Live today and plan for tomorrow: let’s talk about pensions, baby

How do things change! In our twenties and thirties we are too preoccupied with ‘now’ to worry much about the future. So we forget about the passage of time and about our old age. At least, this is what the report of the Workforce Retirement Income Commission published today has found. Up to 9 million people are not likely to be able to afford even hot dogs for dinner; thinking about it, given the direction all things public have been taking in this country, relying on the state pension may mean that one could not afford any dinner at all! This almost one third of the workforce in the UK; or one in every three of us.

There are changes coming in 2012 when compulsory contributions to pension schemes will be introduced. But again, our authorities are missing the point, it seems to me. Too much ‘discipline, punish and threats’ and too little motivation and self-interest. In other words, we are scared into saving for our old age without, generally, creating and affirming the incentives to do so. The way I see it there are three issues with the pension situation as it is.

Residual culture of ‘welfare’

The ‘welfare state’ is probably one the best things; ever! I am serious about this one – problem is that, in reality, it has been crumbling for a long time now. But because it is such a splendid thing there is still the pretence that it mostly exists and that it will continue to exist. This is how the idea of the welfare state is still very much vivid and, let us admit it, dominant in a particular age group. Unfortunately, it is more or less my age cohort: the baby-boomers. We are in a situation where resources to maintain the welfare state are insufficient but we passionately believe in it – and don’t think about pensions very much.

Consumerism rules

This is about the same baby-boomers, I am afraid; the generation that invented the ‘teenager’, going out, having fun and supported all this by using a wonderful financial innovation – credit! Our generation is the first one to have enough so that we can want so much more. Apart from that, consumerism became an official policy in the US (this spread to Europe) after WWII – so we all succumbed. We have become too much ‘people to have’ and have largely forgotten how ‘to be’. Having goes with craving, craving is a sign of addiction. Addicts have no control – they become over-spending over-consumers and there doesn’t seem to be anything left to put aside. No wonder the rates of saving have been going down for several decades now.

Private pension schemes, generally, drool

Anyone with any experience of private pension schemes can confirm that these are far too complex, confusing and inflexible. This pretty much is the main conclusion of the Workforce Retirement Income Commission as well. But personally speaking, I don’t feel comfortable having my retirement money in a pot that after ten years is worth as much as my contributions and where I have no access to these funds should a real emergency come up.

I am not saying that we should not save for retirement – quite the reverse. But what I would like to see is an overhaul of the private pensions sector so that it can be simplified and range of flexible products offered.

Telling people about the bleakness that is awaiting them rarely generates positive, motivated action. Quite the reverse – it is likely to result in the abandonment that characterises each and every big financial crisis in the history of humanity. ‘Live for today’ becomes the mantra. It is time we spread another one:

‘Live today and plan for tomorrow.’

 

10 thoughts on “Live today and plan for tomorrow: let’s talk about pensions, baby”

  1. Yesterday I heard a little about the compulsory pensions coming in next year on the news. From what they were saying, even with the new rules they are putting in place people will not receive a pension large enough to live on, and that’s the new scheme! Surely there needs to be a rethink and a workable plan put in place rather than pushing forward with a plan already known to be insufficient?
    Public sector workers may be feeling a bit sorry for themselves having to pay in more to their pensions, and it may well be a cash grab by the politicians of the day, but at least they have the knowledge that their fund is in decent shape, and they will have a decent pension when they retire. The same cannot be said for private sector workers – There have been so many schemes set up and badly administrated over the years that workers just don’t know if it is a good thing or a bad thing to join them.What to do then? Now this is where I am stuck!

  2. Helen, we will figure this one out. My feeling is that building own investments is the way to go but have not considered the practicalities properly. I am one of the ‘lucky’ ones but still suspect that something will need to be done if I am to retire at all. Self-emloyed people are probably the worst.

  3. So in the spirit of investing for my future – I opened an ISA today. A small step for sure but now I have somewhere sensible to stash my pennies until I figure out the rest.

    1. Well, done, Elaine; this is the spirit. Many people don’t do it because they think it is not worth having it if they can put away only small amount in. But…remember the ‘power of small’? Small amounts add up not only as expenditure but also as savings; next step is investments.

  4. Dh has a private pension from the late 80’s that is worth….. well let’s just say when I am looking at future incomes, it doesn’t even figure in the income column. Maybe the paper it is written on can be used in the smallest room in the house :mrgreen:

    I am looking forward to your thoughts on investments. When our house debt is paid, we will become savers (hopefully inflation-proofed) but investors be that in a pension fund or something else, I really am not sure. I don’t think we have the right attitude to risk nor enough money to become investors. Have you seen the fall in the stock market again today – I would never sleep at night.

    1. @Anne: You make two interesting points and I would disagree with one and agree with the other one (with some conditions). First, you say ‘not enough money to invest’ – I have come to believe that small amounts add up and faster than we expect. Furthermore, all this will have to go through a ‘reservoir’ type of system (a belt of savings). Second, yes I did see that the stock market went down and I feel the same – I am too worried that I will loose it all, remember. But apparently the fluctuations of the stock market even out within ten years or so – this is what I want to look at in more detail.

  5. I have no pension provision in place, but I have adopted the percentage idea. So now 10% of my monthly pay is put straight into savings. I will have a look at opening an ISA though, if there is a reason I should? And I would hope to be able to up the percentage saved over time, but that all depends on how our income goes (OH is self employed and it is a very uncertain time, AGAIN) so we can be sure of nothing, just need to hope it all works out.
    It will be interesting to hear how you think we could build our own investments – I am working on the idea that I create several income streams, and try to make it easier for that income to flow in a way that will enhance my lifestyle and cause me the least stress. So I would be making money but enjoying it at the same time – Not always the case at the minute!

  6. @Helen: ISAs make sense and opening them is a good idea – savings in ISAs are not taxed. Have you notived how fast the savings seem to grow and how good it feels to have something put ‘on the side’? As to the multiple income streams – yes, smart. The proportions rules apply again, though. At the moment, John and I put most other income on the ‘negative wealth’. Once this is dealt with a proportion will be used to enrich life – without waste and without more possessions. I want experiences and adventure.

  7. Yes, putting even just a little bit of money away does feel good, and my plan is to divert more of my ‘other’ income into savings/investment. I am totally with you re enriching life without more possessions and less waste. We have far too much stuff, and it does get in the way of moving forward so the whole decluttering exercise is a part of the same thing really. This is a bit of a slow process for me at the moment, but things are beginning to take shape. Baby steps all the way!

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