Millions ‘at risk of being in debt in retirement’

Millions of people are at risk of being in serious debt when they retire, as one expert has claimed the current pensions system is not prepared for the future.

Dr Ros Altmann, writing in the new CII Retirement Savings Report, claimed that the subject of people working for longer in life has been ignored for too long.

She remarked that this trend was already being seen but more could be done to encourage older people to stay in their jobs or to work part-time after they reach retirement age, as being “economically active” can result in a more comfortable lifestyle for them and their families – and ultimately the rest of the country.

The expert noted that decision-makers have been ignoring demographic shifts which will also put a great deal of strain on the pensions system – namely that the future will see an increased elderly population with some people living to be older than 90, while the number of young people will shrink.

According to the report, the current system will not be able to provide for everybody, as it revealed at least one in four people will need round-the-clock care costing £50,000 if they are put into a residential home for the average period of two years. Currently, the average pension fund only affords the individual a £30,000 entitlement.

“It is absolutely vital that we reinvigorate long-term savings. People have lost faith in pensions and many have put no money aside for retirement, never mind for long-term care. We cannot go on like this,” Dr Altmann remarked.

Earlier this year debt charity Credit Action warned that a switch from the Retail Price Index to the Consumer Price Index of inflation would mean lower increases in coming years for public sector pensions and tax credits.

By Joe White