Downturn hits pensions savings

It has been suggested following recent research that the economic downturn and financial meltdown that has been seen over the past couple of years has had a serious negative impact on pensions savings amongst consumers in the UK. Many have found themselves struggling to make ends meet financially, and this means that they have had to make other financial sacrifices, which for some has meant their pensions provisions.

Scottish Widows, the pensions and life insurance provider, carried out the research and according to the results of the study there has been a fall of around 6 percent in pensions savings over the past year, with the total now falling to 48 percent. This is said to be the lowest it has been since 2006.

The study showed that 41 percent of people said that the reason that they had been saving less – or saving nothing in some cases – was due to the economic downturn. Women aged fifty and over were found to have been worst hit, and whilst 52 percent of women in this age group put enough money aside for retirement last year this feel to just 38 percent.

Officials from Scottish Widows said that the effects of the global financial crisis were only just starting to affect the pensions savings market even through the crisis began back in 2007. Many people were found to be failing to put any money aside at all for their retirement, including many of those that were nearing retirement age such as the over fifties age bracket.

An official from Scottish Widows said: “The whole nation is feeling worse off than a year ago and this is really starting to take its toll on pensions savings. While there are signs that the economy is recovering, the nation’s saving habits paint a very different story.”

Firms will have to stop forcing pensioners to retire

In his recent pre-election budget speech the Chancellor of the Exchequer, Alistair Darling, indicated that the Labour party was looking at scrapping the default retirement age, which would mean that firms would have to stop forcing pensioners to retire at the legal retirement age of sixty five.

At present firms can use their discretion with regards to retirement of workers that reach this age, but whilst they can allow them to continue working they can also refuse to allow them to continue to work should they wish to do so.

Under new reforms, should they go ahead, firms would have to allow workers to continue working if they want to. Alistair Darling indicated in his budget speech that the Labour party would either scrap the default retirement age or would increase the retirement age. He also indicated that the party was looking at giving older workers more rights with regards to being able to get more flexible working hours and conditions from their employers.

A number of campaign groups and charities have said that having the current retirement age in place is discrimination, as it means that older workers that feel perfectly capable of continuing to work could be forced to retire by employers simply because of their age, regardless of their abilities, health, and other factors. However, some believe that the plans will cause concern for some businesses who do not want to be stuck with older workers that refuse to retire.

In his budget speech Alistair Darling stated: ‘To enable people who want to work longer, we are consulting on reform of employers’ right to make people retire at 65. We are looking at options which include scrapping the default retirement age, raising it or giving employees stronger rights.’

Possible further increase in pension age

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How does your future retirement look?

Most of us look forward to a comfortable retirement when we eventually reach out golden years, and we all want to be able to spend time travelling and seeing the world, spend quality time with loved ones, and do the things that you simply cannot do when you have work related commitments. However, many of us tend not to bother thinking about how we will fund our retirement when we are in our twenties and thirties – after all, retirement seems such a long way off at that stage. But the years soon catch up with you, and many people may find that they are suddenly thundering towards retirement age with no real plan in place to fund a comfortable retirement. Read more

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Start saving if you are under forty

According to a recent report younger consumers in their twenties and thirties have become so reliant on credit that many are simply spending all of their money on frivolous spending or repaying debt rather than putting money away for their future.

Twenty and thirty-somethings are now being urged to put money aside into savings or investment for their future to reduce the risk of being left without an adequate retirement fund when they reach retirement age.

The government’s state pension has declined over the years, and with increased life expectancy and higher living costs to also consider younger consumers now need to start thinking about their future in terms of how they will manage financially.

Historically, most people in their twenties and thirties tend not to think much about mortgage provisions, but this has become an increasingly important consideration for the younger generation if they wish to enjoy a certain standard of living when they come to retirement age.

One official advised younger consumers to start putting money into savings or an investment fund as early on as possible to ensure that they had a tidy sum available for when they retire. Increased life expectancy means that consumers must put aside more money to cover the cost of living after retirement, and this has made it even more important for younger consumers to start putting money aside as early as possible.

Consumers in their twenties and thirties are advised to cut back on their frivolous spending, try and avoid getting into further debt, and start putting money aside on a regular basis. Many younger people are wasting a small chunk of their income each month on repayment of interest on their debts, all of which could be used towards saving for the future.

Tom Smith
5th November 2007