While the UK has one of the better funded state pensions systems of the world, the government are still expecting major funding issues for the state pension going forward.  There has, and continues to be, a great move towards putting the onus back on the pubic to arrange their own personal pensions for the future, with the intention of taking some pressure of the state system.  Why should we be funding our own pension arrangements as we have all paid our fair share of taxes?

The truth is that the pensions industry have made a number of simple errors over the last decade or so, with regards to the average life expectancy of the UK population. In an industry where even the smallest under calculation can have majors implications, it seems that that the UK population are living longer, which means extra funding requirements for the state pension (as well as personal and company arrangements).

The government have been offering a number of tax incentives of late to set up your own personal pension arrangement, which will run side by side with the state pension.  While some may consider this strange, the fact is that in relative terms the value of the state pension has been falling for some years with annual increases at best in line with inflation.  As the cost of living increases at a higher rate than the state pension, the power of the state pension is continuously eroded.

There are also concerns that the UK may suffer as the EU grows closer and closer, with talk of “bailing out” fellow EU members who are having major problems with their state pension. The Italian pension system for one is currently in disarray with massive under funding implications forecast for the years ahead - we are talking about billions of pounds, which fellow EU members may be expected to contribute to.

The fact is that by the time many of us reach pension age, the value of the state pension will have fallen so much in relative terms that we will need to have our own arrangements in place.  For those in a position to do so, it his highly advisable to seek professional advice as soon as possible.