Why do I need a pension?
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The inadequacy of the state pension as a sole source of retirement income
The full Basic State Pension (not everyone will be entitled to a full
pension) will only replace about 16% of a persons income
at retirement, for people retiring today on an average wage. It will be even
less for younger generations. The state simply does not provide an adequate level of pension for most
people to live a comfortable retirement, without some additional income and it
is also increasingly unlikely that this situation will change.
If you are earning an average wage please do not rely on the state alone
to provide you with an adequate income in retirement, it will be vastly
inadequate.
A recent survey by the Department for Work and Pensions revealed that over
half the people questioned believed that they would need at least 100% of their
present income as a pension if they were to retire today. This is probably an unrealistic target (see below)
given peoples general attitude to saving. If you compare this with the 16% that the
Basic State Pension aims to provide you can see that there is a real problem. If
you want more than the state provides then you will have to rely on either your
Company Pension Scheme (if you have one) or your own private savings.
Security
Putting money aside in a pension is arguably
one of the most secure ways of saving for your retirement. Not only are the
funds supervised by regulatory authorities but they do not allow you to get your
hands on the proceeds until you are at least age 50 and even then you can not
take it as cash.
Many people see the restriction of not
permitting individuals to take more than 25% of their pension fund as cash at
retirement as a lack of flexibility. However it can equally be argued that this
lack of flexibility forces the discipline needed to maintain a sizable pension
fund without raiding it before retirement. We believe that increased
'flexibility' may well lead to much greater pensioner poverty at the oldest ages
just when it is least desirable.
Increasing life expectancy
Life expectancy is increasing at an alarming
rate. People are living for longer and longer and spending 25 or more in
retirement is not and will not be uncommon. This much greater period in
retirement means the funds needed to provide income in retirement must be
greater than in the past. This is another reason why you should start planning
your retirement today. Please do not leave it too late!
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Use our online calculator
to get an estimate of your basic state pension.
Its free and
simple to use you can even include it on your own website!
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Get the FREE Pension calculators from Essential Pensions.
No money, no
registration, just include one line of HTML in your web page.
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Read the guide to
investment in the pensions guide. It explains what you need to
think about before investing for your retirement.
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Tell a friend about
Essential Pensions. Send an automatic message to your friends
email account about the site.
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