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To not understand the point of pensions unless you're on a high salary?

(164 Posts)
koolkidsss Fri 25-May-18 08:49:08

My salary is below average, and the 3% contributions are nothing. I know employers have to match it, but I just don't see the point as the sun at the end will probably last less than five years. I know some companies offer excellent pensions but the bog standard ones seem so pointless.

I also dread to think what the retirement age will be for me. I have grandparents who died in their 60s so the gloomy part of me wonders if I'll even live to retirement.

Unless you're going to stay in one job for years, which offers an excellent pension I don't see the point. AIBU?

Ifailed Fri 25-May-18 08:58:15

Although 3% is on the low side, if you start paying in during your 20s it'll still be a tidy sum when you hit 67, or whatever the retirement age is then. It's got to be better than totally relying on whatever the state will be paying out in 40 years time?

BlueBug45 Fri 25-May-18 09:00:47

@Ifailed depending on the OP age, the state pension age could be 68 or even higher.

The government is due to make the state pension age for anyone born after 1972 68 but due to Brexit have delayed the legislation. It is then predicted to go up a year every 10 years.

KirstenRaymonde Fri 25-May-18 09:01:22

You can move the pot with you as you move jobs, you can add more to it than the 3% they add as well. For various reasons I’ve barely been able to add to a pension and I’m 30 and not a homeowner yet, and it’s a worry. We should all be worried, state pensions will look even worse by the time we get there.

KirstenRaymonde Fri 25-May-18 09:01:46

I’m preparing to work until I’m 70

Ifailed Fri 25-May-18 09:03:39

I agree, who knows what the retirement age will be in 40 years time?

To take a simple example, if a 27 year old had 3% of their £20k salary paid into their pension they would have £36k in 40 years time. Not a huge sum, but better than nothing?

Lostwithinthehills Fri 25-May-18 09:05:08

Some public sector pensions involve contributions of up to 15%. Could you find some sort of long term private investment or pension package that you could make similar contributions to throughout your working life? 15% of your salary put away over 30 or 40 years would leave you with a worthwhile sum.

Firesuit Fri 25-May-18 09:05:08

3% is bugger all, but it's still more than nothing. You are being unreasonable not to put in the full amount that employers will match, you are giving away free money, that's insane.

It's true that putting in the minimum won't give you any kind of pension, but it will still give you more money than you would have had if you didn't refuse to take the free money.

LifeBeginsAtGin Fri 25-May-18 09:05:09

I think a pension is more important than getting on the housing ladder.

OP look at moving jobs for better pay and conditions and always pay in as much as you can.

My 18yo DD works in Primark and pays 10% matched by the company.

Travis1 Fri 25-May-18 09:05:46

And this was the only thing that motivated me to buy a house! Not having to worry about rent in retirement.

MatildaTheCat Fri 25-May-18 09:07:14

I was unfortunate enough to be given ill health retirement in my late forties. I was and am hugely relieved I had my pension. I’d also paid in some additional voluntary contributions which also made a difference.

If you have such a scheme, which I appreciate not everyone does, value it.

specialsubject Fri 25-May-18 09:08:38

i started my pension at 21, earning 8k a year. that means the contributions were considerably less than you are paying.

inflation, stock market etc - it is doing well over 30 years later. dont refuse free money.

Firesuit Fri 25-May-18 09:11:10

The question here is not whether or not it's worth saving for a pension. That's an important question, but a different one. The question is whether it's worth turning down free money because you don't want to save a tiny, tiny fraction of your own money until retirement age.

ShotsFired Fri 25-May-18 09:12:38

Pension conts can often also decrease the amount of tax you pay on the remaining salary so there's that too.

So why pay in? Free money from your employer, lower income tax, because it removes some of the worry as to how you will fund your later life. Because it's better than doing nothing.

Imchlibob Fri 25-May-18 09:22:04

So you need to pay in more than 3%. That's just the statutory minimum which means that everyone has a pension so that there is no faff involved when you are intelligent enough to realise that you need to do more. Most people who didn't have pensions before being obliged to were just not bothering because it is effort. The effort is done now.

