Pensions; why don’t we teach our children how to save for retirement?
It’s not a common conversation at the dinner table. It isn’t taught between history and geography at school, even though most communities go to great pains to lecture children on safe sex and drugs. Our kids are most likely taken to the zoo for a field trip than to the retirement village to visit the old timers. Why is this? Why don’t our kids learn that they need to think about their old age, their pension, their retirement, their dependents?
The National Employment Savings Trust (NEST) reports that pensioners that earn at least 15 000 pounds a year reach a level of comfort and security no matter how many people there are in the household. This seems to be the threshold. Anything under that becomes strained and difficult to manage. People have a hard time paying for basics like heat and groceries, and often turn to immediate solutions such as short term and payday loans. Often this spirals out of control when it becomes impossible to pay these emergency loans back and the result is pensioners living in poverty and debt.
Ideally we should educate the population to begin contributing to their pension at the age of 22. At this age the minimum contribution is sufficient to ensure a pension of approximately the 15000 pound mark. If it is left until later contributions rise substantially. For example if a person begins contributing the minimum at the age of 30 their pension will come out at 11790 pounds a year. Similarly a 40 year old would end up with 10210 pounds a year. The expected revised state pension due in April 2016 should be worth just about 7500 pounds per annum and the theory behind the revisions is that people will be urged to save along side of the government pension.
The bottom line is that people need to start saving early. A state pension is simply not enough to live on. One needs to contribute to the work place pension scheme, or even take out a private pension plan. Nobody wants to end up old, cold and hungry.
Thankfully NEST has some interesting tricks for the spring chickens that are so busy being young and fabulous they aren’t even thinking along these lines. NEST asserts that by replacing a take-out or restaurant meal with a home cooked meal once a week, a 30 year old worker could save 12 pounds towards their pension. This would increase the pot of gold by over 50 000 astounding pounds. Another easy to implement tip to add another 63000 pounds to the pot of gold to take the time to pack a lunch to take to work instead of buying a lunch. Eliminate just one take-away coffee less during the working week and watch the pot of gold grow by 11800 pounds.
It would be interesting wouldn’t it, if younger people were educated timeously about how large that pot of gold waiting at the end of every rainbow could actually be.