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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

to give up paying into my pension

163 replies

laurageordie · 18/10/2014 08:57

It seems like the rates on return have really gone down. Just had a statement through and it says if I carry on paying into it till I'm 65 and it does averagely well then I will get 3000 a year. Ffs it is impossible to live off that today let alone in 30 odd years time. I earn about the average and put away 5% a month

OP posts:
Trick0rTreatSmellYourFeet · 18/10/2014 08:58

yeh that's ridiculous. you'd be better off buying a garage space in a posh part of london with your money.

UnwittingAccomplice · 18/10/2014 08:59

What are the alternatives? No money at all? Yes, it's shit, but I don't see any other way of doing it? Maybe get a better performing pension fund?

AlpacaYourThings · 18/10/2014 09:04

5% isn't a lot to be paying into your pension. The general rule of thumb is to pay in half your age as a percentage.

Are you employed? If so, does your employer cpntribute?

Have you reviewed your investment choice?

Don't forget with the new legislation this year, you can withdraw the funds as cash at retirement. You will still (based on current legislation) get 25% of the fund tax free and the renaming 75% will be taxed at your highest marginal rate.

I doubt it's the pension that's the problem and more that you are invested in a poorly performing fund and aren't contributing enough.

purplemurple1 · 18/10/2014 09:04

The amount stated is normally adjusted for inflation so it would get you what 3000 would buy today.
You need some sort of plan for retirement (if you hope to retire) so save more, plan to down size you property, invest in property/stocks what ever. Personally I wouldn't stop saving without a sensible alternative in place.

Waitingonasunnyday · 18/10/2014 09:07

I don't pay into mine, but my employer contributes about 5% I think. As a result I will have a crap pension when I retire. Every time I think I will sort it and start paying lots in, one of the DC comes home with a letter about a school trip or something, and I think bollocks to the pension I'd rather focus on their upbringing for now. And put my head back in the sand.

googoodolly · 18/10/2014 09:08

5% isn't a lot to be paying in, so I'm not surprised the return isn't great. However, if you don't want pay into it, that's your choice, but you need another plan for retirement. A savings account, investment in stocks/shares, a property you can sell, etc.

StatisticallyChallenged · 18/10/2014 09:09

Is your employer contributing too, and how much? Remember that unless the rules change you will no longer be obliged to buy an annuity with it so you can use it in ways other than that.

Most pension companies will quote the amount in today's money so people can relate to the amount -check the wording of the quote but it's probably that it would be forecast to provide you with an income equivalent to 3k now, rather than actually being 3k in 30 years.

Also, if it's 5% total contribution that's relatively low. Let's say you work for 40 years roughly, and are expected to be retired for roughly 20 -lazy maths I know. But even allowing for investment growth saving 5% of your income isn't going to be enough to give you a decent standard of living. It'll give you a top up to whatever the state pension is though and something is better than nothing!

You could save the money in a different way eg in an isa. When you put money in to a pension it's tax free on the way in but you get taxed on the income at the end. With an isa it's taxed on the way in but not the way out.

StatisticallyChallenged · 18/10/2014 09:10

Xposted with lots of people!

Longdistance · 18/10/2014 09:11

Yanbu.

Pensions can be a crock of shit. My df is really ill ATM, and SW want to dump him in a care home. Basically, they're after his private pension. You know, the one you save for so you can have a comfortable life later on in old age.

Angry
ShanghaiDiva · 18/10/2014 09:18

Amount you are paying in is too low.
Rules are changing so you no longer need to buy an annuity and will be able to leave pension as part of your estate ( and not just spouse as beneficiary).

Original poster
laurageordie · 18/10/2014 09:19

Well I pay 5and my employer pays 5. I don't know who I can invest in property if I can't even afford a house to live in! This 5 I think I could make better use of now

OP posts:
JustAShopGirl · 18/10/2014 09:20

If you do not pay in what will you live off - the £140 a week that is the current state pension? At least your £3K is ON TOP of that....

