Pensions crisis to get significantly worse?

The Prudential Retirement Income Panel is warning that the UK's retirement income crisis is set to get even worse.

The panel has highlighted three major issues it says are clouding the retirement horizon of millions of Britons:

i) The decline in occupational pensions which pay up to two-thirds final salary.

ii) The Baby Boomer generation (those aged 50 to 65 years-old) cashing in on their housing equity to pay off debts and help their children get onto the housing ladder, thus eroding potential retirement income pots.

iii) Younger generations saddled with student debts and struggling to get on the property ladder, leaving many avoiding making any retirement provision.

The combination of these factors is fuelling a potentially catastrophic income and retirement crisis for the future and the panel, consisting of leading financial advisers, industry product providers and retirement experts, is calling for Government and the financial services industry to work more closely together to find urgent solutions.

The key recommendations made by the panel include:

1- The industry is too reliant on language that people don't understand. Therefore, reducing financial jargon and simplifying product information to open the financial and investment market to a wider number of consumers is critical.

2- A call for more access to financial education and more widespread availability of financial advice to all income groups, with a particular focus on educating Britons in lower income groups who often receive little or no financial advice.

3- Government and industry need to look at examples of best practice from other countries, including the Australian model where Government-backed helplines provide free advice on pension and retirement planning.

4- Greater use of asset / wealth wrappers, whereby consumers can readily see the wealth built up across all their different asset classes from their property to their pension funds, which will make them more engaged with their financial planning.

The panel also believes it would make it easier for consumers to seek financial advice because, in demonstrating more clearly their overall wealth, advisers would see them as being a more attractive proposition and would be more willing and able to provide holistic financial advice.

5- A call for far more to be done to ensure Britons understand the effects of inflation on retirement income and future proof their pension funds and financial arrangements accordingly.

Gary Shaughnessey, Prudential Retirement Income Panel host and Managing Director of Prudential Life & Pensions, makes the point that the average male aged 60 retiring today will live to 85, but their expectation for how long they are going to live is 75. "The average pension pot at retirement is £25,000. It is stunningly low."

21 August 2007 © Moneyextra.com

back

Moneyextra.com recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.