The piggy bank is drowning!

Are you relying on the government to fund your retirement? Then carry on dreaming …

Forecasts in underfunding of global retirement show that government balance sheets on at least 20 OECD countries are estimated to total $78 trillion. It is also estimated that, in Europe, until 2050 the expected 65-plus year population will rise to 26%, as at the moment it is around 17%, meaning even more funding for governments to worry about in “an ageing population” not contributing to the government’s coffers.

If that wasn’t bad enough, did you know that the average level of unfunded government liabilities from the public sector and social security pension is around 190% of GDP? Furthermore, contingent public pension liability is about three times the size of ‘conventional’ public debt-to-GDP ratios in most countries. This represents a big risk towards the compromise to keep up the pay out of any pension in the future.

The icing on the cake is the fact that growing unemployment, early retirement, badly-run welfare programmes and declining labour standards are also drastically impacting the financial sustainability of future pensions, be they government or private.

In our current economic situation, we cannot depend and wait for the governments to provide us with a future pension, therefore we must provide ourselves with the means to achieve our financial goals and the way to do it is by saving – starting as soon as possible so we can do it in a much easier and free-of-financial-stress way.

So what is the future of our pensions?

With absolute certainty, we need to take full responsibility away from state dependency and initiate our private pension/saving plan to create our own retirement nest egg.

The first step is to get the right financial advice and structure on an achievable savings plan to ensure your well-deserved retirement future.

What is a saving plan?

Whether you are still studying or retired, you can and must save for a rainy day or an event requiring capital injection. Nevertheless, the main objective is to maintain liquidity and to meet future expenses without struggle. Having enough cash available can help you through tough situations such as loss of employment. The short to medium term large expenses are often fulfilled by money saved. If you restrict your expenses and put it aside with the purpose of accumulating it, you will be saving money.

How to save money?

Knowing your budget is an important start. First, you need to detail all your income and expenses and if the income exceeds the expenses then you must have a surplus fund to provide yourself with a way to achieve future goals such as children’s education and/or retirement.

Financial planning for the future

At Blacktower, as financial advisers what we do is draw a financial path to see how bright the future can be:

For example, if a 25-year-old was to start to save €500 on a monthly basis now, when he reaches 60 years old, he would have accumulated about € 210,000, as shown in the Savings Plan Graph.

Should the savings start at age 40, they will need to save €875 per month to achieve the same fund value and as much as €1,750 if they start at age 50, as shown in the “Saving Needs” Chart.

So, if you delay the start of the savings programme, you will have to save more money every month in order to achieve the same goal. This will have a dramatic effect not only on the fund value that you will end up with and the available income that you need to achieve the same goal, but also in the lifestyle changes you may have to make as a direct result of having to save more in later years to make up the shortfall.

Basically, we cannot procrastinate when we are talking about savings, so don’t think about it, just do it.

Saving is your way to get a well-earned future

In summary, the importance of saving is quite simply because it allows us to accumulate money in order to provide your future needs and if done at the correct pace with little effort required.

Concluding, with trillions upon trillions of Euros of unfunded retirement obligations, the pensions system is under water – the piggy bank is drowning. Something needs to be done with an immediate effect like initiating savings plans with professional management advice.

By Ricardo Oliveira
Ricardo Oliveira is an International Financial Adviser at Blacktower Financial Management (International) Limited. With offices in Quinta do Lago and Cascais, call 289 355 685, email [email protected] or visit for more information.

Blacktower Financial Management (International) Limited is licensed by the Gibraltar Financial Services Commission Licence 00805B.