Thursday, March 10, 2011

Britain's baby doomers

In the US, baby boomers are finding that their Age of Aquarius has come and gone, as retirement realities loom. Guambat has personal knowledge. For the generations that followed, including Guambat's offsprung offspring, it's a time for a bit of ribbing the old folks; they have felt (without empirical justifications, Guambat reckons) it's about time someone took the punchbowl away from the boomers.

But in the UK, the boomer doomers threaten the whole muddle class economy.

Public sector staff to be told: Work for longer and get a smaller pension
A major Government report will recommend linking the pension age – currently 60 for most state employees – with the state pension age.

It is due to rise to 68 over the years ahead, threatening the retirement plans of millions of public employees, who will also have to contribute more to their ‘gold-plated’ pension funds. And experts forecast the state pension age will continue to rise, eventually hitting 70 as Britain struggles to meet the cost of its ageing population.

State workers who can currently retire as young as 55 will have to work for many more years to secure maximum pension benefits. Even members of theArmed Forces, police and firefighters, who can currently go on full pension as early as 50, will be told they will have to wait until they are 60 before they qualify.

The dramatic move is part of a broader shake-up of state employees’ retirement funds, which have created a £1trillion black hole in the public finances.

The highest-paid public sector employees are likely to have to pay far more into their pensions as a result – around 5 per cent of their earnings.

Read more:

Most Britons face 60 percent income loss in retirement
Almost two-thirds of people living in Britain today are likely to see a 60 percent drop in their income when they retire over the next 40 years and a plummeting quality of life, a report said Thursday.

"The UK has a distinct problem with middle-income earners who are failing to save enough and are likely to find the drop in income during retirement unexpected and unacceptable," said Paola Subacchi, one of the report's authors.

The report says the problem is worsening because of a shift from defined benefit (DB) pension schemes to defined contribution (DC) schemes, which do not guarantee a predetermined retirement income.

"Furthermore, the recent recession has highlighted how vulnerable wealth and pension funds are to economic shocks and reduced annuity conversion rates," it adds.

Middle-class Britons' meagre savings mean they will have to rely heavily on the relatively small state pension, which "only just ensures a minimum standard of living," Chatham House said.

"Some may even slip into poverty," the report adds.

If the economy fares worse over the next decades than most economists forecast, retirement incomes of the so-called squeezed middle will be pressured even more, it adds.

The report follows a warning by Labour leader Ed Miliband that low and middle-income families in Britain are facing a "cost of living" crisis which will persist for years to come.

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