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 glad I worked for a bank. I didn't realise at the time but the pension I will get from them will make all those stressful days seem worthwhile. No wonder these companies with huge defined benefit deficits are struggling.

I am one of the fortunate ones. I don't know how people who haven't got any pension savings will manage.

My mum who lives on her own, lives on £1200 a month quite easily with no debt so I use that as a ballpark figure of what I will need.

The state pension will give around £650.

Pension credit bales out those with no pension.
Intergenerational family living always made more sense to me, but the annex idea isn't always very popular and there arent many around. My mum is sensible, she is buying next to me. Mil wont move, her house costs a fortune to heat etc etc. What can you do?

Can't blame you amysuegina. I pay very little myself but in all honesty I expect it to go towards paying for the pensions of others rather than my own. There simply aren't enough of us in certain generations.

I don't want my mum to downsize. Neither do I want or need her inheritance. That's the whole point of my post.

I worry about this all the time - this thread has made for thought provoking reading.

I am 25 - just bought a flat in zone 4 / and have a 85k joint income with my bf currently ... and I don’t even know where to start planning for it to be honest . Investment schemes super worry me and I’m just not sure on the ins and outs of them so thinking best to see an IFA in the new year .

I've always put something into my pension. Even when I was making $20k a year I put the match amount in (they matched up to 6% of your salary so I contributed 6% of my income).

Overall people need to be realistic about retirement. Nothing wrong with wanting a £40k a year retirement. If you can save enough to have that great. For those that can't save enough there needs to be a realistic expectation of what retirement will look like.

For us we don't need much but we expect to have no state provision as we have lived abroad during our working lives. We therefore need to save a lot to cover medical costs. DH is not on a final salary pension. They kicked him out illegally when he was transferred internationally. It was well worth going to court over. The final salary pension alone was valued at over $1 million in today's money because DH has been with the company for over 15 years and has no desire to leave.

I wish salaries showed the value of a final salary pension (defined benefit) so people with these pensions could see how much that pension is worth.

There are a few good calculators out there. Personally I like the retirement calculators on fidelity.com. They are for the Us I think but just change the $ to a £ and you are good to go.

Gee IMO Best place to start is making max contribution to your IsA. Once that is maxed out it normally makes sense to pay down your mortgage. After that is maxed out then you can look at other savings vehicles and an IFa comes in handy.

Supermum . That’s interesting . So my work pay 5% in and not sure about partners . I’m not yet paying in at this place and I maybe have a few years payments from before here ! Often feels so hard to prioritize this kind of thing !

Will check out about my isa situation too!!!!

It feels hard because no one wants to talk numbers. Call HR and ask for a time to talk to them about it. Have the hard conversation now because the conversation later when you realize you don't have enough in savings will be impossible because there will be no one to talk to.

The public education about pensions is terrible.

I am HR 😂😂 we have a financial advisor / accountant who works for us 3 days a week so should try and sit down with him . HR wise you only really learn the biz responsibilities to auto enroll people etc

I think the main problem is that a significant number of people can’t afford to pay anything into their pension other than that which is required by auto enrollment. The majority of final salary schemes have closed or will be in the coming years.

I’ve friends and colleagues who have spent their 20’s paying their student debt and then taken on a mortgage and childcare costs with no financial ability to pay anything into a pension. By the time their financial position has improved any contributions they can make to a pension will have little impact onto their retirement income.

Saving into a pension plan is FAR better than and ISA as a first step to building a retirement pot.

In an Isa, the profits (interest, capital gains and dividends) aren't subject to tax but you invest your earnings after you've already paid national insurance and income tax.

In a pension the profits also accumulate tax free until you draw your pension but it's put in without any income tax or NI deductions. You basically immediately get 32-48 percent more from the same investment if you did it via an ISA.

If you have an employer who matches your contributions the advantages of a defined contribution pension scheme are even greater. You basically double your investment immediately again.

Speak to an IFA but for the vast majority of people saving into your work place defined contribution scheme up to the level your employer matches is what you should do - assuming you already have a rainy day emergency fund saved elsewhere. After that save in your ISA or pay down your mortgage of the interest rate you pay on your mortgage debt is higher than what you can earn in an ISA. In fact pay off all debts where the interest rate is higher than what you anticipate being able to earn investing.

That makes sense - I’m paying £186 a month off my loan which could have been a nice little pension saving but alas I had to have the support to do my degree

Super helpful post LondonGirl thanks :)

It's also never too late to start saving though the earlier you start the less you have to put aside in total.

Also just to be clear- defined contribution scheme private pension pots are entirely yours. The contributions made don't support anyone else.

