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- Why you should pay in to a pension before April 2015
A recent report from the International Monetary Fund (IMF) has warned that the UK faces a £750bn pension time bomb.
It appears that life expectancy is growing faster than expected and the financial sector has understated how quickly lifespans will rise by around three years. The report by the IMF into longevity risk, says it is not unreasonable to assume the entire cost of this gap could fall on the UK taxpayer. This would mean the extra cost could come from the state pension and public sector pensions, plus the state may have to bail out failed private sector schemes.
The report suggests that public debt in the UK could rise from 76 per cent of GDP to as much as 135 per cent, this could add an extra cost of £750bn to national debt by 2050 to pay for the increased costs. Based on its findings the IMF has urged governments to deal with this problem and suggests further increases in retirement ages, higher contributions into pension pots (from both employers and employees) plus smaller payouts to those in old age. The key message this sends out is that more focus needs to be put on planning for retirement, both from a government perspective but also for us as individuals. The increase in the state pension age to 67 by 2028 and 68 by 2046 may well give us longer to prepare for life after work, but it is important to start thinking now about your lifestyle when you retire and how this is going to be funded.
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