# 107 (2013) The Retirement Timebomb
I was talking to a budding enterpreneur the other day and we were discussing how great the personal allowance is for people like us, in that it allows us to earn up to ‘so much’ before we are asked to pay tax.
Of course, being a non tax payer has its problems, such as non eligibility to buy property etc. Equally those people benefiting from the personal allowance, enterpreneurs and those on part time hours etc, also don’t have to pay National Insurance. I don’t have to pay NI’s through my PAYE job but I do pay them through my business as voluntary contributions even though I am still under the personal allowance.
Those not paying these additional (and sometimes profit crippling) contributions through their earnings think they’re on to a winner, and as a temporary solution it is. But what happens if you are in that position long term? What if you end up never paying any National Insurance?
NI contributions are, amongst other things, essential for the provision of the state pension. And many people – those spending eternity on benefits, part time work or the self employed not volunteering to pay their contributions – are going to have to make some pretty difficult decisions in later life, which will revolve around whether or not they can afford to retire at all. And this is going to become a serious head ache for future Governments as well as taxpayers and hopeful retirees.
The state pension is a very limited income to survive on. And it’s not rising fast enough to meet the cost of living. If you have no alternative the only option for those of retirement age is to keep on working or top up the shortfall.
It’s ironic that this situation is potentially going to resemble the days before anyone had pensions. Those who survived to a retirement age continued to work until they died or were too ill or frail and became reliant on the charity of neighbours, friends and family to support them.
Invariably it was not a comfortable end, and many famiilies already financially at breaking point were put in the position of having to take in an eldery relative.
Retirement may seem a long time away but it can take a whole working life to build up a healthy fund. The full state pension alone requires 30 years of contributions to reap the full benefits of what is, to be honest, an inadequate retirement pay check. I have some savings, a good number of years of work under my belt and a plan if only savings rates would improve. Even so I’m panicking. Are you?