Since I have been writing this column, I have dedicated two of them to pensions. Those attempts to inform public employees about their entitlements have opened a can of worms. Sadly, for many who sought clarification, they have come to the stark realization that they would not be enjoying a financially secure retirement. Today, I would like to point workers, who are young enough to make changes, in a direction that would guarantee some measure of financial independence when they retire.
In the old days when things were simpler, civil servants and those in private sector “good jobs” worked for 33 and a third or more years and received a pension on retirement. The people who did not fit into those categories lined up at post offices for a meagre welfare pension, if you were determined to be poor enough by a means test.
The retirees, who could not take of themselves, hopefully had enough children and were fortunate if some provided for their parents in their declining years. Otherwise, the old person spent their last days in the almshouse. Since Government has closed most of the almshouses, it is more fashionable to leave the older relatives at the Queen Elizabeth Hospital, but with the super bug that is no longer a viable option; but I digress.
In a more caring time, the pensions for civil servants and those with private sector “good jobs” were usually provided at no cost to the worker. They were considered as a normal part of doing business. As a matter of fact, it was not unusual to hear union leaders refer to pensions as a deferred earning.
Nowadays, when the emphasis is on maximizing profits and containing costs, employers are moving away from providing non-contributory pensions to people who made it possible for them to become rich.
However, some employers have been opting for pension schemes where the costs are shared between employer and employee. Government has taken the lead, as an employer, to rid itself or reduce its pension costs; the private sector merely followed. At this point, I feel the urge to chastise politicians for reducing the pension benefits for the average worker while enhancing theirs; but I will resist the temptation except to say that they have increased the pension age for everyone else to 67, and reduced theirs to 50.
Since the advent of the National Insurance Scheme (NIS), workers are being conditioned to rely on it for their retirement income. Regrettably, many are disappointed when they discover NIS’ highest pension is 60 per cent of your insurable earnings.
Before you start calculating 60 per cent of your salary and say, I can live on that, remember that NIS will pay on a maximum of $4 270 per month. As a result, the maximum pension will only reach $2 562. Now, you can see the problem if you were working for say $6 000 per month and then suddenly, you are forced to survive on the NIS pension.
In order to live comfortably in retirement, a pensioner cannot rely on NIS alone. He would most likely have to provide an additional pension or utilize savings, and hope that they would last until the Maker calls him home. The older you get, the more you have to set aside to achieve a decent additional pension, and that might prove to be prohibitive.
It is difficult to get through to young people that they should start retirement planning at an early age. Retirement is the last thing on the mind of a person in their 20s and early 30s. They tend to concentrate on raising their families, but with a little discipline both can be done.
I would therefore like to share some suggestions to save money that were sent to me by a friend. Mind you, they do not apply to everyone but you can choose the ones that are applicable:
• Eliminate cigarettes, weed and daily lunches at restaurants. Cutting back on $25 per week will save you $1 300 per month;
• Do you really need an SUV? Why pay a gas bill of over $1 000 per month when you can buy a 1300cc car and fill up on $500 per month or less? The smart people are selling the SUVs to the other people who are buying them from the smart people;
• Avoid buying too much house. Why would you want a six-bedroom family house? The children will grow up and leave home, and as you get older, who will clean it for you? And with those painful knees, you are not going upstairs too often. Also consider that there will be recurrent charges for things like insurance, land tax and maintenance. If you are going to build big, do so in such a way that you can convert to apartments when the children leave home; and
• Remember that credit cards are not assets – they are not money. Every time you use one of them, you just received a loan that must be paid back.
This list is not exhaustive but I am sure that almost everyone can identify some area of expenditure that is discretionary.
Do not look to the politicians to fill the void. They will promise anything to get the vote but thereafter, as we have heard, they will tell you that a manifesto is not a social contract – it is just a statement of intent.
• Caswell Franklyn is a trade unionist and social commentator.
