Employees 'will be forced to work until 75' as the private sector pension crisis builds
WORKERS could be forced to stay in their jobs until they are 75 because of the crisis in the private sector pensions, the new head of investments in Bloxham Stockbrokers has predicted.
James Forbes said the current pensions crisis was being completely overshadowed by the meltdown in the banks and the public finances.
And instead of encouraging more people to save for retirement, the Government had signed up to cutting the tax reliefs on pensions for higher-rate taxpayers, as part of the €85bn IMF/ECB bailout, he said.
This was due to create a financial timebomb, which was set to start to explode around the time that the country began to emerge from the current banking and public finances mess.
Part of the problem with pensions was that people were living longer, he said.
"You don't have to be an actuary to know that we are all living longer. But we are not saving enough either," Mr Forbes said.
Just 40 years ago, the average person could expect to spend the equivalent of 30pc of his/her adult life in retirement.
Today, the average person who retires can expect to spend half their adult life in retirement.
"If this keeps going, to try to avoid a pension pot meltdown, employees -- that's you and me -- will just have to work longer and 75 could be the new 65 when it comes to retirement age."
This is assuming people can get jobs in their 70s and that they will be physically able to work at that age.
The director of investment solutions at Bloxhams said the problem could only be solved by saving more and saving for longer. And the earlier people started saving for their retirement the greater would their returns be, he added.
Mr Forbes explained that if a child was given €2,000 by his grandparents each year from birth until he was just four years old and then this money was invested in a typical fund, the value of that fund at the age of 65 would be the same if that same person invested €2,000 each year from the age of 25 until he was 65.
This illustrated the importance of starting to save as early as possible, he said.
In addition, if the money was left invested in the fund for a further five years, the value would increase by over €115,000 to €460,000 -- from an initial total investment of €8,000.