In retirement, nobody can hear you scream

Pensions is a horror story. Now it is time to fight back.

Watch out! There's a financial horror story heading your way and it is called your retirement.

And this one is a real nasty. It is Saw parts I-V, the Nightmare on Elm Street box set and the Scream franchise rolled into one.

Yes, I'm know I'm being a bit macabre here, but it really is impossible to overstate the horrendous situation most of us are in.

Because unless we tackle this monster now, we will either spend our final years slaving until we drop, or shivering in poverty.

Or both.

The Omen

The pensions nightmare has been stalking us for years, but rather than facing up to it we have been running away like a bunch of teenagers fleeing an unseen killer in the woods.

During the boom, we had far more exotic things to lavish our money on than dreary old pensions, and during the bust, we've had more pressing financial fears. But the nightmare is there, waiting for us.

Don't believe me? Then let me rattle you with some figures.

Scream

It wasn't just the young and foolish who racked up unsustainable debts during the good times, their parents did also.

One in three pensioners go into retirement still owing money on a mortgage. The average debt these pensioners owe is a shocking £43,000, with monthly repayments of £205, according to equity release provider Key Retirement Solutions. Yet the basic state pension is just £95.25 a week for a single person and £152.30 a week for a couple.

And one in five has outstanding credit card debts, owing on average an alarming £8,892. That could cost another £120 a month.

Talk about 'til debt do us part.

Scream II

The average pension pot is a paltry £30,000. That's enough to buy a single man aged 65 an income for life worth just £40 a week, or £29 if he wants it to rise in line by 3% a year. A couple age 65 would get £35 and £22 a week respectively.

Even without debts, retirement could be a struggle. And who knows what grisly fate awaits annuity rates?

Scream III

The standard response to these ghastly figures has been to urge people to pay all they can into a pension, but a new report by pensions campaigner Ros Altmann for insurer MetLife slays that assumption.

It says that more than half of people who are five years from retirement believe their pension will fall short of expectations. One in three are either unhappy with their pension or feel they have wasted their money.

And no wonder, given that the stock market has returned just 1.2% a year over the past 10 years, compared to 16.1% over the previous decade.

The Blair Brown Project

In the last 12 years, the UK pension system has been transformed from the envy of the world into a phantasmagorial horrorshow, a straight-to-video slasher flick with a dubious plot and implausible villains.

Led by blood-sucker-in-chief Gordon Brown, whose 1997 pensions stealth tax has so far leeched up to £100 billion out of the nation's retirement funds.

He has been supported by a gang of commission-hungry pensions salesmen and their senior managers, who have cannibalised their customer base with a trilogy of pension mis-selling scandals.

Then came the zombie bankers and their toxic debts. Anybody retiring now is 27% worse off than they would have been one year ago, due to stock market volatility and the impact of the Bank of England's quantitive easing policy on annuity rates.

Throw in the slaughter of the final salary scheme, a tax and benefits system that punishes low earners for saving for retirement, and the demographic timebomb, and there is only one way to respond: Aaaaaaaaaaaaagh!!!!!!

Silence of the Lambs

We can't say we haven't been warned. People like me have been banging on about the pensions crisis for years, but nobody listens.

Why? Because pensions are boring. They are dull (see how I've had to spice this article up, just to get you interested). Worse, they aren't even reliable. Not at all. And to wrap things up, they are grotesquely complicated.

But we should at least have tried saving. I am shocked to see friends in their mid-40s who haven't got a penny in their pension pots, in fact haven't got a pot at all, despite my tedious nagging.

Which is strange, given the enthusiasm they have devoted to building up their debts.

The Howling

When I first started writing about finance in the late 1990s people were dreaming of retiring at age 55. Now only the wealthy or deluded can contemplate such a grandiose idea.

The current generation is bracing itself to work beyond age 65, which is fine if you like your job, and still have the strength.

The state retirement age is set to rise to 68 between 2024 and 2046, but many of us will be working to 70 and beyond.

On the plus side, that's the price you pay for greater life expectancy. But I'm worried this will turn into Night of the Living Dead.

The Exorcist

The only way out of this horrorshow, like Sigourney Weaver in Aliens II, is to throw everything you have at the monster.

You should still pay into a pension each month, mostly for the tax relief. Stock markets can't be rubbish forever, can they?

Then spread your money around to reduce risk. Exploit your tax-free cash Isa allowance to the max (some Isas even pay you interest!), and use the rest of your allowance to feed some money into a stocks and shares Isa.

Forget get-rich-quick, this is more avoid-poverty-slowly.

Then save some more, using fixed-rate bonds or corporate bonds to get a slightly better return on your money.

Slash your spending, and bank your savings. And most important of all, start clearing your debts today.

The alternative is to throw yourself at the mercy of the State, which disregards the fact that it is bankrupt. It can't afford you.

The horror

You are alone. The spectre of future poverty is roaming outside your window. You must arm yourself to the teeth, because this is a fight to the death.

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