To not understand the point of pensions unless you're on a high salary?

[koolkidsss]

My salary is below average, and the 3% contributions are nothing. I know employers have to match it, but I just don't see the point as the sun at the end will probably last less than five years. I know some companies offer excellent pensions but the bog standard ones seem so pointless.

I also dread to think what the retirement age will be for me. I have grandparents who died in their 60s so the gloomy part of me wonders if I'll even live to retirement.

Unless you're going to stay in one job for years, which offers an excellent pension I don't see the point. AIBU?

allergic
it's an insurance policy taken out by the company
Because the pension offer is so shit that decent employers have to lay on extra benefits
I rest my case

It's not split in our pensions policy, both done by L&G so never considered that they weren't linked!

Indeed - they can, of course, be provided by the same company. Ours are brokered by one broker but this was the split we ended up with. CL is generally the best life insurer for companies our size. I'm not enamoured with Aegon but I suppose they are much of a muchness.

3x salary seems pretty standard

Actually, not sure I've ever worked anywhere it was less than 4x to be honest - and I've worked in a lot of places because I'm an interim.

4x used to be the max (in DB schemes) but that has all changed now, there is no cap other than the pensions lifetime allowance (currently £1m), which, if you hit it due to the death in service payout, means you pay a shed load of tax (except, you won't, you'll be dead!).

Because the pension offer is so shit that decent employers have to lay on extra benefits
I rest my case

Not really - it is just different. DB schemes have built in life insurance, DC schemes do not - except the trustees decide where the 'pot' goes, so there is that, meaning it's quite possibly more than a DB if you die in service.

pensions will be shit when we get older. Not just that, no one will have any savings because of low interest rates.

learn how to grow your own food and chop your own wood.

If your husband is a higher rate tax payer, and the wife on a lower rate (or vice versa), it makes more sense financially to put more money into his pension for you both to benefit from in retirement, as he will get at least double the tax relief.

Pensions are not worth anything these days. You are better off saving up your own money.

^3x salary seems pretty standard

Actually, not sure I've ever worked anywhere it was less than 4x to be honest - and I've worked in a lot of places because I'm an interim^

Well my so-called 'gold plated' public sector pensions (I have three because despite working for the same employer for over 25 years we've been shunted around pension schemes) all pay 2x salary death in service benefit, so it seems that its a myth that public sector pensions are automatically better, especially as, between me and my employer, over £500 pm goes into my pension.

I developed arthritis at 26. By my 30s I was disabled.

It took me a while to claim my pension but it is nice to have an extra £400 a month. No it is not enough to live on but it certainly helps.

I also have a SIPP that I will probably take as a lump sum (I consolidated a few small pots) and I have a small amount in NEST.

OP

Have a look at your options, if yu are with a private pension scheme you can 'retire' at 55, you can still be working and take your private pension. You will also be entitled to a state pension.

Using a compound interest calculator.

Say you earn £400 a month and pay £12 a month into a pension, the amount increases with inflation at 1% and your employer matches your contribution after 40 years you would have over £42 000.

In reality people are paid to make the amount go up beyond 5%, but even then you can take a lump sum, usually 25% so £10 000+ and still have a small pension, or under the new rules you can take a lump sum and not take the pension but take other lump sums at future dates.

Going back a few pages, but just to be clear, employers can't strip assets from DB or DC schemes! DB assets are held in trust and refunds to companies can only be paid in very limited circumstances (ie if there is a surplus). What happened in the BHS case and others was a deficit arose because the cost of benefits increased more than the assets, and the employer went under before they had paid in the difference. The scandal is about whether Philip Green should have been allowed to sell BHS, possibly weakening the company in the process, without funding the deficit. Clearly the answer is no, hence he was ordered to pay a tonne of money. The regulator is trying to crack down on similar behaviour. It is challenging, but there isn't any asset stripping going on!

Also, the lifeboat scheme pays out 90p in the pound for people under retirement age and 100% for people over retirement age. Only exception is for high earners as there is a total cap of about £35k p.a. It's not at all bad.

If you can't afford to make contributions because you can't afford to eat or heat your home otherwise then obviously you have to prioritise those needs and other essentials. For everyone else it's definitely worth it. With drawdown rules you have full control over what you do on retirement and if you choose not to buy an annuity the entire pot will be left to your children if you die early.

