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Pensioners Living on Pocket Money as Savings Recede
Nearly two million retired adults in the UK have less disposable income than the average 11 year old as a savings crisis creates a generation of pension paupers. A new survey said 15 percent of men and women in retirement have an income of less than 154 a week, which falls to 8 after essential living costs. The crisis in Britain brings fresh warnings that Britons will not have enough money to live when they retire. In an annual state of retirement report the insurance agency says that 12 percent of the population over 50s has cut pension savings by an average of 191 a month in the past year as food prices, energy bills and fuel costs have increased steeply. A senior official from the finance department was quoted saying People in their fifties are saying they cannot afford to save as much as they would like to, we are going to have a generation of pension paupers, a generation over the next decade or so who will move into retirement and be disappointed on what they have to live on.
He also added Decades after leaving their childhoods, millions of retired adults now find themselves back in a situation where their weekly spending power amounts to what is essentially pocket money. There is not enough money salted away in pension funds to guarantee a comfortable retirement for British working population.
Why is the pension fund industry hit?
Medical advancements have greatly prolonged the life spans of individuals over the last few years, which have put an additional burden on the pensions industry to support a greater number of pensioners for longer periods. Official figures from the government show that the average life expectancy in the UK rose by five years for men and four years for women between 1980 and 2000. However, the negative returns from the stock market have aggravated the situation. Pension funds are dependent on steady stock market situations to pay policy holders, and when the prices of shares fall it becomes harder for funds to meet their obligations. Lower returns on most of the big company run pension funds are forced to suspend generous schemes which guarantee employees a fixed proportion of their final salaries on retirement. The basic state pension is fixed at 86.05 per week for a single person and 131.20 which is not sustainable for a comfortable living. The low level of pension by the government pension reflects a concerted move by successive governments, worried at the rapid rise of ageing population, to encourage more people to save for their own retirement. Pensions are long term investments and when the market conditions improve and the stock market gets going things will definitely improve. However, to counter this problem the government has introduced the pension protection fund (PPF). The pension protection fund was established to pay compensation for the members of eligible defined benefit pension schemes, when there is a qualifying insolvency event in relation to the employer and where there are insufficient assets in the pension scheme to cover the pension protection fund level of compensation. The PPF is a statutory fund run by the board of pension protection fund, a statutory corporation fund established under the provisions of the Pensions Act of 2004. Over a third of women over their 50 do not have a private pension and 3 percent of 60 to 65 year olds have considered taking a second job to supplement their savings. Official job figures earlier this month showed records of one million people who have crossed 65 years were working.
Mark miller writes for International Finance Magazine.http://www.internationalfinancemagazine.com/