Why workers may be forced to 'bop until they drop'

Ry Cooder's eight album, ‘Bop Until You Drop’ could have been written for all of us working in our jobs today and saving into our pension.

THE American country singer Ry Cooder had a famous single in 1979 called ‘Little Sister', based on an original recording by the great Elvis.

Well, that song came from Ry's eighth album, the title of which brings us to our theme for today. The album is called ‘Bop Until You Drop'.

Casting an eye over the list of songs, that whole record (sorry, CD ... sorry, download) could have been written for all of us working in our jobs today, and saving into our pension.

For a start, it looks as though over three million of us are going to do just that – ‘bop until we drop' - we who fear we'll have to work until we die, according to some new research just published by Scottish Widows (SW).

There are also over 10 million of us expecting to work until forced to retire through ill-health. What kind of ‘retirement' is that, especially since SW points out nursing home costs these days cost on average £866 a week.

The research was done in January just past, and contains some surprises, but also confirms some traditional bugbears in relation to how we're planning for retirement.

Reports of this kind often reveal how many of us will work beyond retirement age, but aren't so great on indicating if we actually want to, or if we'd like to retire but can't afford to. In other words, we don't know how many of us are actually ‘trapped in the workplace'.

Well, fair play to the Widows this time round, for checking this out. It appears that nearly a fifth of adults in the UK (18 per cent) believe that work beyond age 65 will be forced upon them, rather than a choice. That's one in five whose pension planning has let them down, and failed to meet their expectations.

Scottish Widows recommends that we save 12 per cent of our salary towards retirement each year. To achieve this requires action and planning, especially as it's more than double what you might be saving in an auto-enrolment scheme, where the new minimum contribution level is just 5 per cent.

Which brings us to track three on ‘Bop Until you Drop', entitled ‘The Very Thing that makes You Rich, makes Me Poor'.

This might as well refer to our widely varying levels of retirement saving today. Less than half of us (44 per cent) are saving what Scottish Widows recommend here as a desirable level: 12 per cent of salary. No wonder we might be missing the boat on that long-desired world cruise.

By the way, did you see on the news this week that the QE2 has now been refurbished as a luxury hotel? The catch is, it is harboured, it doesn't sail anywhere. If you don't want to end up on a cruise liner that's going nowhere, it's time to boost your pension saving with Additional Voluntary Contributions!

Now we move to Ry's track number seven, (which could have been written about the state of the Basic State Pension scheme): ‘Trouble, you can't fool me'.

We explain regularly in this column that the state pension scheme may be headed for big trouble in future. Remember the ‘dependency ratio'? This is where the number of older, healthier people drawing out of the state pension is growing faster than the number of workers paying in. As a result, the scheme is losing its puff and going soft, like last weekend's party balloon. Words like ‘unsustainable in its current form' are regularly mentioned.

Government tinkering and cost-cutting of the state pension is increasingly a worry for people, as they wonder how much they'll get out of it, when they retire. Four in ten of us (37per cent) are worried about future policy changes to the state pension, in particular increases to the state pension age, says SW. Again, additional saving could be advisable.

But let's go out on a musical note.

Suppose you fail to plan wisely today, and so end your years trapped in the workplace - then track number seven on Ry Cooder's album could be your grandchildren's very words, 20 years from now:

‘Look at Granny run, run'.

:: Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005 . Further information is available on the Facebook page 'Kennedy Independent Financial Advice Ltd'.

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