There is more of a push for people to save into a pension fund for their retirement years. However, over the recent years, pensions have been in the middle of a number of financial scandals. No matter how many people protest, very few people in power seem to be listening and it seems like pensions are going to be the next big financial scandal.
An Increase in the Retirement Age
The first scandal has been the increase in the retirement age, where it is increasing to 67. People have to work longer but for less money. While this is seen as a way to help a country with a large number of senior citizens in a world where people live longer, it is not helping when energy firms constantly raise their prices and fuel prices are at their all-time high.
It has led to the question of whether there will be a state pension for the next generation of workers. If there is, the retirement age is looking set for 70+.
Impossible to Plan for the Long Term
The constant changes make it impossible for people to plan for the long term. One day there is tax relief at a higher rate than workers and the next day that is reduced in line with those who work. The amount that can be taken from a pension pot is decreased – although this is possibly going to go back up – and the amount a person can save is being capped. It leads to people being unable to save for their future and having to look into riskier options, including the stock market.
Failing to plan ahead and be able to predict the changes is a reason for many to go back to work. There are people in their 70s who retired 10 years earlier who are not back working full time just to be able to afford food and heating in the winter months.
Using Pensions to Keep Benefits
The changes to benefits have led to many people putting more money in their pension pots to save on losing out on their benefits. For example, those earning just above £50,000 per year could put more in their pension so that they keep their child benefit when the new cap is introduced later in 2013.
There are other salary sacrifice schemes available to help save the money on the benefits. The problem is that these are not available to all. There is a cap on the amount of money an employee can put into a pension – and that amount then needs to be agreed with the employer. These caps are looking to rise over the next year.
State Pension the Only Increase
While many benefits have had a cap placed on them for increasing the amounts and many people have seen cuts to their pay, the state pension has increase. While this may sound great, this is only by 2.5% and only works out to be a few extra pounds per week. This is still not enough when the cost of living is increasing. It is leading to more people returning to work to help continue to support themselves after paying their tax for decades.
Pensions are a constant target for politicians. They seem to be the easy way to claw back the debt that the country is in but the politicians fail to look at some of the better options. It is leading to more people taking out loans or going back to work to fund their necessities.