THE SOCRATES COLUMN
 
True wisdom comes to each of us when we realize how little we understand about life, ourselves, and the world around us.
Be careful what you wish for!!
For many the wish for a long and happy life may produce unintended consequences! Indeed, longevity has increased in virtually every country in the world, as advances in medical science, knowledge and better nutrition enables people to live longer and more productively. Retirement is supposed to be the entry point to the "Golden Years"

In an article of 26th April entitled "A Billion Shades of Grey" the Economist writes that "over the next 20 years the global population of those aged 65 or more will almost double, from 600 million to 1.1 billion". Clearly this has a major impact on virtually every aspect of our current lives, from young to old, from emerging to developed economies.
It is estimated that in the UK, an experienced mirrored in most developed countries and in developing countries where there is access to good medical care, those who reach the age of 65 will, in the absence of any life threatening illnesses, live into their mid- eighties. A sobering prospect for those with little or no long term financial provision. There are already over 12 500 centenarians in the UK, a figure which is steadily rising.

Doomsday prophets often predict the past into the future and come up with scenarios which may sell books but often turn out to be wide of the mark. Nevertheless there is a great deal that people contemplating retirement can do to ensure that they are indeed ahead of this curve and to obviate this demographic time bomb.

What are the megatrends? Firstly governments are unlikely to be able to afford generous state or even occupational pension provisions as they are dealing with the ever increasing longevity of its inhabitants. Companies also have already all but abandoned their final salary pension schemes in favour of defined contribution schemes, whereby a lump sum payment, with or without a gold watch is the best we can hope for. Clearly the onus is shifting from state and company assistance to personal provision. This is an opportunity and a threat. It is a wake- up call for everyone to look to themselves now to make their own provisions for retirement. That retirement period could well extend to as much as 30 years!

The pension world is dividing into two categories of retirees - the ones with flexible professions and careers and those who have either little in the way of skills and also those whose skills are narrow and not easily transportable. In future the former will, should they so wish, continue to work probably into their 70's and perhaps later. The latter will find that they will have to rely on whatever provision they have made and possibly less generous government and company pensions. It is vital for those who wish to pursue income- producing careers after the normal retirement age should be encouraged to retrain and stay active. In the UK, the DIY chain B&Q for example hire men and women into their 70's to work in their shops, an experiment which has been highly successful. Lawyers, accountants, teachers, doctors and other professional persons as well as the self- employed are obvious candidates for extended working lives. They are the lucky ones, but even these could find old age a difficult time financially.

Apart from obtaining or maintaining ongoing and income producing skills, a gradual impairment of state pension provisions and the gradual erosion of wealth over the retirement years makes it imperative that proper and regularly updated financial planning is put in place, as early as possible. Private pension plans, whereby, in terms of The Richest Man in Babylon (George Clason), one invests "a part of what you earn is yours to keep", a percentage of your earnings should be placed in a private pension scheme to enjoy when employment stops. Additionally, the acquisition of a capital sum for older age ensures that the golden years are what they promise. For most, it is important to make that phone call soon to your financial adviser.

 
 
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