Are We Being Pulled Toward A Pension Black Hole?

When you were a young adult, entering the workforce, what did you think when people talked about pensions?

I know that I thought that pensions were something that would just happen. That if I had a full working life, I would get a pension that would mean I could have the same kind of retirment that the older people in my life had. Other than that, I gave it no thought at all.

Speaking to many people about finances and pensions over the last 9+ years working with money, I think that a lot of people felt/feel the same.

But, and it’s a big but, the financial landscape in which we have matured has shifted enormously under our feet. No longer does a long working life mean you have a guaranteed comfortable retirement. No longer are our employers running the pension schemes and in charge of managing how they are invested. And, no longer is our retirement income tied to how long we live.

No. Instead, we are now responsible for our pensions, we are responsible for saving enough, responsible for how they are invested and responsible for not running out of money before we die.

And that change and shift to personal responsibility is scary. So scary that a lot of people are still keeping their heads in the sand about the future and hoping that it will all work itself out if they just keep going.

This is why I think that we are heading towards a pension black hole.

I believe that unless we actively take charge of our personal long-term planning, there are a lot of people my age (somewhere around 40) who will not be able to have the retirement they expect and there is a real danger that people will run out of money relatively early in retirement and face real struggle in later life.

To break free of that gravitational pull of the pension black hole, we need to look up from the day to day and ahead to the horizon. We need to work out what we want our later life phases to look like, confront the fact that we may not be on track and figure out the plan to get ourselves to where we want to go.

This isn’t necessarily a comfortable process to go through but, we all know, we feel better when there’s a plan.