A new study by pension provider Royal London suggests some British workers will have to work until they are 81 if they want to build up savings that guarantee their parents’ standard of retirement. The research released Wednesday comes as the British government embarks on a review of pensions that has prompted speculation it will raise the retirement age to compensate for a burgeoning older population. The retirement age for men and women is already set to rise to 66 between December 2018 and October 2020. https://www.washingtonpost.com/worl...3dc6c0-e06d-11e5-8c00-8aa03741dced_story.html
It's not all that surprising, to be honest. In the UK, up until recently you could get get 25% of your pension pot as a tax-free lump sum but you had to use the rest to buy an annuity, that gives you certain income over the rest of your life. In November 1990 a typical annuity rate was 15% (single cover retiring at 65, no inflationary increase etc), so for every £100,000 you spent on an annuity you would get c.£15,000 per annum as income. Obviously the life-expectancies weren't quite as high as now, but you only really had to live 8 or 9 years to see that the annuity was a great option. Today the same annuity rate is around 5-6%. So for the same £100k purchase you'd only be getting an income of £6k a year. You'd have to live for c.20+ years to see a positive net present value on that purchase. So simply looking at this it is clear that the income levels for recent pensioners would be far less, or far more onerous to achieve, than those for people who retired in the late 80s, early 90s. Obviously the later you leave it to retire the higher the annuity you can get, as you would live less long in retirement, so retiring later would help match the income levels your parents achieved. Also, if you were a single person and bought an annuity and then died the next day, you would effectively lose the value of the annuity (married people can buy annuities that would provide for the spouse as well). So now the government have (recently) scrapped the need to buy an annuity, although you could still buy one. Instead they are allowing pension draw-down, which means your pension is simply an investment vehicle, and you can do what you want with the money. Anything you draw down will, however, be taxed as income. You still get either a 25% tax free draw down up front, or the first 25% of your annual draw down will be tax free. The issue with this is that there is nothing to stop a person drawing down their entire pension pot on the day they retire. Yes, they'd be taxed on it as though it is income, but the person can then splash the cash as they see fit. They would then be reliant on state support. Without proper planning, even people who try to be sensible might run out of money far sooner than they think, and once again place a burden on the government. The solution would be to work longer, of course, in which case you'll have less long to spend your pension pot, thus can afford a higher lifestyle.
The better years of life are the early years. A pity. After 40 the danger of all sorts of illness increases and many fun things like sport and sex become increasingly difficult. It's hard to reach 81 years in good mental and bodily shape.
"Sixty years of nonstop work, of being a servant to others, of personal freedom restricted and regulated. Imagine turning 61 and realising that you still have another two decades to go." Shivers down my spine. Please Register or Log in to view the hidden image! Here's an interesting piece from The Guardian stating that we should be striving to work less, not toiling until we drop. Time to challenge this bleak vision of progress that wasn’t supposed to mean chasing an ever-receding prospect of retirement. http://www.theguardian.com/commenti...e-work-less-progress-challenge-bleak-prospect
Although I have no sources for my conjecture here . . . I'm sure that children in the USA have a similar long working life to equal their parents.
