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.

This. I visit a lot of pensioners as part of my job and most have a similar income to your DM. They all seem to have a reasonable lifestyle, the homes are warm, they get out for coffee or lunch a few times a week with family or friends, they can afford their bills. They aren't living a life of cruises etc but they are ok and have enough to live on, especially like you say if they own their own homes. I think the problem for some comes if they don't have any savings to fall back on and something major goes wrong with house maintenance or needing a wet room or something but as long as people can plan and keep a bit of a savings fund for that most are ok.
I think the main thing people should be worrying about s how long the current state pension in it's current form is going to be available for !

It’s never too late to save into your pension, OP!

I’m 28. I have a workplace pension with £2.5k in at the moment (worked a minimal wage job with minimal employer contributions). It’s obviously worth next to nothing, but it will grow - especially when I get back into work again. I’ll be able to merge that pension pot with whatever the new workplace pension provider is, and can keep track of it.

I’m out of work for the foreseeable due to ill health, but I save £10 per month in a SIPP, the Government give me £2.50 on top each month. Obviously, the more you put in, the more the Government will top-up. I wish I could put more in.

Is that something you can do too?

I think the OP needs to decide whether money matters or whether it doesn’t.

On the one hand she is concerned about financial security in old age, and the trade-offs necessary in deciding whether to save for a pension or live well now. On the other she is working for below minimum wage as a freelancer.

A solution to the dilemma would be to get a better paying job! Even a minimum wage full time job would mean more money now and a small amount that could be saved in a pension (plus employer contributions and the security of no longer being freelance). Obviously this would mean giving up her current job but she is worried about money!

She has also said that an £800k pot is required for a £25kpa income. This is perhaps slightly overstating the requirements but not massively. However, £25k is 20% more than she earns now so why would she deem it necessary in retirement? Assuming she pays NI, the state pension will provide over £10,000pa in retirement, which is over half her current income. Top up benefits will also be available. Thus to get to her current income per year in retirement the private pot required is going to probably be about £200,000 not £800,000. Obviously that’s still a lot of money but with compound interest over 30 years it’s absolutely achievable.

Very intrigued as to what is “highly successful” but bringing in £20k? Really struggling to imagine what work that would be? (Sorry completely unrelated, just nosey!!)

It is taxed but your pension comes out of your salary before tax so by contributing to a work based pension, you are reducing the tax you pay now. the tax you will pay when drawing your pension will probably be less than you pay now.
If your income is £50 about the tax threshold, you only pay tax on that £50 not the whole lot. This would be £20 which is still less than thr £60 matched from your employer which has also gained value by being invested.

I would imagine it could be something in the creative industries where you are typically self employed, can have clients everyone has heard of and you're seemingly successful but the work doesn't necessarily pay a huge amount.

the tax you will pay when drawing your pension will probably be less than you pay now.

But if you earn 35k now and your pension will amount to 35k surely you'll be paying the same amount of tax?

I think the OP needs to decide whether money matters or whether it doesn’t.
This.

Having seen my dad scrimp and save for retirement, putting off things he'd like to do, then dropping dead at 62, I'm very much live in the moment.

Yep same. Everyone in my family dies young.

You'd have to have a massive pension for it to make any noticeable difference to your quality of life imo. And even if you had that, you'd be too old to use the money the same way as you can now.

It equates to a pension income of just over £200 per month. It really isn’t much at all for retirement savings. This is why people need to save steadily from their 20s and take advantage of the capital accumulation over time. £50k is going to go nowhere over a 20-30 year retirement.

But if you have 50k saved and earning interest then you can get a new boiler / washing machine when needed. Makes a huge difference to quality of life if you're on a state pension.

But in terms of an actual pension, 50k is miniscule. They weren’t talking about back up savings, they were talking about their pension. 50k a year is a good pension. A 50k pension pot is tiny.

I assumed media/writing/film/TV role

Too old? Oh fgs 😂

Correct.

They don't have to pay for prescriptions

Pensions credit no longer exists for new retirees entitled to the new State Pension, partly to avoid disincentives for low earners to save only to find they can’t get pension credit.

My mum was on pension credit for a while, she didn’t own her house and it was a struggle for her to find anything that housing benefit would cover - she had to use some of her state pension to top up the rent. It was not a great life - much different to if she was a homeowner.

Apologies yes you are correct. I misread that post.

@Heyhowhatsup
Does anyone have any suggestions as to what one I should look at investing in?

I would talk to some places that offer plans, e.g. AJ Bell. They seem to have a small initial investment requirement.

www.ajbell.co.uk/pensions/sipp

There are others as well - Hargreaves Lansdown, Vanguard. See what they offer.

Sorry if I offended anyone.,50 grand was hard pushed to get but I've managed to get alot more by going without in my 50s.
I would rather scrape by now than when I'm old.
I stopped driving and drinking.shop in Aldi.
Every little bit helps and before you know it you have an emergency pot.
Cancer is rife in our family so it maybe needed before retirement.

It is SO great to hear how much you enjoy your job and that you're successful - so many people can't say that.

How about trying to do both - a little of each? I totally agree it is not worth not being able to have a few small treats now... and rather than thinking of building up a pension pot for the future, how about building up a "treats pot" for when you're retired? Then the odd £50 will mean a lot in your old age kitty...

And given you are a long way off retirement, you can reassess every few years and change your strategy if you need or want to...

Thank you for this! 🤣

It’s not a decision that makes sense to many. I always struggle with should I live my life doing something I love and have meaning in or be more pragmatic earning well but unhappy. I’ve seen many people choose the latter and I think to a large extent I’m ok with my decisions but it does worry me. I’m not sure there really is a correct answer.

and yes it’s creative industries to those wondering.

I’m thinking some sort of charity role .