15-20% is advised as a pension investment. We got there by whenever you get a pay rise (poor chances of that right now I know!) invest half of it for the future.

Original poster
laurageordie · 18/10/2014 09:21

5% is a huge part of my disposable income after all the bills are paid, really can't increase it.

OP posts:
StatisticallyChallenged · 18/10/2014 09:21

It'll be 5 before tax, so if you stopped paying in that would drop to 4 that you would see instead of 10 saved.

Charitybelle · 18/10/2014 09:23

At the risk of sounding like a wanker, you need to 'diversify your portfolio'. No point relying on just a private pension, even if you pay in more, the returns are never fantastic. Remember you will also have a state pension of a few grand a year, and I would recommend getting on the property ladder if you're not already? Buying a home means you will either have an asset that you can sell, or at the very least you will have a rent/mortgage free roof over your head in old age, which means you only need your pensions for bills/food etc.
If you can't afford to buy where you live, look to get a cheaper BTL rental somewhere else. This will provide an income and ensure you have an asset to show for your money. If you're not comfortable with property, talk to a broker about other investments, many do carry a certain level of risk, but the returns are better and if you spread your bets across a number of different areas you're likely to make some money in the long run.

JustAShopGirl · 18/10/2014 09:23

I think it is a different mindset though - "disposable income" now or invest for your own future..

do you want your personal "future" to start at 55/60 - or keep working forever....

nannynick · 18/10/2014 09:24

But how can you pay in more if you need the money to live off now?

If I could save 20% of my salary each year that would be great but there is no way of affording that given current cost of living vs my wage.

Lonecatwithkitten · 18/10/2014 09:26

The best pensions are the ones you actively manage yourself. You need to give yourself power with information about what type of pension you currently have, how it performs compared to the market, who the fund manager is, what is their previous track record.

nannynick · 18/10/2014 09:27

You are lucky to have employer contribution. I don't have that, though think that may change in a couple of years with the new rules coming in.

googoodolly · 18/10/2014 09:27

I really hate it when people say "oh, just pay in more/get on the property ladder." If your outgoings (bills, rent, food, childcare, etc.) eat up your entire salary, how are you supposed to save up a deposit or put away money in savings?!

Not everyone has the luxury of putting aside money for a rainy day, some people are struggling to live off what they earn as it is.

rumbleinthrjungle · 18/10/2014 09:32

No spare cash at all for retirement here either, I'm another ostrich as if I think too much about it I panic.

But I'm doing the best I can to get through this year, and there is literally no money available for what may happen thirty years from now. I'm sure many people are in the same boat.

JustAShopGirl · 18/10/2014 09:35

You can't if you NEED the money to live off now - but if you make savings on anything - put away half of it.. if you do get an increase in salary, put away half of it - it is money you haven't had, so don't "use" it if you don't have to.

Childcare will not always be needed - when you don't need to pay it put half of that away - or a quarter - or 10% - not necessarily in a pension, but if you are not used to having it save it.

HermioneWeasley · 18/10/2014 09:38

A wise man told me "you can have your money now, or you can have it when you retire, but you can't have it both times". Obviously I don't know your finances and don't know what you can realistically put away or ways you could earn more, but it's reality.

googoodolly · 18/10/2014 09:39

Or "some people have to have their money now otherwise they can't afford to live." It's not always one or the other. Some people DON'T HAVE A CHOICE.

StatisticallyChallenged · 18/10/2014 09:45

If you literally can't afford it then you can't afford it. But if you can but would just find the extra useful, and your employer and the tax man are effectively going to increase the value of your contributions by 120% as in the ops case then saving for retirement is worthwhile for most people. Even if you never increase the savings and get 3k a year, when you are talking about state pension of what, 140 a week then an extra 60 a week roughly from the private pension is a noticeable difference surely?