Pensions are pretty important. If we want to be able to retire at a reasonable age and live comfortably in our twilight years, we all need to be pension savvy. Unfortunately, that does not seem to be the case, and more than half of people in the UK admit that they are either not saving any money into a pension at all, or they are simply not saving enough to retire in the way they would like! Although the process of auto-enrolment, which came into force late in 2012, has helped to encourage more people to take pensions seriously, there are still a lot of people who aren’t taking it as seriously as they should, and there are numerous misconceptions still surrounding pensions.
Are you pension savvy? Find out by checking out these interesting pension facts that you may not have known about before…
The OAP Act was Introduced in 1908
The Old Age Pension Act, which introduced a non-contributory pension to the masses, was introduced in the summer of 1908, and the first pensions were paid in the January of the following year. At that time, approximately 500,000 people were entitled to receive the pension.
In order to qualify for this, pensioners would have to have lived in the UK for at least 20 years and be over the age of 70. People who were deemed to have made themselves poor on purpose in order to qualify for a pension could be barred from receiving one, as could individuals who had been convicted!
The Basic State Pension was Only worth Five Shillings
When the Basic State Pension was first introduced, it was only worth five shillings, which is the equivalent of just 25p today. You had to have an income of less than £21 annually to qualify for the full amount, but if you were a married man, you would be entitled to seven shillings, so that you could take care of your family.
The State Pension is £115.95 Per Week
The basic state pension today is just £115.95 per week, but how much you receive is down to a number of factors including how many NI contributions you have made, whether or not you’re married and a few other things. If you’re unsure how much you’re likely to be entitled to, the State Pension Calculator will give you some idea. How much are you entitled to?
Working Until the Age of 90 Could be Common for Millenials
Around 20 percent of people in Britain aged between 65-69 are still working, and many scientists believe that, in the not so distant future, living until the age of 100 will be normal. That means that the age we are all expected to work to is likely to go up and up and up, with numerous experts believing that millennials will need to work well into their 80s or even their 90s if they want to retire into a comfortable life. Of course, this does not have to be inevitable, and if you millennials reading this get serious about saving for your future now, you could buck what is predicted to be the norm and retire much earlier.
Women’s Pensions are Generally Lower Than Men’s
Equal pay for women is something of a hot topic right now, with many prominent women pushing to be paid the same as their male peers, but what we haven’t heard a whole lot about is the disparity in pensions between the genders. On average, women’s pensions in Britain are worth £7500 less than men’s. This is, at least in part, down to the fact that most women leave the workplace for a while to raise children, but it is also partly due to the fact that women earn less than men on average, and partly due to the fact that women tend to work in industries that don’t provide pensions more than their male counterparts.
This is something of a worry because, as you will probably know, on average, women live longer than men – three years longer in fact – which means that they will find it harder to live to the same standard than men in the same area of the same age, which does not really seem fair. Of course, if women get serious about their pensions, and see what they can do to mitigate against these facts, that does not have to be the case.
Around Six Million People are Auto-Enrolled
Approximately six million people have started saving for their future thanks to the workplace pensions auto-enrolment scheme. This is the direct result of more than 100,000 employers setting up workplace pension schemes for their staff, prompted by a change in the law. It is helping more people to think more seriously about their pension provision than ever before, which is undoubtedly a good thing.
Expats Can Invest in Pensions in their Homeland
British expats and foreign people who have lived/worked in the UK, can transfer their UK pensions to a Qualifying Recognised Overseas Pension Scheme (QROPS) when they have left the country. You can read about this at Axis-finance.com. This is a great advantage to many expats and is certainly something that should be considered.
Pensioners are Becoming More Common
As we all live longer, the number of pensioners has risen significantly. In 1901 there were ten working people for every pensioner, but in 2010 there were only three! This number is likely to shrink even further thanks to advances in healthcare and lower birth rates in Britain. This means that the government is probably going to have to do some radical thinking around pensions, and increase their contributions if future generations are to enjoy a retirement that is anything like the kind of retirement pensioners have now!
8.4 Percent of Gross Domestic Product is Spent on Pensions
As you can see at economicshelp.org/pension, in 2017, approximately 84 percent of GDP in the UK was spent on pension provision, and it is expected that this figure will rise to around 11.4 percent by 2050. Pensions are a major expenditure for the country but, of course, a very vital one.
A Third of People Don’t Know Where Their Pension Goes
It’s not really surprising, but over a third of people who invest in pensions do not know where their pot of money is being invested. Most of us just pay our money and don’t give a second thought to where it is going, but we probably should care, especially if we have a private pension, because the state of the economy can have a very significant impact on how much our pension pot earns (or doesn’t earn) and the more we know, the better we can make our money work for us.
The Average Pension Pot is Now £50k
The average pension pot by the end of 2017 was £50k, which is 72 percent more than it was in 2015. However, men were much more likely to have this amount in their pots than women, who were found to have three times less, with men averaging £73,600 and women just £24,900 for many of the reasons we have discussed already.
Half of Brits Opt for the Default Option
Studies have shown that around half of the people in Britain who have pensions never review their personal pension plans and the ones who do stick with the default option 38 percent of the time.
People Believe You Should Start Saving at 28
Around 80 percent of people in this country believe that you should start saving towards your pension at the age of 28. This is rather worrying as they are potentially missing out on a decade’s worth of saving if they start working at the age of 18. When it comes to pensions, you can never start too early.
You Can Set Up Pensions for Your Kids
A lot of people are unaware of the fact that it is possible to start saving towards a pension for your kids pretty much as soon as they’re born, and it is a good way to set them up for life as opposed to the average savings account, not least because it will get them into the habit of saving for their retirement.
Now that you know a little more about pensions, are you more likely to take them seriously? It doesn’t matter how young or old you are, taking steps now to add more to your pension pot will almost certainly pay off and enable you to worry a little less about your future. If you don’t have a pension plan and you’ve never even thought about getting one, then it will make a huge difference to your life!