Lepista Posted May 9, 2011 Share Posted May 9, 2011 Woo Hoo - £9Trn - that's the largest UK related figure I've seen yet - beats the last one, more than doubling it. (Last on I'd heard was total UK liability, at around £4Trn.) Deflation - where? Quote Link to comment Share on other sites More sharing options...
leicestersq Posted May 9, 2011 Share Posted May 9, 2011 http://www.telegraph.co.uk/finance/personalfinance/savings/8501286/UK-faces-9-trillion-savings-shortfall.html 'The country faces a staggering £9 trillion shortfall in savings to support the next generation after they stop work, according to a report from the Chartered Insurance Institute (CII). "Currently, many pre-retirees have little savings and carry the burden of significant debts just at a time when their incomes are about to fall," it says. A spokesman for the CII added: "A lot of people are going to have their assets depleted by parents' long-term care costs or their own." The report says the average care home costs £26,000 per year and the average stay is two years, although a significant proportion of people stay for more than four. That will rocket as people start to live longer. The proportion of very old people will grow the fastest, says the report, with the number of people over 90 expected to nearly treble over the next 20 years. The CII insists the taxpayer will only be able to foot part of the bill. Steve Webb, minister for pensions, agrees: "The next generation will face a different world, with increasing life expectancy, the decline in final salary schemes and lower annuity rates. They are going to have to take greater responsibility for saving for their retirement." Pensioners currently only receive 30pc of their former salary on average during retirement, says the OECD.It believes that needs to rise to around 70pc for people to enjoy a similar standard of living in retirement as when they were working' scuse ol pedro for pointing out,but a lot of british people don't even earn £16,700 a year.old age looks certain to become a lot less comfortable for most. Hmm, I bet if you added up all those figures, then retired people would need almost all the output of the economy to have a comfortable living. That might make it difficult for those working to survive on what's left over. The wonders of demographics. I always like to think of the problem in terms of people. One retired person, fifty people working in the supermarket/farms/bakeries, etc. That retired person doesnt need to take much output of each retired person to enjoy a nice comfortable retirement, and those working dont suffer much from the money taken. Then consider what happens when those 50 workers retire, and the next generation moves in to work. Only this time there is just one worker. As you can see, his burden to pay for all of this is impossible to bear. And if you try and make him bear all the load he gives up work. But if he does that, no one gets anything. Indeed such is his power, that he can demand to keep nearly all of his output, as there is no one else to do his job. That in a nutshell, is the demographics nightmare facing the country as it ages. No matter what system you put in place to transfer money from those working to those retiring, it wont work as hoped, someone wont get what they think that they should get. Sure, the ratio of workers to retired people wont be as bad as in my extreme example, but every move in the ratio that reduces those working in proportion to those retired, creates more and more strain. If you try and force those retired to get what 'they are entitled to', even if that burden isnt tenable, then eventually any system you put in place, be it pensions via savings or pensions out of taxation, breaks down. And then those retired get zilch. Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted May 9, 2011 Share Posted May 9, 2011 That's me buggered, like the majority of the population. Living in such a high cost economy I'd barely be able to save 10% of that after all the bills and eating. If I starve and live in a field rent free I might just get close. Quote Link to comment Share on other sites More sharing options...
Timak Posted May 9, 2011 Share Posted May 9, 2011 It is quite possible to have a "comfortable" retirement on the state pension. If your definition of comfortable is a new car every 2 years and eating out every night then you will of course need to make some sort of arrangements for additional income. Quote Link to comment Share on other sites More sharing options...
The Spaniard Posted May 9, 2011 Share Posted May 9, 2011 ... and live in a field rent free I might just get close. Like this man? http://www.amazon.co.uk/Moneyless-Man-Year-Freeconomic-Living/dp/1851687874/ref=sr_1_2?s=books&ie=UTF8&qid=1297875636&sr=1-2 Quote Link to comment Share on other sites More sharing options...
