Pensions

[Le Tout P'ti FC]

Bump. I've been reading this series of articles in the Guardian today and the fear has set in.

Talks of a generation who can't afford to retire, and a return to mass pensioner poverty. The drop in home ownership exacerbating matters because of permanent rental commitments, where previously mortgages would have been cleared.

Most alarming to me was this - the IRRI state that people should put 15% of their lifetime earnings into their pot to avoid pensioner poverty. But 42% have no private pension, and the average fund size is only £47k. This would buy you an income of
47% of those in 30s/40s are not saving adequately, or at all. Over 45s private savings will generate an income of £4k on average.

More. 63% of those retiring today do not receive a full state pension. Hints to expand state retirement age to 75 or even 81. My retirement age has already climbed from 65 to 68, so roughly 1 year added for every 5 years I have worked so far.

It is quite the most depressing and terrifying list of woe I have read in some time.

I'm 38. I saved a little bit privately from graduation at 22 until I was 28, my previous employer did not offer a scheme. It was a modest amount in retrospect.

From 28 onwards I've been saving 10% into my work scheme, and my increasing private contributions into my own scheme take me up to maybe 18% in total. So I've put a decent sum aside.

But yet every time I read something like this and do a pensions calculator it shows that I'm not doing enough.

The whole thing alarms me, and I am a financial professional.

Anyway, if you want to share a dose of the fear, read this...

'There's a danger of a generation who can't afford to retire'

https://www.theguardian.com/membership/2017/jan/23/saving-retirement-pension-generation-old-age?CMP=Share_AndroidApp_Messages

[Ross.]

I'd say 81 is probably a tad optimistic. I'm only a few years younger than you(34 going on 35) but I fully expect the retirement age to be upped to 84 at least for folk my age.

If I still stayed in the UK I would be fucked, as far as that goes. Had a decent enough job but thanks to private renting and a fairly reckless attitude towards my lifestyle, I had next to f*ck all put away beyond my NI contributions and the 5% of my salary that was going into my works pension(matched by my employer).

Since finding work over here I am extremely comfortable. I have one flat back home which is let out at the moment and I hope that it stays that way in perpetuity. I am considering buying a second, but need to really look into the tax consequences as I think the income will move me up a tax bracket over here. My pensions contributions here work out around 8x what I was managing back home, which is helping me catch up with everything I missed out. I shifted the pension I had with my previous employer to a SIPP, which I have so far managed to do OK with though it will only ever form a tiny part of any pension plan I can put together. The Swiss public pension is one of the largest and most stable in the world, and even if I leave here I will be able to transfer my contributions elsewhere so I won't lose out.

Worst case scenario for me is moving back to the UK as it stands, unless there are huge changes in the world. The currency inflation should mean I do OK in that respect.

[dee_62]

54 minutes ago, Le Tout P'ti FC said:

Bump. I've been reading this series of articles in the Guardian today and the fear has set in.

https://www.theguardian.com/membership/2017/jan/23/saving-retirement-pension-generation-old-age?CMP=Share_AndroidApp_Messages

Thanks for posting - a real eye-opener.

Company I work for stopped its final salary scheme a few years ago - I'd accrued 20 years service in it before it closed - I then joined the money purchase scheme and pay in 8% (which attracts a company contribution of 14%).  

After seeing loads of my colleagues do it, I finally got around to getting a valuation for my final salary pot and went to an IFA to discuss options.  Think I'll be moving it from its current location and investing in a private pension with a view to using it for a drawdown.  Ideally, I'd like to take the 25% tax free lump sum option at 55 and have a nice holiday, pay off any remaining debts (potential student loans, weddings and help the kids with deposits for property if needed). (My mortgage is due to be paid off at age 53).  I'd like to keep working FT with the same company, stick the rest of the tax free sum in various ISAs etc and leave the remaining 75% of the pot untouched and earning investment income for another 6/7 years.  Hope to finally quit any form of paid FT work by the time I'm 59, use the leftover tax free sum as an income for a while before finally dipping into the leftover invested pot.

