Planning to prevent the financial equivalent of climate change
Millions of workers across the UK could be heading for a significant shortfall in the amount of pension they need for an adequate income. The World Economic Forum (WEF) has issued a warning that calls on the Government to impose faster pension-age rises as it earmarks the UK as one of several countries facing a ‘pension time bomb’, with the UK pension savings gap reaching £25 trillion by 2050 if action is not taken soon.
PENSION SAVINGS GAP
The pension savings gap is defined as the shortfall between current retirement pots and the
amount of money needed to maintain an income of 70% of pre-retirement levels. Commenting, the WEF head of financial and infrastructure systems, Michael Drexler, said: ‘The anticipated increase in longevity and resulting ageing populations is the financial equivalent of climate change. ‘If increases in life expectancy were matched by corresponding increases in the retirement age,
the challenge would be less acute.’ He added that policymakers need to consider how to integrate 75 and 80-year-olds into the workplace.
The WEF analysis also calls for the £1 million lifetime allowance to be scrapped, arguing it sends the ‘wrong signal’ that there is a limit to pension contributions.