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There are a few things that are certain life, Death, Taxes (mostly in the Western world) and the continuous rise in pension gaps.
We all work for a living and we look to save and invest that money for the future; or as Warren Buffett puts it, ‘Money Saved is Money Earned’.
Pensions play a massive role in world economies, which is built up by working class over the years and relied on when the time to retire comes.
However, pension contributions in the past few years have decreased at an alarming rate, while living standards and expenses have increased, leading to a massive rise in pension gaps. ‘Pension gap’ implies that the amount of money you are likely to get at retirement will be less than your requirements, at the time. This amount is usually assumed to be 70% of pre-retirement levels.
However, currently the World Economic Forum have recognised UK as one of the major countries approaching a “pensions time-bomb”, claiming that people may need to work till the age of 75 to save enough for their retirement (if any retirement period remains at all) as healthcare improves and life expectancy increases to the age of 100.
The U.K. pension gap is higher than any other country in the EU and that individual pension contributions need to increase by at least 20% for people to save enough to afford to live after retirement.
It is believed that this gap is expected to grow to the equivalent of $300,000 per person by 2050, adjusted for inflation, which is larger than the size of the global economy. As a result, workers need to start saving approximately 10-15% of their annual salary to be able to afford to live post-retirement.
In a barbaric statement, WEF have asked policymakers and companies to create roles for people to work up until 75. Leaving no room for downtime.
In addition, the Financial Times reports that the pension savings gap in the UK could hit £25 trn by 2050. This is larger than the GDP of the U.S. or ten times larger than that of the U.K. and therefore, action needs to be taken soon, as the number of people over 65 will more than triple by 2050. According to the WEF, improvement in healthcare have led to an ageing population and constantly changing social norms have decreased birth rate, which were highlighted as the main source of the rising pension gap
To conclude, such changes and news affect millennials and when voting for the upcoming general elections, party mandates and policies need to be looked at with regards to pensions. Labour’s proposal to scrap the regime of increasing retirement age to 67 by 2028 however might might not be idea, given the difficulties people are facing with regards to meeting their retirement income needs.