There are two worlds when it comes to retirement – Monday Musings 08/11/2021
I have just read an article about the university lecturers who are going on strike because they are being asked to contribute a bit more towards their pension scheme. At the moment they have a total of 30.7% of their salary paid into the scheme, they pay 9.6% and their employer 21.1%. After calculating the future pension liabilities of the scheme, it has been calculated that it has a deficit of £14 billion just in case you missed that a deficit of £14 billion. So, the Pension Regulator advised the trustees of the scheme that the funding level has to rise to 56.2%. Without wishing to comment on whether these folks who want to go on strike are right or wrong, I would like to make a couple of comparisons.
The workplace pensions which many employees find themselves in mandate that there must be just 8% of salary paid in.
The vast majority of self-employed people could only dream of making pension contributions at 30.7% let alone 56.2%. And let’s not forget the most people are employed in these small and medium enterprises.
The argument then seems to be are the self employed and workers who are not in one of these schemes that are available to people who work in jobs that are at the end of the day funded by the tax payer more entitled to a decent retirement than the rest of us who have either created jobs and wealth, or should they thank their lucky stars and not cause our young students even more pain than they have already gone through over the recent past.
I won’t bang on about the decision by the Bank of England (BOE) to leave rates where they were as no doubt you have seen this covered in depth elsewhere. The real enemy is inflation combined with poor interest rates paid on your investments. Recent analysis shows that the best fixed rate bond on the market launched last September with a rate of 1.2% would have turned £10,000 into £10,120. With inflation at 3.1% this gives a buying power of £9,816. The frightening thing is that this is better National Savings and Investments which are paying 0.01%. The best easy access account over the period paid 0.67%. With the Office of Budget Responsibility forecasting inflation at an average of 4% next year and the BOE forecasting a peak of 5% in April next year these rates of return are looking more and more disastrous.
Although you should of course have your rainy day fund in cash, it really is time to take advice and get your non rainy day money properly invested.
|04.01.2021||08.11.2021||% Change||% Change on week|
|FTSE 100||6571.80||7303.96||Up 11.13||Up 0.92|
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