Britain is heading towards a retirement disaster.
Public pensions are under-funded and privately people are not putting enough money away to live on when they stop working.
Those aged 55 and over said they will need £2,000 a month to live comfortably during retirement but a fifth of these people say they have saved nothing to date, according to research from UK insurance provider LV=.
For those aged 45-54 in the survey, 38% say they are concerned that they will not be able to retire when they want to. Overall, a third of the 2,045 people surveyed in total say they are worried about financing their retirement.
More than a quarter said they would “not be willing to give up any incidental expenses, such as drinks and meals out, to save towards their retirement.”
This is a cause for concern, considering Britons face huge issues over their pensions already.
My colleague Jim Edwards outlined in a long-read here, how Britain’s public pensions are severely underfunded due a variety of reasons. Mostly, Britain had super-low interest rates since 2009 of 0.5%, until they were cut further to 0.25%.
Low interest rates makes borrowing and servicing debt cheap but it is a nightmare for savers.
Britain’s pension industry could find itself in difficulty because its key asset holdings — government bonds — have negative yields. Pension funds, the money that is invested to make returns for workers and are then given out once they retire, are among the largest holders of UK government debt.
They invest this way because the funds are more risk adverse and government bonds are seen as safe and steady, unlike asset classes such as equities.
So, if government bonds are not producing returns, this means it is increasingly difficult for institutions to give workers agreed pension payouts once they retire.
But on the flipside, if there is a glut of people who are nearing retirement but have no personally saved enough to retire on either, this could cause a huge problem for the country in around a decade’s time.
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