The Hummingbird Blog

A Series of Insights Into Savings, Personal Finance and Behavioural Science
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Part 4 - Can You Really Depend on the Government to Bail You Out?

This is a question for the ages.

The short answer is no. You can’t depend on the government to bail you out for one simple reason: it is not the government’s job to do so. The government is mandated to provide a basic standard of living that can ensure basic living conditions for all citizens. In essence, it’s the government’s job to make sure that people have food to eat and roof over their heads. However, it’s not the government’s job to provide for everyone as far as maintaining their current lifestyle, whatever it may be.

The long answer is a bit more complex. Firstly, many individuals have their hopes set on pensions. Sure, pensions are not going away, at least not for the time being. But if you believe that your pension is going to save you, then you might be in for some unpleasant news.

To begin with, unemployment figures don’t look too promising. Roughly 2.6m working-age individuals (16 and over) filed for unemployment benefits from March to June of 2020. While that may only come out to a 3.9% unemployment rate overall, the fact that you have millions of workers filing for unemployment puts the enormous pressure on public finances. In addition, there are an estimated 253,000 people who aren’t even looking for work anymore. These individuals are considered “inactive” simply because they have given up looking for work or simply decided not to work anymore.

Yet, these are individuals who still need an income to make ends meet. As such, there is additional pressure on the system to look after these individuals.

As for pensions, it’s certainly not worth pinning your hopes on a pension saving you, especially in old age. At the moment, the maximum amount that one can collect from a Basic State Pension is £134.25 a week.

Does this sound like enough to live on?

Under the New State Pension scheme, you can expect about £175.20 a week. Sure, it might sound like it’s better than nothing. But then again, when you factor in inflation over the course of your lifetime, even with pensions themselves going up over time, you can’t expect to have a pension provide for all of your needs in your old age.

With the way things are shaping up, The Resolution Foundation has projected 4 million people jobless by 2021 and the possibility of jobless levels returning to pre-crisis levels by 2022 (optimistically speaking), there is increasing pressure in individual families to do their best to take care of their needs now. This is why there is a new sense of urgency to do something about saving money and building an emergency fund. Please bear in mind that things may not get any easier in the short term. Thus, it’s vital that something is done to ensure that you and your family are taken care of.

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