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'm saying if you invest in a pension pot it is doable at the rates I've said over a long period of time on an average wage of 25k (the UK average).

I'm not denying that it's too late for many but it's important to realise (especially when educating our kids about finances) what is possible

I earn 8k per annum ; I live in rented accommodation.

I have multiple disabilities .

I live week to week in terms of money.

Where exactly do I draw out 10% of my salary from?

Even then , I will STILL be left with pittance to live on in retirement?

To the poster that said if you leave a pension scheme before 2 years you have to take your money back - that's not true.

You have the option to do it - and pay the tax - but you also have the option to transfer it to another pension scheme.

I think it might be better to force the pension saving by taking away the option to withdraw it. That said, it happened to me when I was 25, and though I agonised at taking out nearly 2 years pension contributions, I did it to afford a deposit for a flat, anc in retrospect it was the right decision!

Saving 2,500 a year in your pension of gross income which is 1,675 of net income from your twenties to your 60s would give you a 300k pension pot if your investments earned an annual compound rate of 5 percent. 5 percent as a long term average is well below historical average for a pension pot invested in equities which is what most should be invested in until you are within 10 years of retirement.

Again, like I said for renters, single people and those who make less than he average UK wage it's a different situation and of course that includes a lot of people.

I just think it's dangerous to spread the message that saving for retirement is so hard that you shouldn't even bother when the average person can especially if they start young.

Which is fabulous if you have the money and means to do so.....

And people like me aside , yes I do agree with you - we need to teach our children and young people about pension saving.

And it should be in a pension scheme for the tax advantages not just normal savings and everyone should take advantage of employer matching schemes. Even for people in their 30s it's not too late to build up a decent pot

Agree completely. DH and I will be ok as we are both on defined benefit schemes, but I have been saving since birth into pensions for my 5 and 8 year olds as i expect there won't even be a state pension by the time they retire.

Yanbu - I’ve been saying on various threads for ages that pensions are the next major crisis.

I agree that for ‘generation rent’ it’s a real struggle. Housing is the issue which needs to be prioritised, because affordable housing will have a positive knock on in enabling people to have more money available to plough into pensions.

Having said that, there is also a responsibility on the individual to plan and make provision where possible. I’ve said this before as well: I’m fortunate to have a final salary pension into which I plough over 10% of my earnings. However, I am stunned by the number of (female) colleagues of my age (over 50) who have never returned to full time work since giving birth and only now seem to be realising their pensions are pretty crap. It’s pretty logical that the less you work, the less your pension is going to be.

Ultimately we’re living longer and also having higher expectations than our parents and grandparents did in retirement. I remember about 40 or 50 years ago, people would retire and Potter round the garden for a few years, whereas now, People often expect to have 20 years in retirement and want to travel, eat out etc There isn’t a limitless purse. I’m calculating on the basis that the state pension will provide a fairly meagre top up to my occupational pension. No way would I rely wholly on state provision. Same for anything state funded really.

It's a worry.

I also don't trust that pension pots, nor for that matter property, won't end up being pretty highly taxed. The reason for this being that they comprise a huge amount of the wealth in the UK, and we're clearly entering a situation where the numbers don't add up wrt sufficient working age people to fund pensioners. I therefore don't think governments are going to have any choice but to increase tax on these assets. And yet they're what's apparently going to fund the majority of retirements, for those who have provision other than the state pension.

My pension pot is crap, though I'm only early 30s. But frankly I think working part time in order to avoid burnout and to try and retain the ability to work part time to as old an age as possible is the best plan for many of us.

I also don't trust that pension pots, nor for that matter property, won't end up being pretty highly taxed. The reason for this being that they comprise a huge amount of the wealth in the UK, and we're clearly entering a situation where the numbers don't add up wrt sufficient working age people to fund pensioners. I therefore don't think governments are going to have any choice but to increase tax on these assets. And yet they're what's apparently going to fund the majority of retirements, for those who have provision other than the state pension.

Yep my fear & Iow interest rates have not been good for pensions. Plus I really think we are going to see income tax rises.

I think you are right - income taxes will increase. There is wide speculation that the lifetime limit of 1m tax free for pension pots will be cut in half which will be big boon for government finances but won't affect the vast majority of working people

There is no point in taxing pensions below this level as it would make people need government assistance which means it wouldn't actually raise revenues. Unless you are very well off saving in a pension is probably your best bet.

I do think they might also start means testing the state pension but again I think this would only impact people with large private savings

I think the other problem is funding some of these older final salary civil service type pensions that still exist. This is something that is crippling the government. I read somewhere that said they are £1.2 trillion underfunded.

basically as private sector workers, our tax goes to fund their final salary schemes where we can barely afford to pay into private schemes ourselves

one of my exes works in the civil service - he doesn't even like his job but he'd be mad to leave it as he gets a final salary scheme that will see him earning way above the national average salary when he retires. He is laughing all the way to the bank!

I think there is a wider issue here that compounds the pension problem: demographics and housing.

• The population is getting older. People are living longer, but not in a more healthy way - so there are more elderly folks who need expensive health and social care. At the same time, there are fewer young people who can pay into the tax system - people are having kids later too.
• Because of the way that opportunities for many younger people have been restricted, younger people aren't earning as much, and are therefore not contributing as heavily in tax. If this keeps up, funding health and social care is going to be ever more difficult to find.
• Government WILL be coming for people's housing equity to pay for care, no question. If this happens individually, it will be quite unfair, as those with expensive, long term care needs (though no fault of their own) will end up far less well off than those who don't have that to deal with. ("Dementia tax" debates).
• We are in a new financial world, where we are hitting against the limits of natural systems (climate change), with implications for economic growth and economic systems, hence also for tax revenues and return on investments. It always amazes me how little people on Mumsnet appear to have considered the incredible huge implications of this for the future. People on here really do seem to think of an impossible "business as usual" scenario for the future.

