Martin Weale, an expert at the Bank of England, has predicted that millions of workers will be forced to rely on their children’s money to live after they retire.
Weale said that Britain has had “a long history of not saving enough” and that at the moment the situation is worse than ever. He urged workers to start saving more for their pensions fast.
“Eventually, people and particularly old people will be disappointed by their living standards”, he said. “It is quite likely that this will create pressures to transfer resources from young people to old people, reducing the consumption of the former to support the latter”.
Higher tax for the young
If Weale’s predictions are correct then children will have to pay for their parents to be able to retire. They will also have to pay increased taxes to ensure the government can pay to support pensioners with no savings.
“Our saving record would have made sense only if we either planned to retire much later than most people do, or could be confident of earning the sort of returns delivered to successful investors in Doncaster’s most famous horse race [the St Leger]” Weale said.
The Office for National Statistics have released data showing that private sector workers with company pensions hasn’t been this low for 50 years. Only 14% (3.3 million out of the 23.1 million private sector workers) currently have company pensions.
The Office’s Pension Trends have found that in the United States the number of citizens with good pensions are higher than since records began. The US public sector is made up of 6.2 million and 5.4 million, or 90%, have a company pension.
Increased life expectancy
With the increase in life expectancy 25% of children being born today will reach the age of 100. This is another incentive for the government to improve pension saving. From next year it will be mandatory for employers to pay into their worker’s pensions.
A stakeholder pension is one of the best options available to those trying to save for retirement. For help working out the best possible pension a pension or annuity calculator are great products.