Why you should buy a ‘spectrum’ pension in 2018
The pension fund industry is set to go from being a hotbed of new, innovative ways of funding retirement for the next generation to being a dead end.
In 2018, the Pension Benefit Guarantee Corporation (PBGC), the UK’s pension fund regulator, has estimated that by 2022, pension fund managers will have to invest only £3.8 billion of their funds in “non-core” investments.
The rest will be spent on the “core” assets, such as equities, real estate and cash, according to the PBGC’s latest annual report.
In the meantime, the number of people who are able to retire with a pension plan has shrunk, to around 20.3 million people, and as the UK population grows, this number will continue to decline.
“As a result of a combination of factors including an ageing population, an ageing workforce and the ageing pension fund system, the size of the UK pension fund is set for a long-term decline,” the PBGB report said.
“The number of pensioners is set at 20.5 million people by 2022 and is projected to fall further to 20.4 million by 2038.”
This means pensioners in 2020, 2022 and 2038 will be only a third of the population they were in 20 years ago.
While the PBGT report didn’t address the possibility of pension fund investments falling further in the future, it warned that the outlook for pension fund assets is dire.
“This is likely to be a continuing process that could result in a significant decline in the number and size of pension funds in the UK in the coming years,” it said.
The PBGC estimates that the UK will be in a position to meet its 2020/2022 targets of saving up to £11 billion per year by 2026, with the PBG estimating the total cost of funding the pensioners’ retirement at £20.3 billion.
If you are looking for a new retirement option, or you want to save money but are unsure which pension plan is right for you, the PBCC has some good advice.
We have put together a wealth of financial advice for you to make the right decision, whether you want a traditional pension or a “spectrum” pension, according the PBGG.
Wealth of adviceRead moreThe PBGG is currently working with pension funds to set out how they can ensure they meet their 2020/2018 target, and the regulator has published the full PBGC report, including a detailed breakdown of what it says is the key factors affecting the future.
“In 2018 and 2019, we will review the size and scale of the pension fund, and will examine how the UK government is addressing the challenges of meeting the 2030/2031 targets,” the report said, adding that there are also “further opportunities for improvement in the way the UK funds are funded”.
The PBGT said it is also working with the Government to help pension funds meet their future pension plans targets.
“We are also working closely with the Pension Protection Agency (PPA) to ensure the sector has the resources it needs to fund its own plans for the foreseeable future,” it added.
We’ve put together this wealth of information to help you make the best investment decision.
We’re in the process of working with all pension funds and will be updating this post on a regular basis as more information comes in.