Wait & See Posted May 9, 2011 Share Posted May 9, 2011 I thought the public must spend to save the economy?? Now they're told to save for old age.......hmmm. They way it looks to me, the UK is fubar for the next 50 years. Beans and shotgun time approaching. Quote Link to comment Share on other sites More sharing options...
Georgia O'Keeffe Posted May 9, 2011 Share Posted May 9, 2011 http://www.telegraph.co.uk/finance/personalfinance/savings/8501286/UK-faces-9-trillion-savings-shortfall.html 'The country faces a staggering £9 trillion shortfall in savings to support the next generation after they stop work, according to a report from the Chartered Insurance Institute (CII). "Currently, many pre-retirees have little savings and carry the burden of significant debts just at a time when their incomes are about to fall," it says. A spokesman for the CII added: "A lot of people are going to have their assets depleted by parents' long-term care costs or their own." The report says the average care home costs £26,000 per year and the average stay is two years, although a significant proportion of people stay for more than four. That will rocket as people start to live longer. The proportion of very old people will grow the fastest, says the report, with the number of people over 90 expected to nearly treble over the next 20 years. The CII insists the taxpayer will only be able to foot part of the bill. Steve Webb, minister for pensions, agrees: "The next generation will face a different world, with increasing life expectancy, the decline in final salary schemes and lower annuity rates. They are going to have to take greater responsibility for saving for their retirement." Pensioners currently only receive 30pc of their former salary on average during retirement, says the OECD.It believes that needs to rise to around 70pc for people to enjoy a similar standard of living in retirement as when they were working' scuse ol pedro for pointing out,but a lot of british people don't even earn £16,700 a year.old age looks certain to become a lot less comfortable for most. 9 000 000 000 000 There you go , job done, keep the change, dont thank me heres another 1 000 000 000 000 for pocket money, feel free to set up some sort of Smithsonian institute type thingamijig for me as thankyou Quote Link to comment Share on other sites More sharing options...
SarahBell Posted May 9, 2011 Share Posted May 9, 2011 isa savings were about 3 bn and lloyds said they had an extra £5bn saved in the last year So we're a little short of the total then? Quote Link to comment Share on other sites More sharing options...
needsleep Posted May 9, 2011 Share Posted May 9, 2011 The Chartered Insurance Institue says we need to save more. How lovely of it to think of us, and not its members. I feel quite emotional. Quote Link to comment Share on other sites More sharing options...
bobthe~ Posted May 9, 2011 Share Posted May 9, 2011 Hmm. Pensions Industry document says save more in our pensions scheme. And what is all this rubbish about increasing life expectancy. Surely they haven't heard about the obesity timebomb, where this generation of children will die before their parents? Quote Link to comment Share on other sites More sharing options...
leicestersq Posted May 9, 2011 Share Posted May 9, 2011 exactly,doesn't take much for the tipping point to be reached in terms of sustainability.these ponzi schemes is that they will work as long as there are enough who think they will get paid out. Pedro, it might not be a Ponzi scheme, but the outcome would be just the same. In my example, assume that there is an asset you can buy, called a telephone line. After all, your savings are used to buy some asset somewhere. That first retired person buys the phone line. When he is retired, he rents out the line to the young people. They prefer to rent the line rather than make another one because the rental cost is low, and because there are so many of them renting it, the income is good. Those working save for their own retirement, effectively making their own phone lines to be used as a source of income for when they retire. You can see the problem. When they try and rent out their wares to the worker, there is huge oversupply of phone lines, meaning rock bottom prices. In this market solution to the pensions problem, the market solves the problem by wiping out the savings of this boomer generation. All the power goes to the remaining worker. There is no Ponzi here, in this market there are savings used to buy real things. But the market works to encourage working and discourage overinvestment, by wiping out those investments. End result, Pensioners are penniless. Fighting the market is fools game for any government. Embracing it though, is going to lead to abject pensioner poverty given the demographics that many nations now face. What do you do? Quote Link to comment Share on other sites More sharing options...
