Pensions or live life (when you can’t save much anyway)

[Heyhowhatsup]

This is a combination of two threads I’ve read tonight which coincidentally have captured the predicament I feel in. The threads are the one about heading for a pensions disaster and the other is about why do I never use my best stuff or treat myself and posters saying life is too short to not live and enjoy and value yourself.

I completely agree. I’m a low earner, very successful job but doesn’t pay well. I don’t have a pension or much of one. Have started saving but I’ll never be able to save a huge figure let alone one that will even make much of a difference. I come from
a very poor background so there’s no help or inheritance I can rely on. Also from a small family so worried I won’t even have anyone physically to help when I’m old.

I guess the quandary I find myself in now which the two threads have brought to a head is i could keep saving for a pension. It won’t end up being a lot but perhaps I should. However it would mean my quality of life which is already very low would become even lower. As it is, I barely treat myself or enjoy life.

how do you square the two things? Maybe you can’t.

Put in what you can especially to take advantage of the employer contribution.
When you get any increments, put at least half into the pension.

Are there any additional opportunities? I do feel similarly in some ways; I am relatively well paid but also wish I’d had a different career!

You are 30 years from retirement, you have eons to save, even a small amount. What pension does your employer provide? Have you signed up at all?

At 38 you're far too young to be accepting that you'll be poor all your life and have no pension. You are young enough to contribute to a pension and for it to make a difference to your old age.

You say you are very successful in your lowly-paid job - you could also be very successful in a higher paid one.

Thank you so much to everyone. I earn anywhere between £18-25k a year but it is often less than £20k.

I don’t have an employee pension scheme so they can’t help me there.

I do struggle to make ends meet each month and I am very worried about the future. I also don’t expect to be in a couple and seeing what happened with my parents, I do believe you have to rely on yourself.

I will have a look at a SIPP. I’ve always been worried I wouldn’t be able to save enough into a SIPP for it to make a difference and that I might potentially lose all my money in a stocks and shares SIPP.

I did read on the other thread that you need £800k pension to be able to draw an income of £25k a year which does seem impossible for me to reach.

does anyone have any suggestions as to what one I should look at investing in?

This is the problem. People thinking £50k is a lot of money to last when you've stopped working. It's not. It might last 3 years if you are extremely frugal and have no unexpected bills. You won't be able to heat your house properly though.

OP are you working part time? NMW is over £22k pa for a 37.5 hour week and will reise further next week so you're not even making that, which doesn't sound right for a 'very successful' career.

Plus your employer is required by law to contribute into a pension for you, why aren't they doing this?

This is how I think too. We will have paid our mortgage off by 50/55.

With no mortgage, and if we downsize from our current 4 bed, I'll be absolutely fine on state pension topped up with a little bit of private pension.

We'll have one car between us and probably be done with foreign holidays by then (all the pensioners I know feel they've 'been there done that' and now cant be bothered with flying).

I don’t have an employee pension scheme so they can’t help me there.
That doesn't sound right. See here

If you're successful in your job but still a low earner, you need a new job. Can you retrain?

Or get a new job with promotion prospects eg civil service, big retailer etc.

Yes, invest in a SIPP. Look for one with low charges. Invest in a Global ETF. Over the long term you will not lose money unless Putin blows us all up. You need to spend some time researching low cost SIPPs and low cost ETFs.

OP don't panic. You have 30 years to save into a pension.
Log into your government gateway account and check you have full NI contributions and you are on course to get a full state pension at retirement.
Fill in any gaps if you can as you only have until 6th April now to fill in gaps as far back as 2006/2007. After the 6th April you can only fill in gaps going back 6 years.
Once you have your state pension secured then look at your earnings. earning 18k a year is only part time work on minimum wage. try to go full time to earn at least 22k per year.
If you are employed then you should be getting an employer pension by law so look into that because its free money.
have a look at the meaningful money youtube channel as he gives quite good information about pensions that is easy to understand, also money saving expert website is easy to understand.
look at the rest of your personal finances, planning for retirement is also about not having debt and having a liveable house that doesn't need lots of expensive work done so make sure debts are on track to be paid off.
Open a SIPP its easy to do and not all of them are high risk S&S . Anything you put into a SIPP will be topped up by 20% as well and interest will compound so if you put in £100 per month and the government puts in 20 then in 30 years with a 5% interest rate overall you would be looking at £100k and possibly more, at 68 years old plus your state pension

Oh gosh op you must prioritise your financial security.

A close friend of mine used to have the attitude that she couldn’t save enough for it to be worth it so why bother, and she lived quite happily hand to mouth with the occasional tiny treat. She loved her job even though it paid barely enough to live on. She isn’t materialistic, and she got by.

