A well-documented fact is that many people are unprepared for supporting themselves in retirement for many years. As estimates of life expectancy are currently increasing year-on-year, more people are finding themselves financially unprepared and insecure as retirement age approaches.
It will be interesting to see how the retirement industry, as well as employers and the general public, respond to increasing longevity over the coming decades. Giving people time to prepare is crucial. Ten years is probably a minimal time-frame in which to make a difference. Five years is too short a period for people to plan for retirement, either in terms of their readiness and a positive mind-set, or through ensuring better financial provision after finishing work – already in wind-down mode and if unprepared, already playing ‘catch-up’.
The current situation for those approaching retirement within the ten year preparation period is also complicated by changes, wrought by a Government in a global recession, seeking an affordable welfare state. The national ‘goalpost shifting’, as in the recent budget, creates uncertainty for people approaching retirement. Inside a five year winding down period, negative changes to pension prospects and the cost of living in retirement may well further influence people to give up trying to make adequate provision for themselves.
Encouraging people to save earlier for their retirement is essential. There is a growing body of opinion that future public policy is likely to compel people to put more money into a pension pot. Saving earlier in life by choice, despite economic uncertainties, puts people in a better position to face the likely future challenges of living longer with less public funding support.
Encouraging people to save for their future – the pension pot or nest-egg strategy, is also made difficult by an economic culture that encourages us to spend more for economic growth and national success. We are encouraged to spend our way out of recession and part of our economic plight is that most savings look to have negative equity in the context of inflation! As savers we have to be very trusting and willing to playing the long game. ‘Be prepared’ must be the essential motto in saving for retirement.