Personal Pension  

Recovery will help close savings gap: Gardiner

The chief investment officer for Europe at Barclays said that the growing economy would make it easier to redistribute output to the “swelling ranks of pensioners”.

Pointing to the “misconceptions” surrounding the future funding of pensions, he said the current workforce and today’s ageing society would be able to afford their pensions, despite much-voiced fears to the contrary.

Referring to the perceived link to resources consumed by pensioners and the amount of past savings they had accumulated, he added: “When we allow for the wider non-working population, the increase in dependency in future years is much smaller than the shifting age mix suggests.

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“In the UK, we experienced a bigger burden back in the 1980s. There were fewer pensioners then than there will be in the future, but unemployment was high and participations rates were lower.”

However, Mr Gardiner did concede there were still issues with how best to administer the aggregate redistribution of wealth from the workforce to pensioners.

He said: “At the individual level, many pensioners face the low levels and seemingly arbitrary gyrations of annuity rates and final scheme values.

“With the best of intentions, pension accounting of late has distorted asset allocation and hurt the cashflow of sponsoring companies, perhaps leading to the premature closure of defined benefit plans.”

Mr Gardiner suggested a high equity weighting was central to successful funding of a pension, especially during early accumulation years, and while UK retailers were currently experiencing challenging times, with aggressive discounters prevalent in the market, they could provide an interesting long-term investment opportunity.

Adviser View

Rob Simpson, director of West Midlands-Simpson Financial Services, said: “I would suggest that once everyone has been auto-enrolled, we will be in a far better position regarding the bottom rung of the pensions savings ladder.

“This may prompt the government to start means-testing the state pension, which could reduce taxpayer exposure to pension funding. But hoping that growth holds the key on its own is dangerous.”