This is the single Government advice centre I don't have any beef with, when I had to medically retire in my forties they gave me great advice.

www.gov.uk/browse/working/state-pension

Some people have a lifetime of being poor and there really is no way they can make provisions. I think people like myself that could make provision need to, that's what people, are saying about educating ourselves. SIL and I are the same age, she is a high earner and also benefitted from tax loopholes as worked offshore a lot. She has saved nothing for her retirement.

I have helped out my sisters who work hard but have always been in min wage jobs. I will be pissed off if DH wants to assist his sister ever because she has just wasted the kind of salary many can only dream of. He can of course as it's his own money.

Increasing income taxes or perhaps lowering the threshold. We do have quite a high threshold before income tax kicks in. It's 11.5k now and supposed to go up to 12.5k within the next couple of years, though that's obviously reliant on the Tories lasting that long which isn't a given.

So the income you can earn before paying any income tax is £923 a month for an individual at the moment, £1950 for a couple. That's quite high really. If it goes up to 12.5k, that's £997 each, or £1994 for a couple. Basically 2k a month. There are plenty of areas of the country where people can and do live on that comfortably.

The personal allowance went up a huge amount during the Cameron period, it was just over 6k when he got in. The raises took/will take a lot of lower income people out of income tax altogether, which was obviously the intention, but I wonder how long it will last.

I should declare an interest in that I've worked part time for the majority of this personal allowance raising period and live in a cheap area, so it's a policy that's really benefitted me and mine. I don't know how long it'll be considered sustainable. It's a disincentive to work in some circumstances, of course, but I expect it will be tried over higher taxes on property right until the point when it becomes more politically expedient to appeal to those with fewer/no assets and higher income than vice versa.

BlindedByLove If you're living on an income of £8k now, you'll manage on the state pension. Retirement income should be compared as a % of employment income. In the old final salary days, the ideal was to retire on 2/3 of your pre retirement income because this took into account the paid off mortgage and reduction in costs associated with working. The people who'll find it hardest are those who lived on a higher income and see this drastically reduce on retirement due to inadequate provision.

I'm barely living - I'm existing with the constant stress of money .

But I suppose it's good to know I'll be the same in old age too

I'm barely living - I'm existing with the constant stress of money .

But I suppose it's good to know I'll be the same in old age too

I don't know the figures on this so maybe it's a drop in the ocean, but I really think that 40% tax relief on pension contributions is unfair on lower earners.

I'm on a higher rate tax paying salary. I prioritise pension saving over many things. So I pay all of my earning over the 40% threshold into my private pension. And get 40% relief on it.

I do agree with some tax relief because it encourages people to use pension saving. It will probably save money for the government in the long run for me as an individual, because they won't need to pay me housing benefit.

But... I have excess income, so I can take advantage of it. If I have excess income I can afford to save.

I think pension tax relief should be reduced.

Instead of me getting 40%, use that money to give more relief to lower earning people, or to put actual money into pensions for those without one.

I'd base that on their earnings - you choose to be a SAHP to a 10yo with a wealthy other parent - your problem.

You work full time NMW then a "pension credit."

There is talk of a flat rate 30% but I don't think it goes far enough.

There's no easy answer is there?
Some people have no capital to release and no pension so will be in a really tough position but, while some of those are there through no fault of their own, others will be there through lifestyle choices and there would be complaints if others were expected to fund them

I personally know friends of my parents who had accommodation with a job, spent every penny as it came in then expected council housing and pension top-ups at retirement as they had nothing. Yet, over the years, they had a far more affluent lifestyle than most of their neighbours who faced real hardship and struggled yet were sensible

Friends of ours rent out a house. Their long term tenants have been quite upfront that they had sold their house and were spending the profits in a ten year plan of travelling and enjoyment, safe in the knowledge that, if they outlive the money, the state will provide.

I think you are all panicking unnecessarily.
But you need to lose the mindset that you will retire and have 30 years of good living (that has disappeared along with the index linked generous pensions that were available to a fortunate few)
I am 71 - have a smallish state pension of circa 8.5K per annum and an even smaller annuity of 4K which was funded by my own contributions (nothing to do with the taxpayer) but I can manage with one small holiday a year, paying council tax, insurances and the rest and running a small 12 year old car.
My health is not as good as it was - time to downsize from a 2 bedroom cottage to a 2 bedroom town house - will happily do that and pay for any social care I need. We should all save to be self-supporting in our old age - if at all possible.
How much money do you really need ? - I know anecdotally you will know people living 'high on the hog' at 85/90 but they are the exception rather than the norm. As my Granny used to say - 'you need to cut your coat according to your cloth'

I would just underline whisky's excellent post - it's not just a crisis for individuals saving enough to live on retirement, but a crisis for society / government as the ratio of retired population to working population rises and rises. Who is going to care for all us when we are in our eighties and nineties (and many of us will make it to that age but will need some level of care)?

Unfortunately, I fear there are too many votes at stake for the government to overhaul the state provision for retirees and elderly care, so no-one seems prepared to move to something which is sustainable long-term.

olliegarchy - the key is in your own post - you clearly own your own home.

It is much harder for people to get on to the property ladder these days so they will have to add hundreds of pounds worth on rent on to them retirement outgoings.

I can't see anyone panicking "unnecessarily"