The private pension also gives better provision to my wife and kids in the event of me shuffling off before them - unlike the final salary scheme which would pay them an absolute pittance.

I've also paid in about 32 years of National Insurance, so only 3 more years to qualify for the full £8900 p.a from age 67.

[Granny Danger]

The pension shortfall is quite frightening but the political response that may flow from it may be equally concerning.

I can foresee a right-wing response that seeks to drive a wedge between 'wealthy' pensioners and those less well off (just look at the title of Willets' book mention in the Guardian article).  In doing so they will seek to ignore the fact that the UK state pension is not particularly generous when compared to other economically developed countries.

 

Any serious response to the pension crisis will need to address wealth inequality for those of working age.  People working for the minimum wage can hardly be expected to put much/anything aside for old age, even if they do they won't build up much of a pension pot.

 

I realise most of these points would be more at home on the Politics Forum, but any debate about this issue is largely a political one.

[Dosser-fae-the-shire]

Thanks for posting - a real eye-opener.
Company I work for stopped its final salary scheme a few years ago - I'd accrued 20 years service in it before it closed - I then joined the money purchase scheme and pay in 8% (which attracts a company contribution of 14%).  
After seeing loads of my colleagues do it, I finally got around to getting a valuation for my final salary pot and went to an IFA to discuss options.  Think I'll be moving it from its current location and investing in a private pension with a view to using it for a drawdown.  Ideally, I'd like to take the 25% tax free lump sum option at 55 and have a nice holiday, pay off any remaining debts (potential student loans, weddings and help the kids with deposits for property if needed). (My mortgage is due to be paid off at age 53).  I'd like to keep working FT with the same company, stick the rest of the tax free sum in various ISAs etc and leave the remaining 75% of the pot untouched and earning investment income for another 6/7 years.  Hope to finally quit any form of paid FT work by the time I'm 59, use the leftover tax free sum as an income for a while before finally dipping into the leftover invested pot.
The private pension also gives better provision to my wife and kids in the event of me shuffling off before them - unlike the final salary scheme which would pay them an absolute pittance.
I've also paid in about 32 years of National Insurance, so only 3 more years to qualify for the full £8900 p.a from age 67.

Be careful if you're transferring a final salary pension. Make sure you fully understand what you are doing.

[dee_62]

Be careful if you're transferring a final salary pension. Make sure you fully understand what you are doing.

Yep, been to an IFA qualified to talk transfers. The annuity provided by the final salary isn't that great tbh. Particularly if I want to retire in my late 50s. Other stuff like death in service etc will continue if I keep paying into my money purchase scheme. Also, like I mentioned, the inheritance features of the final salary are non-existent.
Working on the basis that I'd like more money available at a younger age when I'll want to do more stuff and by the time I'm in my 90s, I'll not be needing anything like as much. So, while its nice to know that the final salary scheme will pay a set amount, increasing in line with cost of living, for the rest of my life, I just don't think it's the way ahead for me.

[JamieT1314]

Some of the cetv's bring offered on final salary schemes at the moment mean you would be mental not to transfer, can get your full 25% pcls, tailor your death benefits on the annuity accordingly and possibly stick a bit in drawdown for a rainy day. The new hybrid products are great for this.

[WeeMentalDavie]

For those thinking of taking drawdowns from their pension pots, you should be aware that it's 25% of each drawdown that is tax free so if you take 25% of the full pot then you will pay tax on 75% of that

[Blootoon87]

I'm pretty sure I'll be skint as a pensioner. That's for future me to worry about though, and he'll be a miserable old fucker anyway.

[Suspect Device]

No surprise that they're talking about raising the pension age to 70 again.

http://www.bbc.co.uk/news/business-39352654

It will keep on creeping up.

[beefybake]

On 2/6/2017 at 16:16, Granny Danger said:

The pension shortfall is quite frightening but the political response that may flow from it may be equally concerning.

I can foresee a right-wing response that seeks to drive a wedge between 'wealthy' pensioners and those less well off (just look at the title of Willets' book mention in the Guardian article).  In doing so they will seek to ignore the fact that the UK state pension is not particularly generous when compared to other economically developed countries.