My Mum had no pension by her 40s due to being a SAHM and then working in low wage part time jobs. When she returned to work full time she joined the company scheme of her employer which matched contributions and when she could afford it after her children left home she also made extra contributions to a SIPP (still on a low wage). She is due to retire in the next few years and she will have over 100k, mainly due to tax relief, stock market growth and employer contributions. If she had just saved the money I estimate it would be closer to 30k. She can effectively take 25k of that 30k tax free if she wants to and then still have the rest to draw a small income or draw sporadic lump sums.

The difficult part IMO is knowing what to invest in if you're self managing.

Whilst the death in service benefits may not technically be part of DC pension schemes, you often have to belong to the company pension scheme to be eligible. I imagine this is why people see them as being part of their pension - because there is a link.

Pensions are not worth anything these days. You are better off saving up your own money

If you mean annuities are a poor choice I'd be inclined to agree with you, though there is no obligation nowadays to buy an annuity with your DC pot so it's a false premise. If your aversion to pensions is for some other reason, I'd be interested to hear your argument.

That "you often have to be in the pension to have death in service" is, again, changing. You don't where I work. Everyone has the DIS. To be honest because of auto enrolment and the fact the Co gives 5% nearly everyone is in the pension, but two people are not and I still put their names on the list I send to the life insurer.

if you choose not to buy an annuity the entire pot will be left to your children if you die early.

If it's an employer scheme, then the pot is held in trust. So, you have to fill in a form to indicate what you would like to happen to it when you die (not "if you die early", when you die and if there is anything at all left in the pot). The trustees then take your wishes into account but they don't have to follow them. Obviously they nearly always do but there are circumstances when they might not. But no, it does not automatically go to "your children". You might not have any anyway.

I'm saving 100k...so that I can have a fab last holiday, ending in Switzerland...

You don't need £100k for that, the Switzerland thing is around £10k but you do need to have a life limiting illness. I think £90k for a holiday is a bit much :)

I aim to always have £10k though, for this very reason (plus air fare etc).

disneydatknee

Pensions are not worth anything these days.

Really? care to expand on that - or is that your response because you don't have a pension?

You are better off saving up your own money. And investing where to in order to support your self in retirement?

Can I ask a question? What about those of us in social housing? I'll be paying rent forever but happily housing benefit will cover that. However you don't get housing benefit if you have more than £16k in savings. So it seems to be either save into a pension to have it go on rent, or spend the money now and get housing benefit to cover the rent. Is this the case?

@HaroldsSocalledBluetits

Not sure pension counts in the "over £16k in savings" calculation? I thought pension was ignored (except when it is being used as income) in benefit calculations?

But, anyway, I've never been on benefits or in social housing but my philosophy has always been to be as self-sufficient as possible and to expect the rules to change at any time, which they do.

That £16k could go down (unlikely to go up!), social housing could disappear, housing benefit could (and quite likely will!) disappear.

It would never occur to me to spend my money on the basis the state would provide for me later. Of course, I could have done that, but I haven't.

If you have spare money, save. Whether it's a pension or other savings is a different question.

Lol, nice undertone.

I'm self sufficient atm but I'm wondering if it's worth it if it just means spending money on rent. It's a consideration for all tenants, not just those in social housing. Pension credit is around £168 a week - a £100k pension would see you slightly better off over a ten year period, less so the longer you live. But ten years of hb+pc is getting into a larger sum - closer to £200k - before you're better off. I've already lost thousands having paid into two separate pension schemes that I'll never see - one company went bust, the other sold with pension liability removed - so I'm kind of loathe to sink any more money into this if I'm not going to feel any benefit.

Why did you lose your pension because an employer went bust, was it before the pension protect scheme?

I think you should check into both those pensions.

There was no "undertone", I was being genuine. But you are basically saying you'd rather spend your money now and then rely on the state than save now and rely on the state a bit less. It's not "a consideration", it's a state of mind

Yeah, it was prior to the PPF. The other one got away with it too - there was a challenge but we lost and basically we were screwed. I know that isn't going to happen now, but those years of contributions are lost so, well, that's how it goes. I'm not going to be able to make up for them and I don't earn tonnes now and am unlikely to in the future. I don't see the point in cutting back drastically (which I would need to do) to get myself into the same position as I would be anyway upon retiring with a minimal amount topped up by hb and pc.

The PPF is relatively recent. Before that a number of people lost pensions.

Tell me about it. There were people on both schemes who had literally paid in for decades and lost the lot. It was a disgrace.

I earn less than 30k , married am the main
earner, have 3 kids and a husband who works in a NMW job.

I can't afford to save the 3% it's around £60.

I need that money to live and feed my kids.

Not everyone can afford this.