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No pain no gain – Richard Harvey on the challenges of funding a decent retirement

  • By Sue Whitbread

Richard Harvey bemoans the fact that accumulating enough money for a decent retirement is now a major challenge – and not just for the young

What do you want first? The bad news or the good news?

I thought so. The bad news is the relentless tide of warnings about how we all need to up our game to ensure we can fund a decent standard of living in  retirement, which will come as no surprise to you.

Sadly, for me and many others like me, the prognosis is about as comforting as the thought of Donald Trump opening up that briefcase, and poising his pudgy finger over the big red button.

You don’t have to be a genius to realise that the vast majority of the population simply aren’t willing, or able, to salt away the absolute fortune which is required to guarantee a decent retirement lifestyle. As advisers, you will no doubt come across this situation all too regularly. However, those individuals who seek professional advice at least are in with a good chance of accumulating what they need – as long as they keep up the good work and keep making the payments. It’s those who aren’t taking action who are most at risk.

Workplace pensions are, at least, helping large numbers of people to put something aside each month for their retirement.  But do we really believe that even the longest-serving employee will ultimately be able to build a mountain of money, sufficient to pay for a modestly comfortable future? Are people burying their heads in the sand rather than face up to the level of contributions they will need to make if they are to enjoy the same standard of living in retirement as their parents did? My guess is that many are doing just that.

And now the good news…

You might assume that living longer would come under the ‘good news’ column. Nope – because the last bit of advice I received from my IFA was: “We’re all living longer, so make sure you don’t run out of money in your retirement”.

Just to double check my putative mortality, I logged onto the Office for National Statistics website, which contains a dinky little quiz telling you how much longer you can expect to live.

Despite it appearing incredibly simplistic – the only information they required was about sex (not enough, ho, ho, ho) and my age (71 actually, 14 mentally, 134 physically). The surprising verdict: I have another 16 years to go.

Now there are plenty of other online calculators to establish your longevity, but they’re impertinent enough to ask questions about cigarettes, booze and exercise.

As I have imbibed my share of the first two – plus a lifetime’s allocation for at least another 10 other reprobates – and whose sole exercise is stretching to reach the TV remote, I am sufficiently grown-up to realise that my predicted checking out age of 87 is the sort of hugely optimistic ambition that Leyton Orient might have for winning the European Championship.

However, as the ONS is the guardian and arbiter of the nation’s stats, they really should know. They even reckon I have an (admittedly vanishingly slim) chance of making my centenary.

So, like everyone else of my vintage, I do mental calculations about how long before the pension pot is as empty as that bottle of Aussie red I sank last night, if the ISAs are earning anything remotely respectable, and what might be stuffed down the back of the sofa.

I’m fortunate that the Good Lady Wife has always worked in the basic-plus-bonus world of sales, which has afforded her much better rewards than the stipends afforded to humble hacks like me.

As a result, she has a decent pension pot which, if ONS is correct, may help keep me in incontinence pads and big print books as I slip into dotage.

Others may not be so fortunate. Pension and investments company Aegon has conducted some research, revealing that while the average woman’s pension pot has now increased to £24,900, it is way less than the men’s average of £73,600. To be honest, neither figure is likely to provide the means for a financially-sound retirement. There is work to be done.

Never mind. Perhaps our new, post-election Chancellor of the Exchequer will have some wizard wheeze to help boost everyone’s retirement savings. What do you reckon?