Despite the UK’s pension problems hardly ever being out of the news, many people do not realise just what the problems are. Firstly, the State pension is a pay as you go system. This means that people working and paying National Insurance into the system have that money paid out about eight weeks later in State pensions. This means that the money has no time to grow because it is not invested. It also relies heavily on there being enough people working and paying National Insurance, in order to be able to pay State pension.
Our View
A recent report from the Government Actuary’s Department and the Office for National Statistics claimed that the population will rise by 5 million by 2029 and the numbers of people claiming State pensions will increase by 12% in just 7 years. This is compared to a rise in those people working by only 3.5%. As you can see, an 8.5% black hole to be plugged.
Our advice is to plan for your own retirement, regardless of how much you can actually afford to save. Whilst there are other State benefits to help, such as the Pension Credit, these only provide you with a subsistence level of income. If you want the little luxuries in life, you will have to provide for yourself.