5 min Read
19 Sep 2016

Written by Damien

Damien is one of the most widely quoted money and investment experts in the national press and has made numerous radio & TV appearances. He created MoneytotheMasses.com while working in the City when he became disillusioned with the way the public were left to fend for themselves because they could not afford financial advice.

More about Damien

A radical solution to the pension crisis

You may not have realised but last Thursday (15th September) was 'Pension Awareness Day', a day dedicated to raising awareness of the need to save for your retirement.

As I wrote this time last year, the only people talking or promoting it were those who benefit from selling pensions, namely pension providers and financial advisers. In a world where companies create fictitious days to boost sales consumers are rightly dismissive. Greetings card shops are notorious for it. I don't recall there ever being a Grandparents' day when I was a kid.

Pensions are of course a perfectly sensible way to save for your retirement but there are alternatives. Investing using ISAs is one way and of course there is the nation's unhealthy obsession with investing in property. But policymakers need to be exploring and promoting other avenues.

Anyone born in 1916 had a 1% chance of living 100 years. Anyone born in 2016 has a 33% chance of living 100 years. The old ideas about retirement need to evolve at the same rate as our life expectancy. Are our children really going to spend 40-50 years in retirement? Or put it another way, will they only work for half their lives? How could they afford to? Just imagine the amount they would need to be putting away for retirement. Basic maths, ignoring interest compounding, would suggest that they would have to be putting about half their salary into a pension. That's never going to happen.

Instead we need to realise that the current ways of working aren't actually working. We need to encourage young people to be entrepreneurs and automate as much of their businesses as possible. Automation would increase productivity (one of the biggest challenges facing our economy today) so that people could create lifestyle businesses which are lean and profitable. By a lifestyle business I mean a business that can be run working minimal hours, that fits around family life and can be run from anywhere in the world. It may sound too good to be true but it's possible. Have a read of the best-selling book by Tim Ferriss - The 4 hour work week. Yes it is a little American in it's style but his rebuttal of conventional thinking is admirable.

The point is that if people are encouraged to build businesses that fit their lifestyles and maintain a good work-life balance they won't want to retire. They will be able to generate a healthy income (and taxes for the Government to support the burgeoning elderly population) doing a job they love for as long as they chose. The Internet means that we can now work from anywhere in the world, sell to anybody and amplify our output. It's just most small businesses currently don't.

The state pension nor personal pensions are likely to solve the impending retirement crisis. With an increasing elderly population (which will increase further if more people live to 100) and fewer workers we need to increase productivity if our economy isn't to suffer. How else are we going to generate the taxes to pay for the elderly? The UK population needs to completely change the way it thinks and move away from aspiring to a 9-5 job and a career. We need to build a UK dream, much like the American dream where we inspire the next generation to build businesses they won't need to retire from and that will generate the taxes required to support the elderly. Even if this radical idea doesn't work then there is still a silver lining. Given that those born today will end up having to work until they are 80 regardless, they may as well do it doing something they love.

Finally if you want to work out what your retirement will look like in just a few minutes then use our new retirement calculator.

(If you enjoyed this rant you can view others on my blog here)