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Home > Opinion > Tony Hazell

White paper could offer lifeline for pensions

If, as expected, the new scheme starts in 2016 with a standard pension of £160 a week, it will give saving real meaning.

By Tony Hazell | Published Jun 20, 2012 | Pensions | comments

If there is one area where the financial services industry, government and regulators have failed the general public in the past 25 years or so it is pensions.

The imminently expected state pension reform White Paper could at last redress the balance.

If, as expected, the new scheme starts in 2016 with a standard pension of £160 a week, it will give saving real meaning.

The generation then in work will know there will be less means-testing and that as long as they make 30 years’ national insurance contributions they will qualify for the full pension.

Consider how we got into the current mess. The state second pension in its various forms has been pruned back time and time again by both Labour and Tory governments.

Tax raids – real and threatened – by chancellors Ken Clarke and Gordon Brown undermined company pensions.

There has been mis-selling, high charging and poor investment decisions by the industry.

Regulators failed to regulate and accountants failed to count, leading to hundreds of thousands – and probably millions – losing part or all of their pension.

Perhaps it should come as little surprise that a MetLife survey warned that 41 per cent of 50 year olds expected the state pension to be their main source of income in retirement.

Other headlines from this survey were equally depressing. The average 50 year old has saved only 44 per cent of the amount they need to haul themselves above the poverty line – defined as £14,400 a year by the Joseph Rowntree Foundation.

And 26 per cent have less than £20,000 saved.

This comes on the back of a stream of similar surveys and reports all suggesting that those in their 50s were now really struggling to put money away.

This used to be the prime age of saving. Career earnings should be close to or at their peak, children should be more or less independent and the mortgage small or paid off.

Now children are much more likely to be still at home yet not contributing to household income.

The spending power of earnings is falling as inflation outpaces the average 1 per cent pay rise.

Mortgages are less likely to be paid off, partly because endowments have failed to deliver on their promises.

And any hope of a bail-out from an inheritance is fading as in so many cases care home fees eat up the savings that parents spent a lifetime accumulating.

Regulators failed to regulate and accountants failed to count, leading to probably millions losing part or all of their pension

Small wonder, is it, that increasing numbers of people now expect to work beyond retirement age?

Against this the state pension reform White Paper promises the opportunity for positive and sensible reform to a complex system.

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