Shocking new statistics have revealed that not only are nine in ten people in the UK going to fall short of their retirement plans, but 39% have completely failed to make any plans at all. There's a very real risk these people will enter retirement in terrible financial difficulties.
So how did we end up in such a dire state?%VIRTUAL-SkimlinksPromo%
The figures come from retirement planning company Aegon, which carried out a study of Global Retirement Readiness to find out how prepared people were for their retirement. In the UK only 15% of people are confident of a comfortable retirement - compared to 41% in China, 37% in India, 28% in the US, and 21% in the Netherlands. And when the company assessed how ready they really were, they ranked the UK as less prepared than those in India, Brazil, China, the US and Germany.
The report blames a number of factors. By far the biggest is the decline in company pensions. Until the mid-1980s your employer could force you to join the company pension scheme - and by far the majority of these were defined benefit plans (otherwise known as final salary pensions). It means that people working then tended to have been saving into a decent pension as a default.
In 1986, people were given the right to choose whether or not to join, and at the same time personal pensions came into being. This created the mi-selling scandal which saw so many switched from good final salary schemes into poorer personal plans.
In the intervening years, competitive pressures and accounting rule changes have made it increasingly expensive for employers to offer final salary schemes, so they started to switching defined contribution schemes - which instead of offering a fixed pension on retirement, saved a sum over your working life for you to secure a pension with on retirement. By 1997 only a third of employers offered final salary schemes, and since then the figure has plummeted to just 8%.
Meanwhile, because employees had to choose to join pension schemes, an increasing number of them failed to do so, so membership of these schemes dwindled. In the late 1960s more than 12 million people were a member of their company pension scheme, in 2011 this had fallen to around 8 million.
From October 2012 the government's efforts to undo the damage started to come into effect - auto-enrolment. Under this scheme employees are automatically enrolled into a defined contribution scheme - into which employees and the employer both pay. However, this is only gradually being rolled out, so many won't be enrolled until 2017.
This will drag more people into pensions, but has a number of failings: the lowest earners will not be included, neither will those who change employers regularly or those who opt out. Even for those who join the scheme, the experts warn that the minimum level at which the contributions are set fall far short of the amount required to secure them a comfortable income in retirement.
It means that millions of people have not been saving enough. And the experts emphasise that the only possible solution at the moment lies with you. You are the only person who can put money aside for retirement and the only one who can ensure you have done enough, early enough, to meet your retirement expectations.
Clearly a combination of legislation, mis-selling and companies closing schemes helped to get us in this terrible pensions mess: but it's only you who can get yourself out of it.
Seven retirement nightmares
More than one in three have no pension plans at all
Figures from charity Age UK show that 29% of those over 60 feel uncertain or negative about their current financial situation - with millions facing poverty and hardship. Even though saving for retirement is not much fun, the message is therefore that having to rely on dwindling state benefits in retirement is even less so. To avoid ending up in this situation, adviser Hargreaves Lansdown recommends saving a proportion of your salary equal to half your age at the time of starting a pension. In other words, if you are 30 when you start a pension, you should put in 15% throughout your working life. If you start at 24, saving 12% of your salary a year should produce a similar return.
Many older couples rely on the pension income of one person - often the man. Should that person die first, the other person can therefore be left in a difficult position financially.
One way to prevent financial hardship for the surviving person is to take out a joint life annuity that will continue to pay out up to 67% of the original payments to the surviving partner should one of them die.
The disadvantage of this approach, however, is that the rate you receive will be lower. Again, the Pensions Advisory Service on 0845 601 2923 is a useful first port of call if you are unsure what to do.
Around 427,000 households in the over-70 age groups are either three months behind with a debt repayment or subject to some form of debt action such as insolvency, according to the Consumer Credit Counselling Service (CCCS).
Its figures also show that those aged 60 or older who came to the CCCS for help last year owed an average of £22,330. Whether you are retired or not, the best way to tackle debt problems is head on.
Free counselling services from the likes of CCCS and Citizens Advice can help with budgeting and dealing with creditors.
Importantly, they can also conduct a welfare benefits check to make sure you are receiving the pension credit, housing and council tax benefits, attendance and disability living allowances you are entitled to.
The average UK pensioner household faces a £111,400 tax bill in retirement as increasing longevity means pensioners are living on average up to 19 years past the age of 65, according to figures from MetLife. And every year in retirement adds an extra £5,864 in direct and indirect taxes based on current tax rates to the costs for the average pensioner household. You can be forced to go bankrupt if you fail to pay your taxes, so it is vital to factor these costs into your retirement planning.It is also important to check that you are receiving all the benefits and tax breaks you are entitled to if you want to make the most of your retirement cash.
The cost of a room in a care home in many parts of the country is now over £30,000 a year, according to figures from Prestige Nursing and Care. So even if the prime minister announces a cap on care costs - last year the economist Andrew Dilnot called for a new system of funding which would mean that no one would pay more than £35,000 for lifetime care - families will still face huge accommodation costs. Ways to cut this cost include opting for home care rather than a care home. Jonathan Bruce, managing director of Prestige Nursing and Care, said: "For older people who may need care in the shorter term, home care is an option which allows people to maintain their independence for longer while living in their own home and should be included in the cap." However, the only other answer is to save more while you can.
Older Britons are often targeted by unscrupulous criminals - especially if they have a bit of money put away. For example, many over 50s were victims of the so-called courier scam that tricked into keying their pin numbers into their phones and handing their cards to "couriers" who visited their homes. It parted consumers from £1.5 million in under two years. Detective Chief Inspector Paul Barnard, head of the bank sponsored dedicated cheque and plastic crime unit (DCPCU), said: "Many of us feel confident that we can spot fraudsters, but this type of crime can be sophisticated and could happen to anyone." The same is true of boiler room scams that target wealthier Britons with money to invest, offering "once-in-a-lifetime" opportunities to snap up shares at bargain prices. Tactics to watch out for include cold calling, putting you under pressure to pay up or lose the opportunity for good, and claiming to have insider information that they are prepared to share with you.