Saturday 27 June 2009

For a few dollars more...or a bucket

Pensions - now there's a depressing word.
Has anyone else been having that really bleak dream where you have aged into a creature far greyer and wrinklier than you are now? You are alone; not a sign of a friend or family member anywhere. You are toothless and a bit dribbly and in a terrible care home, with no one to spoon some food into your mouth.
You haven't? Well, I've got some news for you, it might be on its way to you next.
Britain, like other western developed countries, has a demographic timebomb heading its way. We are zooming towards a world where there are a lot of old people and not many young, working ones to pay the bills, manufacture goods or make things happen.
In a highly depressing article in today's Times, Andrew Ellson puts his big black marker pen through final salary schemes, and says we can forget about those being any help.
Yes, we sort of knew that, but we were, you know, ignoring it. However, there are more gloomy clouds flitting along the horizon, says Ellson. Public sector pensions, well, don't expect those to be around much longer. He is not alone in the world of ageing gloom. Master of wise words Vince Cable gave a warning of ructions in the public sector pensions zone at the Fabians' recent ageing society seminar.
And well, where does that leave us, apart from with our heads firmly in the sand? Ellson, who is the Times personal finance editor, says we could get to grips with SIPPS, that's self-invested personal pensions to you and me.
But once he starts explaining what they are, and what you need to do, they sound well beyond the realms of reality for me, my aunty Marge and Jonathan Ross - who admitted this morning on his Radio 2 show that he can't do numbers any more.
So SIPPS are a tax wrapper which you can fold around a number of investment "vehicles". With me so far? They offer greater flexibility than ordinary private pensions, BUT, they have higher fees and need a fair bit of watching.
And, warns Ellson, do read the small print. OK, this all sounds far too scary and difficult for most of us who just want to put some money in a safe place and see it grow.
Meanwhile, over at The Economist they have devoted a whole 14-page special to the scary business of ageing. And if you want to find the numbers to make you wake up at night with the nasty dribbling dream, then this is the place to find them.
In 1950 only around 5% of the population of the "developed" countries were over 60 years old, by 2050 this will be heading towards 35%. Meanwhile, in western Europe the birth rate is dropping fast, so there will be far fewer young people to help the economy work.
Also there will be far fewer kids around to help their ageing parents cope. And yes, we will be living longer, our current life expectancy in Britain is a pretty decent 79.1 years.
So back to pensions - where do we go from here? State pensions might be there for the next generation - and hopefully will cover the absolute basics, so we in Britain are luckier than some. But as to pensions - one of the few options left is gambling on the stock market - in some form, and that's just not very enticing. Private pensions are set up with the wealthy in mind. If you earn above £60,000 you probably have an accountant who can keep an eye on all these stock market fluctuations, fees that can go up as well as down, and who generally understands what to do with SIPPs.
If you are earning something around the average income level or below, then there probably not much cash left in the piggy bank to push into a private pension scheme in the first place, but certainly not much there to be eaten up by managment fees.
So where does that leave us? Well, I'm afraid for me it just feels like impending doom.
Since Andrew Ellson doesn't have any wise words for anyone in my pay bracket, then putting my head back in that bucket of sand seems like the only choice.

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