The golden age of pensions is over. You must start planning now

There was no state pension, no employer scheme – you worked until you couldn't, and then you leaned on your family or your savings.

But from the end of the Second World War to the mid-1980’s, there was a golden window in which someone else basically guaranteed you a comfortable retirement. Companies provided retirement schemes which locked in a reliable income (called “final salary schemes) and the state pension sat underneath as a backstop. Anything you wanted to save on top of that was the cherry on the cake.

That window has been closing since the 1990’s and is now basically shut. Companies don’t offer those kinds of schemes anymore, and the state pension certainly isn’t enough to offer a comfortable living on its own. A government commission warns that many future retirees are on track for a worse deal than today's pensioners.

And that’s if the system remains the same. It won’t.

With more people retiring in the next few decades (and those people living longer), the state will have to keep increasing spending just to stand still. It can’t do that as most of our current spending is funded by borrowing, and the market won’t keep lending more and more and more.

So the government will have the same amount to spend, but on more people. Everyone gets a smaller slice of the pie. Future generations will be, at best, lucky to have the bare essentials covered by a government pension – shelter, food, warmth. Anything else is up to you.

That sounds gloomy. It doesn't have to be. Because although it's your responsibility, it’s also within your control. Make a few changes now, and reap the rewards later on.

You might have heard Tom Swarbrick, Chris Justham and me talk about these kinds of things on “The Invest Sesh” – we reckon there are some things that everyone should at least consider doing, in order to give your future self a few more options.

1. Join your workplace pension (if you’ve got one). It's the best deal you'll ever get. Your own money, plus your employer's contribution, plus tax relief. Opting out is like handing back part of your salary.
2. If you’re self-employed, set up a SIPP to save. You might not get the employer matching, but the tax benefits are for everyone. If you’re saving anything for retirement, and can lock it away until you’re 55, it’s worth doing.
3. Save before you see it. One of the best tricks to play on yourself is to automate the saving – ideally for the day you get paid. Get it out of your bank account into a different place before you even notice you had it, rather than seeing what’s left at the end of the month.
4. Don't leave long-term money in cash. Investing in stocks is easier now than it ever has been. You can do it through your bank or a company such as Hargreaves Lansdown or AJ Bell. Stock markets jump around a lot over the course of a year, but over the course of decades, they leave you much richer than holding cash.
5. Make the time today. Most of us spend longer planning a summer holiday than our retirement. Sit down, and spend some time thinking about what you’re spending today. Halve it and work out if you could survive. If you could, great, best get saving! If you can’t, then that’s what’s waiting for you in retirement … so best get saving!

The age of assuming someone else will sort it out is over. With a little thought (and help from LBC), you can turn the responsibility into an opportunity.

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Ben Kumar is head of strategy for wealth, public policy and investment at 7IM.

LBC Opinion provides a platform for diverse opinions on current affairs and matters of public interest.

The views expressed are those of the authors and do not necessarily reflect the official LBC position.

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