Rule of thumb - half your age when you start saving should be the percentage you start at. So a 20yo can get away with 10% over 50 years but a 40yo needs to put in 20% over 30 years.

muffinthepuffin Fri 25-May-18 09:23:02

Also it's unlikely you'll just run down the full amount in three years, you'll have a small income from retirement until you die that will supplement the state pension, if that's still around. I know annuities are no longer compulsory, but an investment rule of thumb is that you can withdraw 4% pa (if in stocks and shares pension or isa in uk) without eroding your capital. So if you'd saved £40k, you'd have an extra £1600 a year to live off for life.

JeanMichelBisquiat Fri 25-May-18 09:24:40

It's worth it if the employer's matching, as it reduces your taxable income and gives you free money to boot.

As Firesuit says, the issue of whether it's worth saving for a pension, and how much you'd need to save in order to achieve significant payments when you purchase an annuity, is a separate one.

It makes sense to take the free money, even if that on its own isn't going to build you a whole pension "salary" eventually.

traciebanbanjo Fri 25-May-18 09:25:26

The state pension and housing benefits, free bus pass and free prescriptions probably won't exist for many working people under 50 now.

Adversecamber22 Fri 25-May-18 09:26:00

I started a pension at 21, roll on 27 years and I was hit with bad health so was retired early with a decent lump sum and a decent pension. I will admit when I started my pension I didn't envisage needing it in my forties but thank goodness I did.

I can take my second pension at 55 if I choose to from my previous job as well.

Zaphodsotherhead Fri 25-May-18 09:26:30

All those of us on NMW jobs can't just 'pay in extra to our pension pots'. There simple isn't enough to live on, let alone shove extra money aside as 'savings'.

The shit is really going to hit the fan when the government of the day decides it can no longer afford state pension and everyone is going to have to rely on (dodgy) private pensions. The one I paid in to when I was younger and earning more is in such a negative state I doubt I'll even get back what I paid in, let alone be 'comfortable' in old age.

I've told all my kids to try to save and invest for their (almost inevitably) pensionless old ages.

worridmum Fri 25-May-18 09:26:58

the problem is that pension schemes can and are often stripped by the companies despite it being "Your" money that you have contributed too and if the company goes bust you are the last to receive any money.

Its become legal requirement to contribute but there has not been any changes so companies can still strip them of all the money aka BHS style and you end up having to use the government insurance scheme which pays less then 20p in the pound.

MrsDilber Fri 25-May-18 09:29:24

When we were young and skint, we still put in a pension pot. As DH career progressed, we continued, DH is 12 years off retirement and were so glad we did this. I couldn't work and gave up my career to care for our severely disabled son. God I miss work!

However, It feels like you'll be young forever, I'm 48 and that time has flew. From 30 to now feels like the blink of an eye.

mimibunz Fri 25-May-18 09:30:05

The idea is that you have your work pension, personal savings and a government pension, so 3 pots to fund your retirement.

titchy Fri 25-May-18 09:31:09

Ok do the maths. 3% of £10k, so minimum wage is £300. So that's what you have extra every year if you didn't bother with a pension. £25 a month.

Or, put it in a pension. Employer matches so contribution now £600. Gov tops up to £800. 40 years of working gives you a pot of £32,000 when you retire.

Plus if you die before you retire there'll be some associated death benefits for your family.

Or you can have your £25 a month...

BackInTime Fri 25-May-18 09:34:21

This is free money OP. You get tax relief on your contribution and your employer is also making a contribution - it is certainly better than nothing. Don’t forget that this money is invested so it should outperform the current dire interest rates in the long term. I know it doesn’t seem like a lot but it soon builds up and it really is better than money in the bank. You do have more flexibility these days and the option of taking your personal pension at any time from age 55 and you can also have some or all as a lump sum you wish - although this might be taxed. Ideally you should save more but if you don’t want to save into a pension perhaps consider ISAs.

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