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?

My Local Government Pension Scheme also provides life insurance and a children's pension if I die whilst in service so that is worthwhile even if my contributions aren't massive.

8HaroldsSocalledBluetits*, I live in a H.A area, up the road, it's private LL and lower priced houses. I was out the other night and we were having this discussion. There a few people who have landed jobs and are on 30k+, but the majority earn a lot less.

They've found that unless you own your house outright, it hasn't been worth having a private pension. they certainly cannot retire in their 50's, or semi-retire, so that perk is no use to them.

Pension pots and what you take out are counted as income/savings/assets, for benefit purposes and that will probably get worse.

There will be housing benefit in the future, or we will have to reopen the institutions and that costs more, that's why they shut them.

before the PPF Cap'n Bob and his ilk deliberately stripped many a pension scheme

Pension schemes are not savings accounts.

If you take into account interest and compound interest on contributions things look a bit better.

Pensions are mostly invested in equities funds bonds etc which pay interest. (Just for the the sake of illustration) if you are on an average wage of £26,000 and your contributions your employers contributions and tax concessions give you an annual contribution of 6% to a pension fund = £1560

The average annual growth for FTSE 100 stocks is 7% per year. So £1560 per year invested over 40 years with 7% growth per year compounded would give you a pension pot of £343,216 at 67 if you make contributions from the age of 27 to the age of 67. I'm assuming here you are invested in low risk funds that track the FTSE 100 index.

I'm not clever enough to work this out by the way, I have used a compound interest calculator

This all assumes that your contributions are being honestly and competently managed. Definitely be careful who you trust your pension pot with or do it yourself in the form of a SIP

God, it was practically a national sport in the 1990s/2000s. We only got statutory redundancy as well, despite what our contracts said - and we had to apply for that. A week for every year, and it was capped at I think 18 years, plus there was an overall cap as well.

I'm glad things are different now, but it's not going to get me my money back. I spent the years after having babies, so on maternity leave and paying childcare, no chance for putting into a pension then plus I'd been robbed twice trying to be self sufficient. Not too inclined to try to make it up now if I'll be no better off in terms of money in my pocket. Birdsgottafly, yeah, that's how I figure it. I think I'll ring Age Concern to clarify. Pensioners are exempt from the bedroom tax too so as long as I downsize to somewhere covered by the one bedroom rate (quite easy when social housing rents are low) Icould possibly even have a nice little two bedroom place. I've got a lifetime tenancy that passes to my kids so at least I've got security - just won't have a lot of money.

Pensions are mostly invested in equities funds bonds etc which pay interest.

No, they don't pay interest.

The average annual growth for FTSE 100 stocks is 7% per year.

I'm assuming here you are invested in low risk funds that track the FTSE 100 index.

If 7% is the average but you assume low risk funds, you have to assume the investor would not get the average as low risk generally means lower returns.

7% is way higher than is usually discussed - usually it's either 3% or 4%. And, the 7% is pre inflation too - while investments may grow at 7%, that will be eroded by inflation - so the figure you've given won;t be worth as much as it looks like today.

And charges, all schemes have charges, funds have charges, trackers have charges.....

I work on 3% for my projections.

You pay a bit, your employer pays a bit and then the government gives you back the tax paid on it and adds their bit to the pot.

I wish I had saved small amounts earlier into my pension.

You'd be crazy not to. Free money, and a way of saving. Put it this way, if you didn't you sure would be regretting it later. Put in the maximum you can to get the highest possibly amount from your employer. It's totally a no brainer.

purplelila2 if you can save this it will make such a difference to you later. Even if you have to work an extra shift to cover it.

I personally didn't start to pay into a pension until I was maxing out my ISA allowance every year - firstly to save up 6 months in living expenses (cash), and then save into a S&S ISA for a deposit

It didn't make sense to me to be locking money away in a pension till I was 55 if I didn't have any actual savings I could access when I needed NOW

I'm also self employed so I am the employer making contributions into my own pension!

I do now save into a pension, but didn't make sense to me to lock into the future when i needed to be saving for a deposit NOW.

I don't really understand what my pension will be. I have had several periods of employment where I have paid into pensions and then had 9 years at home with my children, I am not married and my BF (childrens father) and I split up after 28 years together, so I am not entitled to any of his.

I am 53, and have about 30k in Tesco pension scheme, think its defined benefits, I have 17K with Aegon pension scheme, 9k with equitable life (when I temporarily opted out and then back in) I am now 6 months in to working for the NHS and contributing to that pension (which I don't really understand) I also have about 40k in a Vantage SIPP with Hargreaves Lansdown but when I add up the yearly annual amounts it comes to about 4000 a year + state pension which is about 6k a year so not sure I can pay my bills, etc on an income of 10k, I don't even know if what I have calculated makes sense or not. Anyone know what I could reasonably expect from those amounts. I estimate working for the NHS until I retire at 65 so 12 more years of contributing about £90 a month of my £19,404 salary and my employer contributes 15% (I think)

Jenasaurus Don't rely on this advice as it may be wrong, I am not a professional.