Defined benefit (final salary) schemes are the only kind that can have shortfalls whereby current workers' contributions are paying for others care.

gee London is totally right that you should do the company pension before an ISA. You say they have a match so it's like free money so to speak for your pension.

We contribute $ for $ to employees contributions up to the max of $17k a year for 401k pensions here in the US. We are one of very few companies doing this. Pensions and medical care are huge benefits people don't realize are important until afterwards.

I have my head firmly in the sand with this issue, and unfortunately I don't see any way out of that mindset.
I'm a single mum with 2 children, and I'm renting as I had to sell my last home at a big loss due to changing areas, so lost all my equity.
I work 3 days a week in employment and 3 days per week in self employment.
After rent/bills/food etc I usually end up with not a penny left at the end of the month to save, that said I am in the process of trying to pay off debt that built up when I was still married/in the initial period on my own. Once that's paid off I will have £300-£400 extra per month but then this will go into savings for a deposit so that I can get back on the property ladder before it's too late, but that means that at 32 years old I don't have any pension provision at all at the moment, and don't think I will for the foreseeable future, nor do I think there will be a state pension by the time I reach retirement age. Euthanasia may very well be my only option too!

Lack of knowledge about pensions really frustrates me.

I don't have the answer.

But if you google "how do pensions work uk" one of the first hits is the Pensions Advisory Service. They come up with plenty of other searches too. They are free to speak to. The website is really clear, and you can web chat and phone them too - for free!

Do they not advertise though / in the right places? (I don't watch TV or buy printed media so rarely see adverts)

I am reluctant to dump everything on an over stretched curriculum, but I think this is something that really is worth covering in schools.

Should employers have a legal obligation to produce a booklet of less than 5 pages approved by the Crystal Mark campaign?

How do drag the horses to water and make them drink?

There is a wealth of information out there, and for most people it isn't that complicated.

Yet too many people think it is. So they bury their head in the sand and ignore it.

Someone upthread said it's hard to know what your DB FS pension will be. It shouldn't be. OK, they're going to be a thing of the past... But each year I receive a pension projection that tells me for the old closed DB scheme what it will pay per year if I take it at 60, or 65.

For my DC part, of course there are no guarantees, but I have a projection to work from.

The documents are clear. Do other companies not produce something that is clear enough - or is the issue that people don't even try to understand it because the barriers go up?

As people move jobs a lot, should there be a standard format that all companies should follow for projections?

Should all private and company schemes have to report in via your NI number to an HMRC database so that you get a full projection every year with your tax coding notice?

How do we engage people?
How do we get people to post on MN "is 4% a realistic drawdown for a private pension projection?" instead of "ooooh - a total wedding!" (or rather, to post both!)

*royal

Ellisandra-I think the problem is that many people do not find it easy. They don't find money easy full stop. Financial education in schools and at University should be compulsory. Maths lessons should be more centred around money, arithmetic and the like as this is what is important for most people. I almost think the government want people spending money they haven't got though as that's what keeps the economy growing. It will hit the buffers big style eventually.

Pension simplification actually made things more complicated and most IFA's won't advise people who want to set up a pension without charging an extremely high fee now that commission is outlawed.

I seem to think about pensions an awful lot lately!

Thanks to the link someone posted upthread I've been trying to find out what my state pension entitlement will be. I was contracted out for quite a few years - all the advice used to be to pay into employer contracted-out schemes, which I did. I'm finding it really hard to work out how that will impact on my eventual state pension. The government website state pension forecast tells me what I'd get as a full pension (ie if I work till SPA £159.55 a week) but then tells me I was contracted out for some of my working life and my 'COPE' amount (contracted out) will be £61.25 a week, and that the private pension, not the government, will pay this (subject to the scheme and the investment choices). So does that mean if I have a full NI record by SPA I'll get £98.30 as my state pension? And the shortfall will be made up by my occupational pension, assuming it does well enough on the stock market? It feels like yet another layer of uncertainty, and I was hoping I'd get rather more than that for a state pension for as long as such a thing exists.

In reality no one wants to talk money. It's a huge divider. If you can overcome that then you have a chance at educating them on pensions. This is why it's best to hit people with these topics at school and at university.

I think some basic financial information should be covered at school - how to prepare a budget, how interest rates are calculated etc but from my experience of having DT’s currently at Uni - they have no interest in pension schemes or retirement planning. They, and their peers, have other concerns - exam pressure, getting a job, student debt, accommodation costs.

I think investing and financial planning should be part of the school curriculum

My father was an IFA and he drilled the basics into me from primary school age including how investments grow and compounding wealth the benefits of a diverse portfolio, how annuities work.

How can people make sensible choices without understanding how these things work