State Pension ‘Not Enough’

State Pension 'Not Enough'

by David Redmond on 11 Aug, 2011

A recent survey conducted by Standard Life reveals that 2 out of 3 people believe they would not be able to live on the new flat rate £140 a week state pension.

Although Standard Life welcome the new our own personal flat rate being introduced by the current government for its transparency and simplicity, it underlines the necessity of taking control of your own personal finances and investing in private pension funds.

Whilst some people are lucky enough to work at companies large enough to offer company pension schemes with regular payments on top of salary, most people need to take the initiative and start a private pension of their own, or risk being confined to the basic state pension for the duration of their retirement.

And with a pension crisis looming thanks to the ageing population it’s hard to say what other state pension reforms are around the corner.

Workers are advised to start savings as early as possibly in order to accrue as much interest as possible. The longer your money is tied up in some form of savings account and/or pension fund, the more money you will have by the time you retire. With the state pension looking increasingly unreliable, the old adage ‘it is never too early to save for retirement’ has never been truer.

The advice comes at a time when consumers have less incentive than ever to save thanks to a historically low base rate set by the Bank of England, resulting in high street interest rates that fail to beat rising inflation. But this makes long-term saving even more important to minimise the deterioration of the value of your money: crucial to ensure an adequate income in your twilight years, particularly with life expectancies in the west consistently increasing thanks to advances in medical science.

Perhaps contributing to worry about the £140 state pension is the spectre of rising inflation. The figure may seem difficult to live on now, but if it remains unchanged by the time most of us retire, that £140 could be worth an awful lot less. The message is simple: start saving now.

About the Author

David Redmond

David Redmond is a Partner of Don Gilliard Finance Group. He is a fee-only, independent financial advisor and financial planner. For over 15 years, he has been helping individual investors and their families realize their investment goals.