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BoE Warns on Pension Uncertainty

By: Elizabeth Rigby


 Financial Times, July 22, 2002

The Bank of England warned that even if people save for their old age, market volatility could mean they could end up with less than they hoped for in retirement.

The research, part of a wider study on the implications of an ageing population by the Financial Services Authority, urges people to start thinking about retirement sooner rather than later if they want to retain a little glean to their golden years.

"One of the effects of people living longer is that they have to spread their lifetime incomes over more years of life, implying a need for saving when working," said Garry Young, author of the study.

However, the report goes on to stress that those relying on financial market returns to top-up their pensions "could be much less lucky than those who enjoyed the high returns of the 1980s and 1990s", particularly as provision shifts from the public to the private sector.

Such patterns could have wider macroeconomic repercussions, warned Mr Young, if "lower expenditure for the retired was intensified by lower spending by those of working age who become concerned about their own retirement income."

The research adds weight to the growing concern among policymakers over provision for dramatically ageing populations across Europe as people live longer and birth rates fall. Such fears have been compounded in recent weeks by market turmoil coupled with the poor performance of some pension funds.

The average age in the UK is set to rise from 38.6 years in 1998 to 41.9 years in 2021, with the number of over-75s rising sharply from 4.4m in 2000 to 8.3m in 2040.

The report urged financial regulators to provide more education for people about their options for old age. The FSA on Monday said it had not yet seen the report.

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