With increasing pressure on State and Occupational Pension Schemes, clients should consider alternative means for preparing for their retirement.
Over the last century life expectancy has significantly increased with current UK estimates from the Office for National Statistics for male life expectancy at birth are 78.1 years, and 82.1 for women.
Unfortunately however, as people have come to expect longer lives, our pension systems have not adjusted accordingly. Therefore it places more responsibility on individuals to fund their own retirement. A recent survey conducted by Allianz asked the question: “Which do you fear the most: outliving your money in retirement or death?” Surprisingly, 61% said they were more scared of outliving their assets than they were of dying.
A global issue …………………..
State pensions use the tax taken from the income of younger working generations to fund older generations. As global birth rates continue to drop, people continue to live longer and fewer workers are left to support an increasing number of retirees.
In the UK, the state pension age will be raised to 66 from October 2020 and pension experts are warning that this could go to 68 as early as 2027.
Not just individuals……………
At the same time as state pensions come under increasing pressure to fund retirement provision, occupational schemes face similar pressures. These schemes can be either defined contribution (DC) or defined benefit (DB) arrangements. With a DC scheme, the risk for providing an adequate pension rests on the accumulated savings built up at retirement. With a DB scheme the investment risk is taken by the employer and the member is guaranteed a retirement income based on pay and length of service.
Over the years there has been a marked shift from DB to DC schemes. Many UK DB schemes are heavily in deficit and companies are coming under increasing pressure to address the current funding gap. It was recently reported that British businesses currently face a corporate pension’s deficit of £295 Billion!
Bridging the gap………………..
It is becoming increasingly obvious that we must all now look beyond state and occupational pension schemes to ensure we have sufficient retirement income in our old age.
One of the ways this can be done is to invest in a regular premium savings policy issued by an offshore provider. These plans are generally available for UK expatriates or foreign nationals, and are designed to generate capital growth over the medium to long term. At Asia Pacific Pensions we can show you several options tailor made for your needs.
Remember more than at any other time in history, there is an urgent need for all of us to accept more responsibility for the provision of our own financial security. As the well known author on time management, Alan Lakein, once said: “Failing to plan, is simply planning to fail”. The cost of inaction and procrastination is simply too high to ignore.