British workers 'sleep-walking' into pensions' disaster

Apr 20 2005 by Nic Paton Print This Article

With Britain's pensions' crisis firmly in the political spotlight in the run-up to the May 5 General Election, two surveys have highlighted just how serious a workplace problem it is likely to become in the future.

A study from the US by recruitment firm Korn/Ferry International has found nearly half – 44 per cent – of almost 2,000 global executives polled plan to continue working past the age of 64, with 15 per cent planning to work past 70.

At the same time, a study by financial institution Friends Provident has warned that the future for most people is bleak, with some 68 per cent believing they will be worse off in retirement.

Yesterday, the Conservatives said, if elected in May, they would ensure employers would no longer be able to force workers to retire before 70.

Last December the Government said it planned to ban forced retirement for anyone under the age of 65.

But ministers have stressed they plan to wait for the findings of the Pension Commission, due out in the autumn, before addressing further issues, such as possibly making saving for pensions compulsory.

The Korn/Ferry International survey found 29 per cent of executive hoped to retire between the ages of 65 and 69, with just one per cent fewer aiming to hang up their spurs between 60 and 64.

A total of 19 per cent selected 55 to 59, 15 per cent over 70, seven per cent between 50 and 55 and just a lucky 2 per cent said they would retire before they reached 50.

Of those that planned to work long into what has traditionally been retirement age, six out of 10 said it was because their employers had inadequate retirement benefits programmes.

Just as worrying for succession planning, just 21 per cent of executives believed their employers actively took steps to retain critical knowledge that might otherwise be lost when employees retired.

The Friends Provident survey found most people are likely to have a suffer a shortfall of around £10,000 in their pension income compared to what they needed.

On average, Britons reckoned they would need between £20,000 to £24,000 each year to maintain the lifestyle they wantd in retirement.

But the amount they realistically anticipated they would get was only £10,000 to £12,000.

Although people were aware of the shortfall, a staggering 27 per cent put nothing into their pensions at all, said Friends Provident.

More than half claimed they simply "don't have enough money to put aside for a pension".

But many chose to spend much less on their pension than on holidays, going out for the evening, their motor cars, purchases for the home, home improvements and "enjoying life while I can".

Only one in ten (12 per cent) believed they were saving enough to meet their pension requirements.

Jeremy Ward, head of pensions marketing for Friends Provident, said: "The bad news is that Britain is sleepwalking towards hard times in retirement. These findings are a wake-up call to warn people to start putting enough money into a pension, sooner rather than later, in order to enjoy a more financially secure retirement.

"It's not rocket science – it's common sense, especially because you get tax relief on all the money you put aside."

Yet the Friends Provident research also found a startling naivety in people's expectations about when they would be able to retire.

Nearly half – 44 per cent – of those surveyed said they ideally wanted to retire by the age of 55, but only 8 per cent expect to achieve this.

More than two thirds expected to have to soldier on until they were 60 or over, and eight per cent were convinced they would have to work into their 70s.