/ 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?

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 no fund set up into which our pension monies were paid into. Mind Messrs Brown and Co would have raided them!

Retiree says:
3 August 2011

I have worked hard in the private sector and have saved into various pension schemes for more than 40 years only to find that the recent recession caused be irrisponsible greedy bankers and half witted politicians have eroded the value of these. To make matters worse I now have to buy an annuity with the bits I have left whilst annuity rates are now at amongst their lowest values ever, and still dropping. I cannot buy a pension that is index linked because this will reduce the small amount I will get by half. Who is going to subsidise my pension?
I have nothing against teachers and all those in the public sector getting good index linked pensions, but I do resent the fact that the tax I will still pay on my paltry pension is going to subsidise their pensions.

I remember under Thatcher’s Cuts when it was common knowledge that MPs would not take a pay rise but adapt expenses – obviously some overdid it? Showing those not to be trusted. Deregulation seems to be causing a lot of the problem ,allowing them all not to check , monitor and govern competently .

PWDM says:
4 August 2011

It is part of human nature to live for today, dealing with todays problems, and not to plan strategically for tomorrow. This is the same in private as well as political life. As a consequence all developed countries, until relatively recently, have continued over generous pensions schemes and failed to plan for people living longer; huge numbers over 90 and increasing numbers over 100. The current readjustments are painful but necessary in both the public and private sectors for the sake of future ganerations…our children..
If the purpose of current pensions reforms is to stop future elderly people (our children) becoming dependent solely on the State, those who have made adequate provision for their retirement should be allowed to pass onto their children any uncrystallised direct contribution schemes free of Inheritance Tax beyond the age of 75years. Currently this is allowed up to this age.

Only a minority will voluntarily save enough for retirement especially when young.
Those who do will see their pensions hit by high tax rates to provide a safety net for those who havent saved or those who have been on low incomes all their working life.

Therefore the only equitable solution is to provide a very good state pension paid for through income tax.

Okay no one likes higher rates of income tax – but for those who can remember back 30/40 years it used to be far far higher than the 20% it is now.

worked in the private sector 40 yrs,was paid,saved,without a bonus for actually attending.Then i retired
and was very surprised when I was not given TWO yrs pay as a bonus for having endured a working life
of virtual garrantied employment,good pay,very good – inflation proofed-pension,at an early age,to
enjoy after developing many pastimes in my short working week”””; should have been a teacher????

I can only say to those that denigrate teacher’s pensions and working conditions – obviously they have never taught – the stress is enormous – the pay far less than those in the private sector with the same qualifications. A vast number of teachers actually work a 60 hour week (the 40 hour week is in front of children) – Being in front of children is hard work – remember the vast majority of parents can’t control their one child for an hour – Teachers have to control AND teach groups of 30 – many of whom (30 %) are educationally inadequate GENETICALLY and there are also great numbers of.pupils who are only at school because the law says so. The children’s attainment on entry in slum areas range from educational sub normal unable to speak English (let alone read and write it) to bright articulate but very disadvantaged and poor. They are constantly criticised by the Government who couldn’t teach the average child to read.

Teachers are criticised if they don’t get 100% A to C even though 30% of pupils are intellectually incapable of doing so and ignoring the effects of social conditions. They are inspected by OFSTED whose motive is to criticise publicly – the old HMI were there to help teachers not criticise. Teachers are forced to teach a National Curriculum imposed by a government that know nothing by education. Then lunch and tea (AKA playground) ‘break’ taken up by playground control of say 400 pupils – Ah then “Holidays” taken up by planning and preparation of lessons – educational conferences etc

Teachers are blamed for all forms of social misbehaviour especially by Thatcher rather than the true cause – the government.

Many Teachers are in schools that have to accept pupils that other local schools reject making it even harder. I know a sizeable number of teachers who have died of stress related problems. I have known even greater numbers who left through being able to cope with the stress.

I have worked in Electronics Research (rocket/jet guidance systems) – radar – House Building and repair – Dental Clinic design and building – large scale (over 1000 employees) Industrial Manufacturing – Senior Rating Officer – Passport Officer – Shop Assistant – Computer design and manufacture – Data coding and processing – plus a few small jobs.

In comparison to the stress and effort of teaching they were ALL rest cures. Frankly the teacher’s pension was a “reward” for appalling pay and conditions – they also used to be respected – now they are denigrated for having a pension scheme that everybody USED to have until Brown and Thatcher allowed the private sector to renege on their social responsibility to contribute to workers pensions/.

The real world is that teachers will leave in droves creating the same teacher shortages of the Thatcher era as their conditions deteriorate.

I can identify with some of the problems, though only from trying to teach those who go on to university. I don’t think anyone sees school teaching as an easy job and it is well known that teachers put in a lot more time than the 40 hour week (so do many lecturers).

Despite – or because of – the challenges, many teachers find their work very rewarding and the occasional kind comment is a great help. We can blame government, parents and goodness knows who else for problems but constructive and selective criticism is better than whinging.

I recently had a grand tour of one of the new academies, which is run by one of my former research students. The catchment area provides challenges and there are problems to be addressed but I was incredibly impressed by the enthusiasm of the teachers I met. I am convinced that it was genuine and not just an act put on to impress me. If I had kids, that is the sort of environment I would like them to experience. My old grammar school was a dreadful, antiquated building (thankfully now demolished) but if my teachers were despondent then they kept it well hidden.

Fortunately there are people up to the challenge of school teaching, but perhaps it is not a job that we should expect anyone to do for their working life. I think you were right to move around and enjoy different challenges.

Oops I mean to write

“I have known even greater numbers who left through NOT being able to cope with the stress.”