 

Any serious response to the pension crisis will need to address wealth inequality for those of working age.  People working for the minimum wage can hardly be expected to put much/anything aside for old age, even if they do they won't build up much of a pension pot.

 

I realise most of these points would be more at home on the Politics Forum, but any debate about this issue is largely a political one.

'Bout  a year ago, I was driving home one Sunday.., Radio 4 on the radio. Some phone-in program where an expert answered questions about financial stuff.

A lot of the questions were about pensions, and welfare. The expert was an adviser from what I understand is a reasonably respectable outfit, Hargreaves Lansdown.

I particularly remember, after answering several questions, he came out with almost these exact words.... "To make this clear, no matter what you read in some

newspapers, or hear from some politicians..., compared with other West European countries, the welfare, benefits and pensions systems in this country are frugal.."

 

In my opinion, with half the country working multiple 'jobs', zero hours contracts, just to stay afloat, something major has to change.

[Granny Danger]

17 minutes ago, beefybake said:

'Bout  a year ago, I was driving home one Sunday.., Radio 4 on the radio. Some phone-in program where an expert answered questions about financial stuff.

A lot of the questions were about pensions, and welfare. The expert was an adviser from what I understand is a reasonably respectable outfit, Hargreaves Lansdown.

I particularly remember, after answering several questions, he came out with almost these exact words.... "To make this clear, no matter what you read in some

newspapers, or hear from some politicians..., compared with other West European countries, the welfare, benefits and pensions systems in this country are frugal.."

 

In my opinion, with half the country working multiple 'jobs', zero hours contracts, just to stay afloat, something major has to change.

The biggest misconception is about the well off pensioners, a point repeatedly referred to in the Politics Forum.

Yes there are many well off pensioners, some are incredibly well off, but many are living in abject poverty.  Not surprisingly the most impoverished pensioners are largely those who worked in low paid jobs - you don't need to be a genius to understand the correlation.

This is from the BBC wesite today

http://www.bbc.co.uk/news/business-39352654

This is from 13 January.

http://www.bbc.co.uk/news/business-38609422

A 25 year old wanting to get a pension that would meet the pension 'gap' would need to start saving £246 each month net of tax!  

I trust all you 25 year P&Brs are managing to do this without any problem.  

[mizfit]

I can't even afford to get a mortgage, let alone save for a pension deficit.

f**k this.

[Blootoon87]

What are the chances of reaching pension age anyway? 50/50?

[Ross.]

44 minutes ago, Blootoon87 said:

What are the chances of reaching pension age anyway? 50/50?

Better than even chance these days: http://www.bbc.co.uk/news/uk-scotland-38142537

[KnightswoodBear]

Just now, Ross. said:

Better than even chance these days: http://www.bbc.co.uk/news/uk-scotland-38142537

I'm shite at gambling.

[Ross.]

3 minutes ago, KnightswoodBear said:

I'm shite at gambling.

I probably fund the William Hills pension plan single handedly.

[resk]

There's a school of thought that says that full tax relief on additional pension contributions might not be available forever. Ie some government in the future may reduce the tax relief. So if you can afford it, it's sensible to consider making additional contributions now.

[DI Bruce Robertson]

I plan on taking out the largest possible personal loan when I'm 64, at numerous banks, then killing myself the day I turn 65. If the coke & hookers haven't killed me in the intervening period. Whatever is left will be my legacy.

[Granny Danger]

1 hour ago, Blootoon87 said:

What are the chances of reaching pension age anyway? 50/50?

Saw something on the BBC recently suggesting that anyone born after 2000 has a 50/50 chance of reaching 100.

5 minutes ago, resk said:

There's a school of thought that says that full tax relief on additional pension contributions might not be available forever. Ie some government in the future may reduce the tax relief. So if you can afford it, it's sensible to consider making additional contributions now.

Tax relief on pension contributions is a tricky one, costs a fortune in lost revenue but withdrawing or reducing it could impact on folks willingness to save as opposed to be reliant on further state aid down the line.