Retirement: Pleasure or Poverty?
Tony Ashton is an Associate Vice President with Continental specializing in savings and pensions for expatriates.
Your retirement might seem and age away, but it can sneak up on you before you know it. The surprise could be more of a shock when you realise retirement day isn’t the end of the story – not only will have living costs risen hugely, but they will continue to rise over the next 30 years or so that you are retired.
Why you can’t rely on the state (or your company)
Many European countries now face the possibility that up to one third of their population will be over the age of 65 in years to come.
In the UK, the number of people over the age of 65 will increase by about 5 million in the next 20 years.
In India the number of elderly people is steadily growing. By 2050, those aged 60 to 79 will make up one fifth of the population.
If people live longer they need pensions for longer.
For many governments, state pension arrangements have become too expensive to maintain in their current form.
If you also consider that fertility rates in over 95% of European countries are in decline, it will come as no surprise that we will have to work longer in order to provide pension benefits for the ageing population.
Already, state retirement ages are rising. In the UK, it will rise to 66 in 2020 and 67 by 2028. In the Netherlands, it’s rising to 66.
Even company pensions can’t be relied on. For the same reasons the state will struggle to meet demand, companies are having to downgrade or scrap ‘final salary’ schemes
Earn less, save less
As European stagnation has seen EU unemployment rates increase, many people have been forced to cut their pension contributions.
Others, particularly in Eastern Europe, have been exposed to currency fluctuations, while some retirees have seen a marked fall in the value of their retirement income due to historically low interest rates.Start saving now, don’t delay
So, we are left with 3 options – save more, work longer or accept receiving less.
A more proactive approach is now required to ensure savings meet future retirement expectations – doing nothing and hoping for the best is clearly not a wise approach!
It is better to start saving for retirement whilst you are relatively young as compound interest means that starting to save early leads to a greater pension pot than saving more at a later date.
However, evidence from the UK suggests those aged between 30 and 50 are falling behind older people in saving for retirement.
A survey by UK firm Scottish Widows showed that some 59% of those aged over 50 are preparing financially for their retirement compared with 47% of those aged 30 to 50, and a fifth of people asked in the poll are failing to save anything for retirement.
Expats can have limited pension options whilst working abroad. Those with an opportunity to save should do so, especially if considering early retirement. Reviewing existing pension arrangements and investments with a view to supplementing current contributions should also be considered.
Sources: Royal London 360, BBC news, Reuters, Scottish Widows, Skandia International, UK Office of National Statistics,
Associate Vice President
Continental Group International