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Wednesday, February 08, 2017

We will increasingly grow old before we grow rich or even moderately well-off

The UK is going through a navel-gazing process to look (yet again) at the state of pension saving. We do this every couple of years - everybody gets very worried - and then we do nothing about it.

A couple of days back a lady (Sofia Stayte) who is head of the Independent State Pension Age Review was addressing a conference and made a statement that should strike terror into businesses.

This is what she said

Phasing out of defined benefit schemes, the rocketing cost of housing, and low levels of private savings meant even today's high earners would lean on the state for the majority of their income in old age. This would force a shift in expectations of what retirement means.
When we look at analysis 20 years in the future, most people on all income deciles will depend heavily on the state pension because they will not have much private wealth."
You can download her PowerPoint presentation from the conference web site. 

When I was writing my latest book (This I Know) I spent a lot of time looking the lack of wealth accumulation in younger age cohorts and even though I know the arguments it still scared me.

We rely on accumulating wealth during our working years that can be converted into income when full-time work stops. We are now in a world where the young and middle aged will become old before they become rich. In truth, before they have any meaningful levels of wealth.

Of course there will always be rich and poor in all ages. Ms Stayte's argument, which I agree with, is there will be more in the poor category with every passing year.

I hope, but don't expect, businesses are thinking about this and the implications. Dick Stroud

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