To think we’re sitting in a pensions time bomb

[Iwanttobe8stoneagain]

I have been thinking more and more about my retirement I reckon I’ll have a pot (pension and other investments) equivalent to about £300k when I retire. But looking st what return I’ll get on this it’s about £11k year (plus whatever state pension still exists). My DH will prob have a little less. I thought we were doing quite well saving and certainly can’t afford any more. AIBU to be panicking over how we will be able to afford retirement and I suspect lots of people will have even less of a pot.

I agree it’s a worry. Can you sell your home once you retire, move somewhere smaller and less be of the proceeds

Live of the proceeds

Don't forget you won't have mortgage repayments out of that and there will be no NI.

I agree. DH has had a decent job all his life and paid into a money purchase pension all that time. His retirement income will be tiny compared to mine - I'm fortunate to have a defined benefit scheme and while that's no where near as good as the same type of scheme was for my parents' generation, at least the uncertainty is removed.

For people just a few years younger than me the defined benefit scheme is a thing of the past.

I don't think living off the proceeds of your house is an option for most. We have a four bed detached. If we downsized to a one bed flat, we'd realise about £200k. That's not going to last long. It's an option for well off people in the affluent parts of the South East but its not a national solution.

With a private pension of £11k pa PLUS the State Pension I'd have to say you would be well off compared to most pensioners OP! After all your major expense - mortgage - will be paid off by then.
The people in real trouble will be those who do not own their own homes.

I know many pensioners with very good pensions who live off £700 ish a month. It doesn't sound like much but they certainly seem fine.

I agree it's a ticking time bomb- but with shit pension options, the expense of mortgages childcare and university what can the man on the street do?

You are right, it's very alarming. My colleague and I retired at the same time. Our pensions are c£1200 a month. We both work to top up.
However, my mortgage is paid off, and I'm comfortable. She rents. Her rent is £1000 a month.

Agree with others - if you no longer have rent or mortgage, then £11k per year plus state pension is alright. It's not wadded, but you're not going to be struggling to cover your bills, food, going out for the odd meal etc. Plus if you can top up your pot a little by downsizing, then that will help too. You're right to keep an eye on the situation but don't let it eat away at you!

What am I missing?

Someone said a released amount of 200k wouldn't go very far. That's 10 years of comfortable living on its own, and then you get the state pension on top. That's quite a lot, isn't it?

I suppose in one way we are lucky in that we own our house. Heaven knows what those stuck in rental properties will do when they have to pay £700 rent. I’m guessing it’s going to go back to lots of multigenerational living again. I’ve already asked my 5 year if I can live with him apparently that’s fine but it appears daddy is in the streets!

I’m a renter and I’m shitting it. There’s no way I can earn enough to pay my rent now and save to pay it then.
That’s the ticking time bomb the government aren’t talking about

I know a mortgage is a significant part of most peoples income, but ... it shouldn't really be more than a 1/3 of your income if you listened to your bank manager.

but most pensions look to be way less than 2/3rds of salary so I think a lot of people are going to find it quite tough - I know I will.

I am banking on house prices remaining different in different areas and my area remaining an expensive one - then down sizing to a cheaper area and from a house to flat. but it all rides on being able to keep up with the mortgage and the whole economy not falling apart.

Op with a pension pot of £300k you are in a better place than a lot of people. New state pension will be about £8k per year in today's money. But of course that could all change.

The problem is all the old people are refusing to die, hence previous generations calculations on pension don't add up anymore

Low income family here. Once our mortgage and bills are paid there is nothing spare for a pension. We are approaching 40 with 2 children near university age. Ill heath prevents additional hours. Care may be needed in the future for both of us.
I recognise that we are in a better position than many and we’ve always said we’d ‘use’ our property but I’ve just read this article.
www.bbc.co.uk/news/business-42193251

The future petrifies me. It seems so much closer now!

I’m a renter and I’m shitting it. There’s no way I can earn enough to pay my rent now and save to pay it then.
That’s the ticking time bomb the government aren’t talking about

Article in the Guardian a couple of days ago saying exactly that. Elderly renters with their pension entirely taken up by rent .. either government will need to support, or they'll have 80 year-olds sleeping rough (and I hope we're still a compassionate enough society for that to be unthinkable). So the really big time bomb is not "can we pay people's pensions?" but "can we pay housing benefit for retired people whose pensions won't cover both rent and all their other living costs?"

But it's not like you are going to have any outgoings beyond food and utilities. £11k a year should be enough.

It depends on what you want from you retired life and your age of retirement.
Trips abroad, new car every 6 years healthcare expenses, hobbies and activities, house upkeep and improvements etc. all mount up!

Personally my “number” is £40,000 per year to have the retirement I want (I could “live” on far less but that’s not my aspiration), this has been part of my financial plannng since leaving university.

But lots of people live 20 years plus after retirement SEmyarse and £20k pa might seems a decent income now, but in real terms it gets less each year.

SEmyarse I don't mean to sound flippant but £200k isn't going to help if you're retired and live for 30,40 years and/or need care.

I don't think people should be relying on their property value. You just can't. I would say the exception is Londoners moving out but still- the housing market isn't predictable over such a long period of time.

Ttbb - they are retired, not dead.

most retirees still pay council tax, tv licence, as well as food and utilities, they have mobile phones and internet connects, run a car to get to medical appointments if nothing else, they might want a couple of hobbies like line dancing and bridge, might want a cat for company.

My aspirations are similar to yours uplink, but I try not to rub the faces of people who have not had the same opportunities in life in that of my my good fortune.

A little bit of empathy goes a long way.

I have no idea how pensions will work if the majority of pensioners rent. How will the country afford the housing benefit?

I'm not sure the majority of pensioners will rent, but to be fair, amongst the war babies (75+) when council housing was readily available renting was very much the norm and we seem to be coping now

mered I’m glad it’s being thought of and picked up by someone.
The housing benefit bill will be through the roof, there certainly isn’t enough suitable homes now. If councils were smart they would start building it now or all the money will go in private landlords pockets.

I think it opens the door to a lot of older people being taken advantage of in a modern slave way.
Kids having to ‘keep’ parents

Well done you Uplink.

Meanwhile, in the real world, despite decent jobs with decent pay, a frugal lifestyle and paying into our pensions since graduation, our projected pensions will just about cover our food and nothing more. It would appear defined contribution pensions aren't all that great.

£40k pa. hahaha.