Since the economic crisis began in 2007, the FTSE 100 has seen a crippling overall fall of 15%. This has damaged many people’s existing pension schemes. A pension with a previous value of £100,000 would now be worth £85,000, a huge blow to the saver who has devoted a proportion of their wages every month, under the impression that they would receive a much larger sum in return.
Over the past five years this information has drifted to its consumers and this has instilled a negative outlook regarding pensions throughout Britain. This has left 54% of workers anxious about saving, meaning the previous average £300 a month going into workplace pensions is almost nonexistent.
Pension’s minister Steve Webb has urged industry experts to recognise the gap in the market for a cost efficient pension protection scheme. He wants to give people the certainty of a guaranteed income and to regain the lost faith in pensions.
But should people really have to protect their pensions? Maybe the banks and pension funds dealing with people’s future should stop taking unnecessary risks, causing people to lose tens of thousands of pounds.
Without a doubt, people are going to think twice about paying into pension schemes until it is guaranteed that their money will be safe. Since the recession began, household income has seen a significant change and people are constantly tightening their belts, making it difficult to save even without worries about the safety of their savings.
In 1997 when records of workplace pensions began, 55% of employee’s paid into a scheme compared to 2011, where the percentage has drastically dropped below half for the first time to 48%.
Due to be launched in October this year, the government has announced an auto- save scheme that will automatically enrol nine to ten million people into a saving scheme. This will run on an opt-out basis, allowing people to decide after whether the scheme is beneficial to them or not. Mr Webb believes that ‘some form of guarantee has an important part to play in the success of auto-enrolment’ meaning that the government must include some kind of insurance alongside the scheme to establish a positive outlook on the issue.
Although the opt-out scheme is set to go ahead later this year, it is reported that four in ten of those eligible have said that they would struggle to pay into the scheme, while a third say that they would promptly quit the new pension. According to the government, between two to four million people will opt out of the automatic scheme, leaving only five to eight million continuing to save.
One third of Britons over 50 currently have no private retirement savings, making their futures very uncertain. Whether it’s by enforcing an opt-out scheme or swaying people’s perception of the current situation, this is an issue that needs some kind of change.
Tags:
consumer,
economic crisis,
ftse 100,
pension protection,
pension scheme,
pensions minister,
retirement savings,
saver,
savings