“Should Millennials forget retirement or at least the word ‘pension’?” asks Mark O’Neill, Director at Jones Harris Chartered Financial Planners. “Retirement is an old-fashioned concept, and ‘pension’ is a word that has become tainted.”
Mark goes on to comment, “The concept of retirement was to stop work at 65 for men and 60 for women. They would then receive their state pension and occupational pension and live a few years more until illness and the age of inflation caught up. Pensioners then sat in two camps; those lucky enough to have many years in an occupational pension scheme, and those who didn’t. The state pension today is an income that is below the poverty line”.
Pensions are viewed with suspicion by some members of the public. Numerous scandals, from Robert Maxwell misappropriating his employee’s funds, to the more recent events of the British Steelworkers, has led to mistrust amongst consumers. With the constant amendments made by each successive government, no wonder there is confusion.
Millenials and Retirement
Millennials, when considering saving money for their long-term future, really need to start saving today. The job and skills market is changing at an incredible rate. Employees have to be prepared to change, retrain and produce, then change, retrain and produce again. This cycle is already happening to them, and may be repeated several times during their working lives.
It has already been well publicised that the Government’s National Insurance pot of funds to pay out state pensions is running low. Demographics in the UK are working against the Millennials. The ratio of over 60’s to under 30’s means fewer are contributing to a pension pot, whilst there is an increasing number of consumers now at that stage of retirement. The Government has no choice but to push back the age when it pays out. By the year 2020, that retirement age will be 66 for both men and woman if they want to claim their state pensions. It will likely be 67 by 2021, and 68 by 2028. What next?
Today, an increasing number of retirees are continuing to work beyond retirement ‘age’, perhaps because they are much healthier than their previous generations. Healthcare technology is improving, and as a result, people are living longer. That final 25-30% of their lives offers new possibilities, such as part-time or periodic work projects. These benefit not only the individual but also the country. A purpose in life improves the quality or the person, whilst years of experience can be passed on to the next generation of workers.
What’s the Answer?
What is needed is a large sum of money, built up over the years, with the encouragement of some tax relief.
This money has to be contributed to by both the individual and their employer. Each party must put in a minimum percentage of their salary. Access to the pension pot should only be available later in life.
When money is taken out of the pot, there should be further tax relief. Money should be able to come out on an ad hoc basis to match the individual’s needs. The money in the pension pot should be able to grow with tax reliefs to enable better growth potential. The pot should be able to pass to the next of kin in the event of death.
“The politicians have just got to stop tinkering,” says Mark. “If we don’t understand something, we are all reluctant to participate. Let’s take pensions out of their hands. We can then all plan for the future with confidence.”
Get in touch
If you’d like advice for yourself, a member of your family or your employees, please get in touch for a no-obligation chat.
Contact Mark O’Neill at Jones Harris Chartered Financial Planning on: 01253 874255 or email: email@example.com
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