bobthe~ Posted May 9, 2011 Share Posted May 9, 2011 It is also worth considering how much smaller the shortfall would be if annuity rates were normalised with increasing IRs. Law of unintended consequences. i see also that needsleep said pretty much the same as me. Well done that man/gal. Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted May 9, 2011 Share Posted May 9, 2011 That's me buggered, like the majority of the population. Living in such a high cost economy I'd barely be able to save 10% of that after all the bills and eating. If I starve and live in a field rent free I might just get close. Problem solved Quote Link to comment Share on other sites More sharing options...
fluffy666 Posted May 9, 2011 Share Posted May 9, 2011 Pensioners currently only receive 30pc of their former salary on average during retirement, says the OECD.It believes that needs to rise to around 70pc for people to enjoy a similar standard of living in retirement as when they were working' Hmmm. So if people expect to retire on 70% of final salary there is a insane shortfall... How about is that figure is a bit lower (mortgage paid off and kids left home), and retirement age goes up a bit? Quote Link to comment Share on other sites More sharing options...
plummet expert Posted May 9, 2011 Share Posted May 9, 2011 http://www.telegraph.co.uk/finance/personalfinance/savings/8501286/UK-faces-9-trillion-savings-shortfall.html 'The country faces a staggering £9 trillion shortfall in savings to support the next generation after they stop work, according to a report from the Chartered Insurance Institute (CII). "Currently, many pre-retirees have little savings and carry the burden of significant debts just at a time when their incomes are about to fall," it says. A spokesman for the CII added: "A lot of people are going to have their assets depleted by parents' long-term care costs or their own." The report says the average care home costs £26,000 per year and the average stay is two years, although a significant proportion of people stay for more than four. That will rocket as people start to live longer. The proportion of very old people will grow the fastest, says the report, with the number of people over 90 expected to nearly treble over the next 20 years. The CII insists the taxpayer will only be able to foot part of the bill. Steve Webb, minister for pensions, agrees: "The next generation will face a different world, with increasing life expectancy, the decline in final salary schemes and lower annuity rates. They are going to have to take greater responsibility for saving for their retirement." Pensioners currently only receive 30pc of their former salary on average during retirement, says the OECD.It believes that needs to rise to around 70pc for people to enjoy a similar standard of living in retirement as when they were working' scuse ol pedro for pointing out,but a lot of british people don't even earn £16,700 a year.old age looks certain to become a lot less comfortable for most. Only people with enormous incomes, inherited wealth or public sector pensioners will be retiring soon. Ther rest will work til they are 70 or more or til they drop. People do not realise the adjustment in living standards downwards, required to deal with the mountain of debt built up over the last 15 years or so. Total national debt is still rising and cannot be reduced by the current cuts programme. Borrowing will be rising again as the economy is so weak and the fanfared (welcome but insufficient) rise in manufactured exports wanes a bit over the summer. Hopefully the HPC for April at 1.4% will mark a proper change in sentiment and help FTB's stay away for their own good. Mortgage approvals are at a very low level for months now. No one should be tempted by these disgraceful govt/new home builder schemes, virtually guaranteed to land you in negative equity over the next 2 years. Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted May 9, 2011 Share Posted May 9, 2011 Ahhh, I remember the days when a trillion was a lot of money.... Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted May 9, 2011 Share Posted May 9, 2011 Problem solved Wow and change as well. Quote Link to comment Share on other sites More sharing options...
