To think we are heading into a pensions disaster

Anybody relying on state pension being roughly the same as it is now with the same eligibility and real-terms value when they retire, unless they’re doing so within the next decade or so, is being very foolhardy.

Well, yeah. Obviously not much point people going to university and incurring that debt for low quality, pointless degrees. But those who do worthwhile ones at decent universities are the ones who end up paying it all back and funding others to pointless ones, in effect. If you’re building a decent career them the 9% kicks in pretty quickly at a fair low level of earnings now, below the starting salary for many grad schemes.

I agree that far too many people are going to university and it’s helping nobody. We need to make university for the top 10-15% and fully funded, and reinstated decent polys, technical colleges, apprenticeships with proper links to business and genuine routes into permanent employment, and stop pretending everybody is academic. Also funded evening classes etc to enable people to retrain midlife.

But this is one reason why, as I said in an earlier post, the UK healthcare system and public sector and state pensions systems should be the urgent priority for reform. They are bleeding the country dry. These systems simply do not and cannot work in their current form and the longer it takes people to accept this mathematic fact the less likely it is that the UK will be able to reverse its declining living standards by investing in young people (the whole education budget should be doubled), infrastructure, cheap energy, technology, and look to the future. Nothing will improve in the UK until all of the ever-increasing tax revenue is being siphoned off to pay for elderly people who made no provision for their retirements, despite living through the period of the most favourable economic conditions in the entirety of human history.

£140bn on pension, £160bn of the NHS cost spent on the same cohort, and £100bn on the debts they ran up. That’s before you even get to the off-balance sheet unfunded public sector pay schemes. It’s just not feasible for it to continue. They didn’t pay anywhere near enough tax in their lifetimes to cover the costs of the welfare and services they are extracting as a cohort (averaging £200k per person above their inflation-adjusted lifetime tax payments), nor did they provide such pensions and healthcare and long retirements to their own parents and grandparents. It is financially crippling the country and every government passes the buck as they don’t want to be the one to do what needs to be done but it won’t be long now before they have no choice, which will be far messier than transitioning to a sustainable system in an ordered and phased manner.

It won’t be pretty, but the maths simply can’t be made to work so it is inevitable that before much longer one unlucky government will be left holding the hot potato, which is now roughly the temperature of the Sun.

It's virtually impossible to take away pensions that have been part of an employment contract for decades, so I think we have to accept paying for the gold plated ones and also the reduced silver plated ones, for which contributions have been being made in past decades.

The only real answer is to tax the pension payments. I.e. reduce the tax free lump sum, or at least impose limits on it, and either increase the rate of income tax or impose NIC on all income so that it's payable on pensions as well as wages.

There's more than one way to skin a cat.

I think there are many jobs, particularly at the lower end of the pay scales, where physically being able to carry on to mid 60s is a lottery. DH(60) works in a physical role in a supermarket and is putting a lot of work into staying fit enough to carry on.

Of course workers in the private sector on the lowest wages tend also to be on the lowest percentage pension contribution.

I have been advising my DCs to pay attention to employer pension contributions when looking at different jobs. I'm fortunate that I changed jobs a few years ago and went from an employer contribution if 4% to 12.5% on a significantly bigger salary. It's late in the day for me but not too late.

Oh yes, fully agree, especially with the fact that public sector pensions are heavily subsidised (but all taxpayers!). I personally think that at one point state employees will be told that actually their pension is going to be less than what they expected.

The question is which political party will have to make that decision… but then I guess that they could phrase it as ‘pension age to go to 80 for everybody or we keep the current pension age but pensions for the state sector are cut’

You don't make ALL workers work shorter shifts. Just create some flexibility so that in, say a 12 hour shift, you have say half the workers doing the full 12 hours and the other half being done by two sets of part timers working 6 hours, so there's still the continuity from the 12 hour workers. Or stagger shift patterns. It's really no surprise that they struggle to recruit if they are so inflexible.

