Emma Ann Hughes  

State pension fails to meet expectations

Emma Ann Hughes

Emma Ann Hughes

It is good news that people are living longer and more fulfilling lives.

But longer life also has implications for public services and for taxpayers.

It is time the government admits the state pension is going to fail to deliver as well as it did in the past.

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I don’t mean mumbling about reviews of state pension age, national insurance contributions – I mean shouting from the rooftops in clear language that engages and is understandable to all.

As the number of people in retirement continues to rise, it is clear that the responsibility for providing an income in retirement is increasingly moving from the state to individuals.

Well, I say clear.

It is clear to journalists writing about financial services and to those who work in this industry but far less clear to the average man on the street.

Plenty of polls have shown the fact the state pension is inferior to what it was in the past is far from clear to the average man on the street.

Prudential research indicates that at least one in seven people retiring this year have made no provision for their retirement and rely heavily on the state pension to provide an income when they stop working.

They don’t set aside cash in a private pension because they believe they can rely on the state pension.

The equalisation of pension ages and the Cridland report is an early warning of the way the state pension is heading – but I would argue it isn’t a clear enough warning to the man on the street.

The reality of being of working age in 2016 is you are going to have to work more years to get the state pension, you won’t be able to access it until you are far older than your grandparents' generation was and you therefore won’t get the benefit of it for as long as previous generations did.

The reality is people are going to have to work longer and save harder to ensure not just a comfortable but a basic income in retirement – and it is disgusting that the government is failing to clearly communicate that fact.

The best way for those planning for retirement to ensure they have the most comfortable life when they give up work is to save as much as possible as early as possible and, for many, to take regular professional financial advice.

The government needs to admit the nation must seek advice and state people must set aside cash in occupational and private pension pots – and not just the state pension – if they don’t want a cold retirement.

However I acknowledge that a government that admits it can’t afford to keep people from freezing to death in retirement is never likely to get re-elected.