The ￡408 billion hole that no one wants to talk about
Phil Blows
Co-Founder AQRU, Accounting Flow & B2 Capital Management | Receivables & Digital Asset Financing
The UK has run up a national pension deficit of more than ￡400 billion ($518 billion) over the past decade, becoming the biggest liability to the economy.
These headlines are nothing new but how could it affect the average person on the street? The strategy for dealing with this deficit has always been to simply kick it down the road for future generations to deal with but, given the ballooning size of the problem, this may no longer be an option.
So what possible solutions are being talked about:
1. A pension haircut - Yep, that pot you built up over the course of your lifetime will no longer give you what was promised.
2. Increased government/corporate borrowing - after all what's another ￡trillion here or there?
3. Simply let the schemes collapse and put the blame on whichever corporate raider last owned the company and hope she/he puts their hand in their pocket...
This deficit although scary only refers to Defined Benefit (DB) Pension schemes. Worryingly the issue is far larger in the world of Defined Contribution (DC) Pensions. The average Pension pot at retirement remains around ￡70,000 and retirement income ￡3,500. The amount of additional saving required to get this figure to more meaningful sums is vast and is largely ignored by both individuals and employers.
They key difference in the world of DC is that the employer has very little obligation to help their DC population to improve their Pension outcome. The employee is often left confused as to what Pension benefits they are entitled to receive and how to gain access to them. There are very few meaningful services offered by employers to help staff make improvements to their Pension savings.
Wealth Wizards works with employers to ensure employees are:
1. Contributing as much as they can afford.
2. Doing this in a tax efficient manner.
3. Invested in the right funds.
Although by no means an exhaustive list, if these 3 checks have been made an individual is well on the way to improving their financial wellbeing in retirement.
Only by close collaboration between end users, employers and third party advisers can we quickly tackle the growing problem of the U.K Pension system.
Reference
https://uk.businessinsider.com/britain-pension-crisis-explained-bank-of-england-2016-8
*** On a career break due to health reasons *** Senior Reward Professional committed to delivering great People Experience to engage and motivate our people.
8 年Recently a recruiter said to me that candidates just aren't that interested in pension as a benefit when joining a company; shocking when you consider the general lack of saving, coupled with the fact that for a lot of people the pension will be the single largest cash benefit they get from their employer after their salary. Great article, and a good read.