Pensions lottery could make us all losers in long run
A former colleague relished telling me last week about two forthcoming new additions to the population. His wife is fit to pop with identical twin girls.
He and our sister publication, The Times, got me thinking: could the twins live to be 150? Times2 posed this very question alongside a photograph of a thumb-sucking newborn. Decrepitude is no longer inevitable, it said. Science will help us to stop the rot. There is, some scientists say, a real Dorian Gray among us — someone who, through a mixture of good genes, healthy lifestyle. and timely medical interventions, will give the impression of staying young throughout an extraordinarily long life.
I was still pondering the likelihood of living to 150 when I was presented with another big question: just how did Derren Brown do it? In a television stunt, he claimed to have predicted the six winning Lotto numbers, sparking an online guessing game about how did it. Indeed, “Derren Brown” and “lottery” were the two top searched-for keywords on the web that led users to timesonline.co.uk. Dozens of theories were offered — from camera trickery to simple sleight of hand.
Even actuaries were speaking about it. Clive Grimley, a partner at Barnett Waddingham, bought into the most popular theory. “According to someone on YouTube, he used split-screen technology to give the impression that the balls were in the live shot, when in fact they were a static image,” he mused. “The left-hand side of the screen, which showed the numbered balls in a row, was a frozen image. In reality, an assistant was putting the balls in place during the 30- second delay between them being drawn and Brown revealing his numbers. Like Edward Norton in The Illusionist, it’s all a trick.” Just as illusory, he says, are projections of retirement income. Pensioners today can expect to spend a third of their lives in retirement — a figure that could grow to half our life or more, as we all die later.
It may sound good in theory, but Grimley had some sobering views: the state pension age will have to rocket, a growing number of people will be forced to take “the glide path” — gradually winding down into retirement rather than stopping work altogether immediately — and the onus for funding our latter years will increasingly fall on our own shoulders. The NHS will crumble under the pressure, with 100-plus pensioners battering down the doors at doctors’ surgeries.
Early evidence stacks up his argument. It is already proposed that the state pension age for women will rise to 65 by 2020, making it equal to that of men. For both sexes, it will rise to 68 by 2046. That will be far from sufficient, though. “Increases to state retirement age are going to have to be fairly radical — I don’t think anyone wants to admit just how radical,” said Grimley.
A former colleague relished telling me last week about two forthcoming new additions to the population. His wife is fit to pop with identical twin girls.
He and our sister publication, The Times, got me thinking: could the twins live to be 150? Times2 posed this very question alongside a photograph of a thumb-sucking newborn. Decrepitude is no longer inevitable, it said. Science will help us to stop the rot. There is, some scientists say, a real Dorian Gray among us — someone who, through a mixture of good genes, healthy lifestyle. and timely medical interventions, will give the impression of staying young throughout an extraordinarily long life.
I was still pondering the likelihood of living to 150 when I was presented with another big question: just how did Derren Brown do it? In a television stunt, he claimed to have predicted the six winning Lotto numbers, sparking an online guessing game about how did it. Indeed, “Derren Brown” and “lottery” were the two top searched-for keywords on the web that led users to timesonline.co.uk. Dozens of theories were offered — from camera trickery to simple sleight of hand.
Even actuaries were speaking about it. Clive Grimley, a partner at Barnett Waddingham, bought into the most popular theory. “According to someone on YouTube, he used split-screen technology to give the impression that the balls were in the live shot, when in fact they were a static image,” he mused. “The left-hand side of the screen, which showed the numbered balls in a row, was a frozen image. In reality, an assistant was putting the balls in place during the 30- second delay between them being drawn and Brown revealing his numbers. Like Edward Norton in The Illusionist, it’s all a trick.” Just as illusory, he says, are projections of retirement income. Pensioners today can expect to spend a third of their lives in retirement — a figure that could grow to half our life or more, as we all die later.
It may sound good in theory, but Grimley had some sobering views: the state pension age will have to rocket, a growing number of people will be forced to take “the glide path” — gradually winding down into retirement rather than stopping work altogether immediately — and the onus for funding our latter years will increasingly fall on our own shoulders. The NHS will crumble under the pressure, with 100-plus pensioners battering down the doors at doctors’ surgeries.
Early evidence stacks up his argument. It is already proposed that the state pension age for women will rise to 65 by 2020, making it equal to that of men. For both sexes, it will rise to 68 by 2046. That will be far from sufficient, though. “Increases to state retirement age are going to have to be fairly radical — I don’t think anyone wants to admit just how radical,” said Grimley.
When you reach the magic age — whatever that may be — you could be sorely disappointed. The Institute of Directors said last week that the government should freeze the state pension to help cut its growing budget deficit, and freezes — or cuts — could soon become the norm.
How much you stand to get from personal pension savings could be a shock, too. Annuity rates have dropped almost 10% since last summer, pushed down by the government’s attempts to reflate the economy. It has pumped £175 billion into the financial system by buying up gilts. This has pushed gilt prices up and yields down by as much as 50 to 100 basis points, and it is these that determine annuity rates.
Moreover, the sort of income you can expect from your pension pot is also determined by life expectancy. Clearly, the longer you’re expected to live, the lower the annuity rate. Three decades ago, in 1980, benchmark annuity rates for a 65-year-old man were almost 16%. Today, they’re less than half that at 7% — knocking £9,000 a year off what you’d get for a £100,000 pot.
What if in another 30 years they’re just 3%? That would knock off another £4,000, giving you a pitiful £3,000 a year for every £100,000 of pension savings.
Never mind the twins. I’d better get on with cracking the code for predicting the numbers of those Lotto balls.
Questions:
Why does the author introduce the topic of the likelihood of 150?
What does the expression “the glide path”(in para5) mean?
Why does the author use the Lottery number?
Please give a summary of the personal pension saving in the United Kingdom.
