After it was recently released that three in four Britons 50 years of age or older plan to continue working when they reach the traditional retirement age, an overhaul of the pension industry was immediately called upon.
In fact, former advisor to the government Ros Altman proclaimed that pensions were “fit for the past” and that Britons need more flexible savings plans.
Altman’s comments were made shortly after publishing the results of a survey sponsored by MetLife, which uncovered the extent of the ongoing social change experienced by older residents.
According to the survey, nearly one-third of individuals 50 to 60 years of age do not believe they will begin feeling old until they reach their 80s.
Nearly half plan to keep working beyond the current retirement age of 65. Another 40 per cent of Britons plan to work part-time in order to supplement their income and socialise with colleagues.
A mere one-fourth of those polled plan to stop working entirely when they reach 65 years old.
According to Altman, “retirement is changing” and pensions must change as well. The current pension options are not designed for the future.
Known as a pensions expert, Altman continued by explaining that employees must be encouraged to learn about how their money is being invested, the exact returns they are earning, and what their future returns will likely be. She also argued that the annuities system needed a dramatic overhaul, due to frequent hidden charges and lack of transparency.
Altman warned that the auto-enrollment performed by the government may have successfully signed up hundreds of thousands of people to pension plans, but it could provide people with a “false sense of security.”
The government has enrolled over 1.6 million people into pension schemes under its automatic enrollment programme, which began in October of 2012 and is slated to turn 11 million people into first-time pension savers by 2017.
However, in an earlier report, Altman declared that defined contribution pensions needed to be completely overhauled, because they are not suitable for people living and retiring in the 21st century.
Unlike final salary pension schemes, which guarantee customers receive a specific set income when they retire, defined contribution pension schemes only provide payouts based upon the performance of a person’s investments. Since employees absorb the investment risk, this pension scheme is a much cheaper choice for firms.
The current risk of not choosing the right annuity, purchasing one at the wrong time, or failing to secure a reasonable rate may result in millions of significantly poorer pensioners.