My OH knows a few nurses very well because he's a regular visitor to the oncology day treatment centre for his regular infusions (7 years and counting!). There's usually one of the older ones retiring every few months as they can't cope with working full day shifts nor 5 day weeks. All have told him the same, that they've asked for part time, fewer days or half days, and been rejected, so they just retire! These are highly skilled/qualified/experienced cancer nurses.

The funny thing is that some of them have come back but at some kind of different level, for which there ARE part time/fewer day shifts, but they're not allowed to do the same work, so instead of administering chemo injections/setting up chem drips, etc., they're the ones doing the blood tests, making the tea round, and general "dogsbody" work, obviously being paid a lot less for a lower level of work. But it's so bloody stupid to force highly skilled nurses to do the HCA level of work because the management are too stubborn to consider letting them do the skilled work, but on a basis other than full time!

It's things like that which need to change. In real life business or other organisations, the employer would be falling over themselves to be flexible to keep on their skilled/experienced staff, yet in the NHS (and presumably other public sector), it seems to be "computer says no" causing the shortage in qualified staff.

@SinkToTheBottomWithYou No employee contributions is quite rare and almost unheard of in smaller companies. Obviously it’s a massive perk but even what your employer puts in, it’s less than the government puts in for state employees.

Maybe, however historically for what it’s worth healthcare used to do early/lates/nights. (6 hours)

It’s harder to recruit staff as people need more childcare etc, they require larger volumes of staff to fill shifts ( we all know the current staffing crisis) and the instance of mistakes is higher due to more handovers, things getting missed etc which was largely why it was changed to 12 hours - to give continuity of care.

Maybe working patterns need to change over time? 12 hour shifts to 6 hour for older part time workers. Flexibility of employment perhaps

I have good news for you. The Lifetime allowance on pensions was removed last year. I rather suspect as Rachel and her husband were likely to breach it themselves.

The bad news in that both Rachel Reeves and Torsten Bell mooted the idea of lifetime allowance on ISAs when in opposition

We're sticking with pension contributions to bring us below child benefit crawlback threshold. So still a big chunk into pensions tbh.

But similarly to you, have started diverting more into mortgage overpayments and S&S ISA and reduced pension contributions a bit, just with that threshold in mind. Also because forecasted to hit lifetime allowance! Good problems to have I suppose ☺️

My private sector employer contributes 18% of gross salary with no employee contribution needed (large company, finance)

I think the big issue is the lack of knowledge around pensions and retirement.

I'm 58, I came into pension saving as DB schemes were being phased out in the private sector. At that time there had been a number of pension scandals (eg Mirror Group, Burlingtons) where company pension funds had been used to prop up ailing businesses.

Regulation meant that companies had to maintain funds which could meet pension needs. DC schemes meant the companies just had to hand over contributions. Further regulation meant they had to contribute themselves.

Too many people now believe that the minimum contributions made by themselves and their employer will give them a level of pension similar to their pay. They believe that the minimum is 'enough'.

People have built up pension pots. There is a lack of knowledge around how to use them.

A lot of people do still assume that the best or proper way to use this is to buy an annuity. However buying an annuity with a small fund may well not be the best use of the money delivering a tiny trickle of income. It may work out if they live to be 130 but otherwise the insurance companies win.

The most expensive retirement years in terms of discretionary spending are the first few years of retirement: a 'big' holiday, DIY projects etc. A small pension pot may be better used in drawdown to fund this.

DH and I are doing things very similarly. If you don’t mind me asking: what are your thoughts on private pension pots potentially being taxed in the future and also the fact that they can’t be taken before a certain age (which can change)?

We are planning to stop saving into a pension but do it into savings accounts / other investments. Less tax efficient but less chances of govt decisions affecting us. But maybe that doesn’t make sense.

