One in four putting off retirement

MILLIONS of workers are having to delay their retirement because of collapsing shares, a survey has revealed. One in four is planning to quit work later than they had intended just two years ago.

It means that many are being robbed of years in retirement simply to avoid living in poverty or having to manage on less than they had expected.

The figures again highlight the pensions crisis, brought on by longer life expectancy and declining fund values.

A multi-billion-pound shortfall exists between what people are saving and what they should be putting aside.

The survey, of 4,500 workers aged 50 to 64, found that 50% said their savings had 'declined a lot' since pension funds and other investments suffered a big fall in value between 1999 and 2002. Another 20% of those questioned by consultants Watson Wyatt said their savings had 'declined a little'.

The fall in those years was prompted by the stock market losing 40% of its value. It hit many savers hard as they had grown used to the the 1990s boom. But with many pension schemes having over 70% of their assets in shares, it left them heavily exposed to a collapse.

'The bear market from the end of 1999 is the first time in which significant volumes of retirement savings were at risk in equity markets,' said Jonathan Gardner, of Watson Wyatt. 'The euphoria of the late 1990s was such that this decline, or at least its scale, was probably not anticipated by most investors.'

Experts estimate that a worker who had expected to retire with a pension pot worth £100,000 in 1999 would have seen their expected fund slump by almost 20% by the end of 2002, to just £80,000.

They would have to work on to make up the difference - although the number of years would depend on how quickly shares recovered.

The Watson survey also found that women were more likely than men to cut back on future investments in shares if they had been hit by falling markets. With people living longer, the collapse has left many needing to save even more.

And the crisis has been deepened by many firms moving workers out of traditional final salary pensions.

As shares have collapsed, they are being switched to more risky schemes which place the burden of saving enough on workers.

A survey by Close Wealth Management revealed earlier this week that hundreds of thousands of people have seen the amount their employer saves for them cut.

Typically, an employer will contribute almost 15% of their salary each year to a final salary pension, but just half this amount into the new-style schemes.

Critics also blame a £ 5bn a year tax on pensions, introduced by Chancellor Gordon Brown in 1997, for hitting fund returns.

Work and Pensions Secretary Andrew Smith's proposals to plug the pensions gap offered little hope of halting the closures of final salary schemes, his critics say.

Instead, the Government has resorted to a policy of encouraging people to save more and work longer. A drive to outlaw ageism at work is seen as an attempt to offset the crisis, with the age at which people have to stop work being raised.

The retirement age of 60 for women and 65 for men would be scrapped under the plans, with a possible new age of 70.

Nest eggs 'facing crisis'
DISASTER is looming for millions of investors who may lose out on vital nest eggs, an expert has warned. With-profits pensions, mortgage endowments and other schemes are said to be in 'terminal decline'.

It means that nest eggs promised by banks and insurance firms, as well as independent financial advisers, may turn out to be much lower than expected.

Millions of Britons are looking to the schemes to provide a pension fund or pay off their mortgage.

John Chapman, a former watchdog at the Office of Fair Trading, urges the Government to take action. He warns in Money Management magazine that the value of the schemes is draining away as annual bonuses which fuel them are frozen or cut.

Equitable Life, Royal & SunAlliance, Scottish Mutual, Britannic, Pearl and NPI have closed schemes which hold the nest eggs of six million people. Four of them declared no bonus payments last year.

Chapman said the stock market would need to rise by 20% a year to maintain bonuses.