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Financial futurology and your pension

The future we’ve ended up in is nothing like the one that was predicted by the futurologists of the past, writes Steve Bee.

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by Steve Bee on Aug 25, 2010 at 14:17

Back in the early 1960s there was a lot of talk about the future. I know, I was there and I heard it. Basically the future we were heading for back then was going to be fantastic.

To start with, by the end of the 20th Century we were going to have holiday homes not just on the moon, but almost certainly on Mars and Venus too. There seemed a high chance that the biggest problem people in the 21st Century were likely to face was that with billions of robots performing all the menial work and household chores for us we’d simply end up with too much spare time on our hands; even skiing on Mars or scuba-diving on Venus would eventually lose their attractions.

Forty years later here we all are; in the future. I don’t know about you, but I haven’t been to another planet recently and none of my friends travel around with the aid of a jetpack strapped to their backs. Not only that, but we’re not living in glass eco-houses floating above the cities either. On the plus side I suppose we’re not all required to wear skin-tight mauve and lime green suits and strange headgear which was one aspect of the proposed future that I had some reservations about if I’m being honest.

The fact is, the future we’ve ended up in is nothing like the one that was predicted by the futurologists of the past. Probably just as well I guess, but if nothing else it goes to show just how hard it is to predict what life will be like even forty years hence.

That’s probably just as well because back in the 1960s another bunch of futurologists working on the macro finance predictions and stuff decided that what we’d all need in the early decades of the 21st Century would be something called the Graduated Pension to keep us in the lap of luxury in our retirement. The Graduated Pension didn’t actually amount to much more than a row of beans as it turned out and was eventually replaced with some later futurologists’ idea of the State Earnings-Related Pension. That was, by the mid to late 1970s looking the best bet for our far-flung future financial requirements.

Not for long though. After suffering numerous cuts and re-jiggings the Serps scheme failed to actually make it to the future it was aimed at and was replaced by a new state second pension called S2P. The financial futurologists of the late 1990s thought that S2P was the way to go future finance-wise. S2P started at the beginning of the new century, but didn’t make it to the end of its first decade. The 21st Century financial futurologists decided to keep the S2P name, but changed every other aspect of the scheme.

Following the recent change of government I suppose a whole new generation of financial futurologists will come up with new views of what life will be like by 2050 and what type of financial life would suit the retired population in those far-off days. I’m no futurologist myself, but my guess is that things will change again on the pensions front; and again; and again; and...

Steve Bee is managing pensions partner at Paradigm Pensions. Visit jargonfreepensions.co.uk where you can find a simple pensions A-Z.

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10 comments so far. Why not have your say?

All state pensions should be removed from political interference. Any money paid into them via contributions should be ring fenced and managed by a responsible structure possibly reporting to the Bank of England. I do not trust politicians in any way to look after my long term interests and manage the money I have contributed.

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you trust the bank of england?

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On the practicalities of State Pensions.

I deferred my pension for a while and now have the option of taking the money or getting a slight increase in my basic state pension.

After allowing for inflation, the increase does not appear worthwhile in my opinion, when coupled with the uncertainties of future changes within the deficit context Do you agree?.

Is there some way of avoiding/reducing tax on the deferment, e.g. putting it into a SIPP or ISA?

Or is there some tax efficient way of doing things?

Has anyone been through this and give some advice.

I do not want to gamble with this money.

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I did trust the Bank of England, now I,m not so shure. Who can I trust?

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Steve,

A thought provoking article.

Additionally: In order to get us to sign up en masse, which we did, endowment policies were going to provide spectacular yeilds.

After the war we were going to create "a land fit for heroe's". The Beveridge proposals would provide support from "cradle to grave".

In the 80's the advent of the computer age was going to leave us with nothing but recreation time and in the year 2000 the millenium bug was going to destroy civilisation

. In the 50's and 60's we tore up our railway network because it wouldn't be needed in the age of the car.

In the 70's,it was the trade unions who were going to destroy civilisation and hospitals were adopting mixed sex wards because it was regarded as a reflection of normal society. Or am I just a cynic !

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i have worked all my life i am 63 i have paid my stamp and will be surprised if i get a pension at 65 i have known people all my life who have not had a job they will get the same pension its a joke

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not so bothered about the pension situation . . . but bloody disappointed that we're not all wearing skin tight mauve and lime green lycra . . . : ((

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To Emanuel Wilamowski - take the cash and, if you want more income, invest it in a portfolio of high income funds, which a good IFA can tell you about. You should be able to get 5% to 6% p.a. after charges and still have access to the growing capital if you need it. Alternatively, an Investment Bond, with a well chosen portfolio of funds within it, can give you 5% p.a. and not affect your enhanced age-related personal allowances as investment funds could. Just don't be silly and go to a 'wealth manager' at a bank for advice ("How do you get your bank to make you a small fortune? Give them a large one to start off with...")

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Thank you Orlando.

Will follow this up

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Pat Aldridge

Aug 31, 2010 at 08:24

I have deferred my state pension because I don't feel I would earn a better return by taking the money and investing it myself. But I might take the pension soon (although I am still earning so don't need it yet) as I am slightly afraid that the public spending review this autumn may stop paying people to defer it. They might even retrospectively take away the extra %age my deferral has earned so far, saying that people who defer the pension are rich enough to target?

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