Democorruptcy Posted May 9, 2011 Share Posted May 9, 2011 http://www.telegraph.co.uk/finance/personalfinance/savings/8501286/UK-faces-9-trillion-savings-shortfall.html 'The country faces a staggering £9 trillion shortfall in savings to support the next generation after they stop work, according to a report from the Chartered Insurance Institute (CII). I can't believe people aren't taking more advantage of our generous saving interest rates. It isn't like you get an interest rate well below the inflation rate and have to pay 20% or 40% tax on money you have already had taxed is it? Oh.... wait a minute.... Quote Link to comment Share on other sites More sharing options...
scepticus Posted May 9, 2011 Share Posted May 9, 2011 Hmmm. So if people expect to retire on 70% of final salary there is a insane shortfall... How about is that figure is a bit lower (mortgage paid off and kids left home), and retirement age goes up a bit? Well if life expectancy goes up then so would the retirement age as you say. Old folks will be working well into old age and there will be plenty of work about, because by this stage the labour market will be extremely tight because of the high dependancy ratio. Large amounts of physical capital will be sitting unused (e.g. buildings, factories, land, etc) because there will not be enough people to staff them. Unskilled labour will rise in value compared to skilled labour as a result. Happy days for old dodderers who are mostly mentally past it but can still empty bedpans of those 10 years their senior. This will cause wage inflation that will mike life intolerable for those not working and make living off asset yield even more tricky than it is now. Of course immigrants will be imported to make up some of the shortfall but probably not enough, and in any case this will push up wages in the places from where the immigrants are coming. The solution then is to assume one will keep working and rely upon younger friends and family who are at peak earning power to help you out, like in the days before pensions, or simply work till you are nearly dead then have two years in a care home before karking it. Whether the former solution is available would presumably depend on what kind of life one has lived beforehand. Quote Link to comment Share on other sites More sharing options...
wealthy Posted May 9, 2011 Share Posted May 9, 2011 easy solution, legalise euthanasia. I would like to be put out of my misery if I get to the stage of entering a care home Quote Link to comment Share on other sites More sharing options...
Jack's Creation Posted May 9, 2011 Share Posted May 9, 2011 Pedro, it might not be a Ponzi scheme, but the outcome would be just the same. In my example, assume that there is an asset you can buy, called a telephone line. After all, your savings are used to buy some asset somewhere. That first retired person buys the phone line. When he is retired, he rents out the line to the young people. They prefer to rent the line rather than make another one because the rental cost is low, and because there are so many of them renting it, the income is good. Those working save for their own retirement, effectively making their own phone lines to be used as a source of income for when they retire. You can see the problem. When they try and rent out their wares to the worker, there is huge oversupply of phone lines, meaning rock bottom prices. In this market solution to the pensions problem, the market solves the problem by wiping out the savings of this boomer generation. All the power goes to the remaining worker. There is no Ponzi here, in this market there are savings used to buy real things. But the market works to encourage working and discourage overinvestment, by wiping out those investments. End result, Pensioners are penniless. Fighting the market is fools game for any government. Embracing it though, is going to lead to abject pensioner poverty given the demographics that many nations now face. What do you do? My link Quote Link to comment Share on other sites More sharing options...
_w_ Posted May 9, 2011 Share Posted May 9, 2011 It is quite possible to have a "comfortable" retirement on the state pension. It is today, because it is unsustainably expensive. It won't be long before a state pension will be very far from 'comfortable'. Quote Link to comment Share on other sites More sharing options...
_w_ Posted May 9, 2011 Share Posted May 9, 2011 (edited) Total UK property value is around £7tr so a bit of a shortfall I'd say. Particularly when, as they all try to sell, total UK property 'value' falls to £2tr... Edited May 9, 2011 by _w_ Quote Link to comment Share on other sites More sharing options...
guitarman001 Posted May 9, 2011 Share Posted May 9, 2011 That's me buggered, like the majority of the population. +1 lol!!!!! Quote Link to comment Share on other sites More sharing options...
General Congreve Posted May 9, 2011 Share Posted May 9, 2011 (edited) Second the euthanasia angle. I imagine we will start to see a sea-change in news print regarding the esteem in which it is currently held Hell, I'm sure it could even get legalised here given 10 or 20 years. Not a bad idea for a business plan... Edited May 9, 2011 by General Congreve Quote Link to comment Share on other sites More sharing options...
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