Her world is very different for her now she’s in her 50s. Health issues and changes in her industry meant she lost her job. Rents increasing meant she couldn’t afford her home, or find anything else. She ended up unemployed and sofa surfing. No savings meant no safety net.

She eventually managed to get a low paid admin job that she hated, and was just about managing to keep her head above water, eating beans and not much else, when she was diagnosed with cancer.

Her world is very bleak. Friends and family try to help her, but there’s only so much we can do. She has suffered more than her fair share of bad luck in life, but also wishes she’d made different choices twenty, thirty years ago.

Do everything you can to protect your future self.

Thank you. This is really helpful. I will take a look.

I’m a freelancer so have no workplace pension and I do really love my job but the nature of it is precarious and low paid. I work every shift and opportunity I’m given and I’m really proud of how far I’ve come and I definitely am successful. It’s just a hard career if you’re not independently wealthy or married to a high earning partner. It means a lot to me though and I get a huge amount of fulfilment from it.

Please correct me if I'm wrong (because I'm far from an expert on pensions) but isn't this 'free' money then taken back when you draw your pension in tax?

The state pension is only just under the tax threshold (so tax fee) meaning any pension you have saved independently is taxed as income isn't it?

A lot of posters repeating the official line, supporting pensions for all. My worry is that some people Will stint themselves now for a small pension, so all they willl do is miss the pensions credit in old age and save the government money, then they will be no better off for having saved. Similar to all those saddled with uni debts with no evident benefit. Sorry to be negative, but you have to see all sides. Living in a poorer area of the country, there are many who have ended up acting against their own interests. Obviously no one has a way to see the future.
Agree if op is capable, she needs to focus on getting a better job, then the pension she can aim for will be meaningful and worthwhile.

I think the poster means the employer contribution. Employers have to give a certain amount by law (think it’s 3%) and it absolutely is free money as I doubt they’ll add that 3% onto your salary if you don’t take it in your pension

The tax advantages depend on your situation before and after retirement. So you’re correct there that they definitely aren’t clear cut free money as most people will use up their tax free allowance on their state pension and so pay tax on any additional pension income.

I think you are overly optimistic.
No mortgage but you still have to run a house - it costs just sitting there.

1. council tax could be about 220 a month and going up soon
2. house insurance maybe 25 a month
3. tv licence 14 a month
4. utilities water approx 45 a month
5. utilities gas and electricity 130 a month
6. a basic tv package with sky about 32 a month
7. a policy to maintain your boiler heating system about 25 a month
8. you mention eating out lunch - approx 15 each time and that's a sandwich
9. internet sub to stay in touch approx 40

that's over 500 and that's only eating out once a month . 700 pounds to last you a month for everything ? To keep amounts for a disaster like a washing machine breaking and a call out and repair?

Why is there this feeling that retirees are pottering about in their gardens ? Have you actually been to a garden centre lately and seen the cost of items?

Your grandmother may live like this but it's not everyone's aim.

I also agree that sometimes it might be better to have no private pension than to have a tiny one that ultimately disqualifies you from various benefits and essentially gives no higher living standard than if you had none. I think this is going to be a big problem in the future as people live longer

People living longer and birth rates dropping, so less people working to fund more and more pensioners…

I think pensioners have to pay for dentist and prescriptions also if you need glasses etc that can add up

I feel the same about holidays. I'm 55 now. Planning 2 final big trips for my late 50's/early 60's and then will be happy to put my suitcases away! I'll certainly be done with long haul by then. I'm not a heat/beach person and city breaks in Europe can be done cheaply if I fancy it.

I'll also be on state pension plus tiny private pension. I've done the sums and after food and bills, I'll still have at least £600 a month left over. I don't run a car, live in London and will have my free oyster card. I'll have some money in savings for any large expenses. £600 a month is plenty if I want the odd meal out or theatre trip or that cheap European break. I probably won't actually spend that every month. All my hobbies are cheap or free. I'm not at all worried.

All that said, at 38 I would do things differently. Because you still have another 30 years of work to go. But you definitely need proper financial advice.

Well for starters I don’t think you can assume you’ll be retiring early (which is what anything before 68 will be given your age now).

I may be wrong, but I thought all companies had to offer a pension scheme now. OPs post does pose a quandary, but realistically, although we all would like to enjoy life we also don’t want to live in abject poverty when retired. It’s about finding a balance, though I don’t pretend to have the answer to how you achieve it

It’s not a lot if you’re going to dip into it all the time.

You should also have a pension at least the state pension.

Sorry but success doesn’t equal low wages. This is not sustainable. Can you get a second job ? Or do your job as a hobby ?