Jeff Salway: It’s a bleak outlook for those who want to retire

Accepting that you’ll probably never be able to retire, as I did some time ago, can be liberating. My reasoning was that, by the time I reach that point, either the very concept itself will seem quaint and outdated or I simply won’t be able to afford it.

I know of other people that have taken the same view, creating a psychological safety net for themselves by considering retirement less as a right and more as an added bonus.

Many people closer to the state pension age are doubtless beginning to see it the same way, particularly if they’ve read the latest report from those happy-go-lucky purveyors of good cheer at the Pensions Policy Institute.

Millions of people will pay for not saving sufficiently for retirement by having to work beyond the age of 75, it said this week.

Ramming home what we already know, it said too few people are building the level of savings that they’ll need to tide them over throughout retirement.

The institute’s research found that 45 per cent of people already in their fifties and sixties will need to work for an extra 11 years past the state pension age – currently 65 but rising to 66 and then 67 over the coming years – if they want a comfortable retirement.

Joanne Segars, left, of the National Association of Pension Funds, hit the nail on the head when remarking that “many people in their fifties will be stunned by the prospect of working for another decade after getting their state pension”.

The choice for anyone who wants to maintain a decent standard of living in their post-work years is stark, Segars added – you either have to work longer, save more, or both.

And while more Scottish pensioners are either delaying their retirement or returning to work in their late sixties and early seventies, finding that employment is not exactly easy, particularly in the current climate. So in one sense the challenge is quite simple in that it boils down to savings – think about how much you would need set aside if you want to maintain your lifestyle in retirement, and work out how to do it.

It might help to imagine the idea of never being able to retire. You may be fortunate enough to love your job, but do you want to do it as long as you live?

Retirement will come to be thought of in the not-too-distant future as less of a right and more a reward, perhaps even a luxury.

Unfortunately that will make it the preserve of the affluent. As the value of the state pension diminishes – and it can only do so, in spite of the proposed universal state pension – we’ll move closer to a two-tier society where a minority get to end their working lives sufficiently early to enjoy a comfortable retirement and others have little choice but to work for far longer than they had ever anticipated.

It’s a bleak outlook that would do those dour number crunchers at the Pensions Policy Institute proud; sadly it’s also very realistic.

Deep in the bowels of the financial services sector are people who spend large parts of their waking hours trying to work out how to get more people buying income protection.

To their endless frustration there remains a significant disconnect between the average person’s acceptance that they would be vulnerable to financial difficulties should they lose their main household income, and their willingness to take out an income protection policy.

Income protection is one of the most logical products ever developed by financial services providers. At its most simple it is designed to replace a decent proportion of your income in the event of being unable to work because of illness or an accident. It’s also possible to buy the product with an unemployment “bolt-on”.

The number of Scots taking out the insurance is falling even as fears over the security of household finances continue to rise, according to Scottish Widows.

Its latest Protection Report found that more than half of Scots rely on just one income, leaving them open to problems if they were to lose that income.

A common claim made against income protection is that it’s preferable to fall back on savings than an insurance product. But almost one in three Scots would have used up their savings within four weeks if they lost their income and the majority would hit financial difficulties within six months.

In income protection the insurers believe they have what people admit they need, yet they still can’t sell it. You can understand their frustration.