You cut your cloth according to your means
Your older and not working,so eat less .
No car car ,so free bus pass (assuming that's still the case)
A lot will of paid their mortgage of so that's a huge chunk extra
And there's pension credit for those who haven't saved enough in their pension
Plus housing benefit if you are paying rent .
No expensive holidays or new cars or new kitchens.

I have actually been a SAHP the whole time I've had kids ,we have managed on one wage .
No expensive holidays,no new car ,no oacdo shops ,
No moving to a bigger house / bigger car when your family gets older
You just manage on what you have
(We have a disabled adult child living with us ,who needs a lot of care so ,that's why I've not worked,plus a disabled child .)
Our pension between us will about £40,000 ..but no mortgage,so definitely do able .

Hold the front page : it's the end of ageism.

I was replying to someone saying that physical job workers couldn't work till they were 67/68. Lots of people seem to think it's reasonable to retire in their 50s, on the grounds of having a physical job, so they really would be likely to be retired for longer than they worked. It's not those working till their late 60s who are the problem, it's the ones retiring 10-15 years earlier than that.

Of course not everyone worked for money whilst at university - some did and some didn’t. Thats not a barrier to working after university. That’s down to actually warring to work and personal attributes. It was easier to buy as a single person 40 years ago. However most of us didn’t and got marrried - two salaries. This makes life easier now - two salaries pooled. It was easier for us as we had mortgage tax relief too.

However we need to get away from thinking all graduates are fools to get a degree because they will pay a contribution towards the costs. For many it’s an absolute necessity and as a country we need the best graduates we can get. What we don’t need is unpaid student loans and graduates earning low salaries. 38. % of young people going to universities is too high and we need recalibration of expectations and the sector as well as the jobs market expecting graduates.

Yes, the numbers are way out of date. Today you can get around 5% on an index linked annuity at 65; 7% for a flat rate. So as a minimum £500k gets you £25k for life index linked. Even if you take a 25% lump sum, a pot of £650k or so will give you that plus £25k a year.

£800k by itself gets you £40k index linked on an annuity basis and more in drawdown if you are happy with the risk. Becase, now that the tax benefit of preserving the capital value in a pension fund have gone you might as well draw the lot down... On thats basis you could probably draw an index linked £60k a year (dropping when your state pension kicks in, to maintain the overall income) and not run out until you were well over 95 in almost all scenarios

There aren't many jobs for people the wrong side of 50z

Well I am the 'wrong side of 50' and have no problems finding a job....

I always lived in shared accommodations with friends and/or other students.

The costs for doing that aren't extortionate. I looked it up and you can get a room today in a shared house in Brighton for £135 per week. I earned £150 per week term time and £400 a week in the holidays all the way through uni - 1996-1999.

Yeah I was broke, I was a student, we were all broke but we were all in the same boat and we had a lot of fun. 10p a pint night 😄

Of course could never afford a flat on my own like you did, it wasn't a viable option then and it isn't affordable for young adults now either.
I lived in shared houses until 2010, aged 32, - all my friends did this too - it was very normal throughout the 90's and 2000's.

Young people now seem to think it was once normal to have your own private rented flat or even start buying a house in your 20's. It never was.

Sharing and scraping by was always what students did.

And all my friends worked whilst at uni. Every, single, one. All over the country.

The generally accepted measure is the 4% rule ie you can sustainably take 4% every year from your pension pot. So £800K would provide an income of £32K.
£450K would give income of £18K + State Pension of £12K = £30K. Not too shabby.
(I know there is lots of uncertainty in these calculations… )

I'm one of those people who doesn't have anywhere near enough in the pot and never will unless there's a big economic change. I can't afford to increase my contributions and no, I don't eat avocado toast or buy a Costa every day.

I'm banking on dying before retirement.

Late 40's, two pensions, each forecast to give me an income of about £1,000/yr if I retire at 67. Not sure what the current value of each is.

Not much I can do about it though, I try not to think about it too much as I have enough on my plate ATM.

The company I work for pays 8% so long as the employee pays 6%.
That's open to every employee.