/ Money

Are we all heading for pension poverty?

Broken gold egg

If yesterday’s report into the state of our pensions is to be believed then the answer is ‘yes’ – unless some dramatic changes are made, and fast. But will the recommendations be enough to save our paltry pensions?

‘Too many people are stuck in a complex, costly and inefficient system that relegates the consumer’s interest to second place. On top of that, they simply aren’t saving enough to secure a decent retirement.’

Not my words, but those of Lord McFall, leader of the Workplace Retirement Income Commission, which issued its final report yesterday. He also said:

‘People need to get more bang for their buck, or they’re not going to bother with a pension. Instead they’ll end up spending today, ignoring tomorrow, and scraping by in poverty on the state pension. We cannot stand by and let that happen. The complacency of many in the pensions industry is alarming.’

The future isn’t bright

The independent body paints an alarming picture of the state of things to come. It highlighted the contrast between defined benefit (or final salary) pension schemes, enjoyed by many who have already retired, with the less certain (and less generous) defined contribution schemes that most people in the private sector are offered today.

The report warned that many are paying in too little – and that 14 million aren’t saving for a pension at all!

The situation should improve in 2012 when those who don’t have a workplace pension are automatically enrolled into one. But even then, McFall is concerned that the minimum contribution level of 8% of your salary (from both you and your employer combined) still won’t be enough for retirement.

He is also worried about high investment charges, insisting that these should be capped at 1.5% for the first 10 years and 1% thereafter, and at the deal we get when we turn our pension pot into retirement income. Securing a better outcome here is something Which? has long supported.

Are you positive about your pension?

There are 16 recommendations in all – but generally the Commission’s message is clear- the time bomb is ticking loud and clear for those who have yet to retire.

Shopping around for the best rate is clearly beneficial, but only one third of people currently switch their pension provider. Our research suggests the difference between the best and the worst standard rates can be as much as 10% a year. For those with a medical condition the potential loss is even greater – an enhanced annuity might pay out 40% extra.

How do you feel about your pension arrangements? Are you confident you’re saving enough and do you know how much income you might get? If you’ve already retired, do you feel as if you’ve hit the jackpot – or is talk of a ‘golden generation’ over exaggeration?

Lord McFall has thrown down a challenge to government and the pension industry – many of our futures depend on whether they will they be up to meeting the challenge.


It is nearly impossible to save enough. We work for roughly 40 years, and then now live for 40 years on the pension. This is an impossible formula unless we have major investment growth without major inflation.
The industry has taken too much commission from pensions, and expects to talke lots more. Gone are the days when the company directors managed the funds as part of the company scheme, with zero overheads.
Now looking with my fund as to how to improve on drawdown to avoid poor annuity rates.


The Government & country will suffer severely if reduce Teachers Pensions as one of few attractions to the job with such a paltry salary.

ex teacher says:
3 August 2011

Sorry but I think the salaries now for teachers are excellent – you need to look at the real world, many people have to exist on an annual salary between 13K to 17K.


Give up teaching and try your luck in the real world, if you can.
Teaching, even with a reduced pension (but still much better than in the private sector) will very quickly start looking pretty good again.


I am ex teacher with a post targeted out with Thatchers Cuts surviving on a pension based on less than those who were entering the profession in 1996 . Since done a BA 2001 & MA 2003 in real world which financed myself finding Union NUT is a call centre looking after own interest when Government medical targetting not giving antibiotics which was a clear case of DISABILITY discrimination ?!! In fact caused cardiac arrest 6 years ago because they are all ignoring Chronically Sick and Disabled Act 1970 regarding access to the medical & social .Needless to say although retired my work concerns age & identity & how one is viewed by system as one ages ” I am rapidly becoming a spectre ” Roland Barthes linking photography to fine art paintings Impressionism Abstraction utube9773165. No wonder the below is no longer teaching?

cynical says:
3 August 2011

Given that MPs are public employees? are they subject to the same austerity measures. ie. redundancies, cuts in their pension benefits?
Can people really be expected to contribute large amounts of their income over many years when there`s no guarantee of anything at the end of it, apart from that is the people running most of these schemes will have done very nicely out of them.


If the Danish or German pension funds are better than ours, why don’t we invest in them?

Does any one know? I have a French back account and French insurance, previously I had the French equivalent of a unit trust, but sold it. It could be a great business opportunity for a finance company

Is this something the researchers at Which could investigate?


Not cynical at all. Note how well the MPs protect themselves financially. It would be interesting to see a comparison of all Government pension schemes. I bet the MP’s will be the best.

Notice how quiet this subject is. The BBC and the press never seem to comment on the very generous MPs salaries, allowances and pensions. They just use teacher’s or government workers. Come to that, the BBC have quite generous pensions too I believe.

Antrich says:
3 August 2011

One will only ever get out what one has put into the system! It has been more than obvious over several decades, that we were getting far too much for what we put in, but what we put in was, to a degree, governed by Statutory Legislation. Therefore, this mess is down to our Elected Representitives who failed to keep their fingers on the pulse. I can’t see any alternative other than we will have to pay for their errors ……….. and we elected them into that Office. Why, for instance, was