Are we really heading toward an era whereas we know it will no longer exist? Could it be true that the ‘death of retirement’ will sooner or later become inevitable?
It sounds a little on the frightening side, but is nonetheless the prediction made recently by experts from Royal London. The dramatically-titled Death ofreport suggests that in order for younger generations to achieve similar to those of their parents, they may be required to work right into their late 70s, or even their 80s.
The report focuses on what it will take for younger generations to eventually retire with enough money to enjoy good life-quality throughout their retirement years. Its writers worked in accordance with the standard 8% salary contribution, which the UK gov’s automatic-enrolment scheme requires.
“Getting millions more people saving through automatic enrolment is a huge step forward, but many face a cruel disappointment if they think that current minimum contribution levels will deliver them the sort of retirement they are looking for,” wrote Steve Webb, director of policy for Royal London.
“Without significant increases in contributions, we could be witnessing the death of retirement,” he added.
“This report shows that today’s workers are unlikely to be able to secure the quality ofprovision enjoyed by many in previous generations without either working well beyond pension age or contributing substantially more,”
“Even those who save systematically from the start of their working life could face working into their late seventies if they want to replicate the best pensions of those retiring today.”
It’s a pretty worrying notion to say the least, but one that only gets more troubling when considering the main findings of the report.
For example, the report suggests that in order to retire with a pension pot sufficient to provide the individual with two thirds of their income prior to retirement – the so-called ‘gold standard’ – minimum statutory contributions would mean that the person in question would need to work until they were at least 77. If on the other hand the same individual would be happy to live off around half of their income prior to retirement – aka the ‘silver standard’ – this would mean working until the age of 71.
Each of these examples applies to an instance where the individual begins saving when aged 22 years old and continually contributes the statutory minimum 8% without fail until their retirement.
Needless to say, those beginning their retirement savings at a later stage are liable to face an even more unnerving long-term prospect. If an individual of 35 was to start saving with the intention of hitting the pension ‘gold standard’, they would be required to work until they were 79. And if pension savings and contributions didn’t begin until the person was 45, they would find themselves having to continue working well into their 80s to hit the same standard.
It’s once again a stark reminder of the importance of both saving from the earliest possible age, while seeking independent expert advice to gain a better understanding of the long-term retirement options available. Get in touch with theteam today for more information.