for larger companies, and over the following three years will be extended to all employers.
The amount individuals are saving has also dropped dramatically over the past few years. Many got caught up in the frenzy of spending, thinking the boom years would go on for ever. That’s a hard lesson learned.
Over the last year, there have been indications that the amount of personal debt has gone down as spending has reduced and loans are starting to get repaid. We all need to save more – not just for retirement, but to protect ourselves from unforeseen circumstances.
Within this column I continually advocate that everyone should be contributing to a pension if they can afford to do so. The tax advantages can not be beaten.
If you have several different pension plans, it may be better to amalgamate them in order to ensure that they are more cost effective. It is always a good idea to review at least every two years the funds that the pension is invested in.
For those under 35, the prospect is that they will not get a state pension until they are 70. Already, the government is increasing the retirement age for men to 66 as early as 2016. For women, this will be the case a few years later. Those that are in jobs with heavy workloads will find the increased age of retirement difficult. They may not be physically able to do such work!
We must all address the problem about income in retirement. Pensions may not be your preferred solution; rental property or investments could be your choice. Whatever the situation, the earlier we start planning for what could be a third of our lives, the better.
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