If you started with the NHS after 2015 then you will be on their career-average scheme which is good. Each year you earn a pension equal to 1/54th of your earnings that year, so your 12.5 years if you stay at £19k and only get inflation-linked pay rises will be 23% of £19k=£4300 ish

If I were you I would ask all the other pension providers to tell you a current transfer value of your pot (that will be a different amount to their statement for how much you would get if you retired now) and find out how many years of additional NHS scheme membership you could buy with that as lump sums transferred in.

Once you have that info it won't be an easy decision because you basically have to make a bet on what the global economy is going to do in the next 12 years. If there is another 2007- style crash then the value of your smaller defined-contribution pots could shrink. If the economy picks up and starts improving then they could grow. Meanwhile the NHS scheme will be the same either way - effectively you would sacrifice the possibility of benefitting from a boom for the sake of protection from a crash. There's no "fund" - the government will pay the pension out of the taxes collected in the 2030s+ after you retire.

There's an online calculator which says you can only buy a maximum of £6.5kpa additional membership but this would cost £75k of transferred in lump sum which sounds like a good deal to me. Assuming your smaller pots come to more than this, you could leave one pot where it is to give a little additional supplement.

If the pension you have earned by the age of 65 isn't going to be enough to live on then you may not be able to retire at 65. Perhaps start thinking now about what kind of jobs you might feel OK about doing between the ages of 65 and 70 and take steps now to position yourself to be able to do that.

Surely the OP has a point?
if you go down the annuity route, (rates can go up or down). so at present, with a pot of 100k, and 65yo, you ll get 5.5k pa, so you need to live until 84 to get back your "pot!
At their low point, it was about 4.5k /per 100k, 10 years ago, approx 7k.

Also, how many on low wages are going to accrue anything like 100k?

i wish i d bought a house (when they were affordable) in my 20s instead of saving into several pension schemes.

I can tell you exactly what I put into my private pension - not works pension - £100 a month for about 8 years. So a maximum, of 10K over all. Back in the 90's. It has sat there steadily accruing, is now worth £195K - of which I can commute 25% as a cash tax free sum. That gives me 45K and income of around 5K a year if I take it at 55.

My works pensions are on top. Plus state pension.

I work in Local Government, I work in a low paid role. When I looked into how much I would receive if I joined the pension it was such a low amount I didn't bother. I was young and decided I'd rather have the money I'd pay in to spend.

Since auto enrolment began I've been opting out, it just doesn't seem worthwhile, the lump sum would be small and the monthly payments also negligible. Less than my state pension.

Imo property is a far better investment.

Average life expectancy at the moment is 79 for men and 82 for women. Retiring at 68 means an average retirement of 11 years for men. Pension ages will increase as life expectancy increases

It’s actually even worse than this.

At age 68 a man can expect to live until 84 and a woman 86.

In the over 80s 1 in 6 will have dementia, so is likely to need care.

The Local Government scheme is one of the best there is, you really are throwing money away if you're not in it.

As well as throwing money away, even if the final pension is small, it could make a significant difference, eg if your only income is the state pension, it's subsistence living, but if you have even a couple of hundred pounds additional income on top, you could be reasonably comfortable as long as you don't expect a long haul holidays and flash cars lifestyle.

DM is in this position. She has just got to retirement age and has close to the new state pension income (slightly less than the full amount because she worked part time a lot) and probably around £300 pm as a widows pension on top and she leads a reasonably comfortable lifestyle (can afford to buy M&S food, have pets, take trips out, treat children and grandchildren, go on holiday, buy stuff for the house, that sort of thing).

She does own her house outright, so doesn't have housing costs and the situation may be different for people who rent - eg if they didn't have any additional pension income they would get housing benefit, where if they did, they wouldn't get HB?

I pay in to my civil service pension 50 a month at part time. And I'm keeping a eye on my state pension too. I'm not even 30 yet and I have nearly 70 a week on the state one and my private is only 2.5 years going and they say I'll be getting about 500 a month from that so They do help no matter how much you pay in. I've got loads of years left to pay in to it and all it can do is go up.

The LG pension is good (although it has changed so not as good as it used to be) and with hindsight I should have joined but at the time I really couldn't afford the contributions from my low monthly wage.

I could now afford to pay into it but as I'm part time even if I work there the next 30 years till I can retire it wouldn't be much in total.

Luckily we will be mortgage free in our 40s and also have rental property, which will also be mortgage free. The rental income is way more than I'd receive from my work pension. We could also opt to sell to have a lump sum, and/or downsize.

I got my 1st pension at 19 after 9 yrs they wound up the scheme.....had to choose keep the money with provider but it wouldn't accrue any interest and would be subject to annual charges or. I could transfer money out but a 25 % penalty charge would be applied. Nice

@Fullofthought

What % of your monthly salary is your pension contribution? Is the £500 per month based on you paying the same amount in for the next 38 years?

I don't know if to just stay enrolled the next time work auto enrols me. I've no idea what % would be taken from my pay, if it's 3% I'd not miss it anyway.

Sorry I'm not sure. I get 930 a month for part time and pay 50 in a month. Work pay about 75 a month so not sure how it works.

Even DB schemes are ring fenced. Unless the company is committing fraud on a massive scale it canNOT strip the pension.

And anyway then you go into the protection fund who actually make you almost whole. It’s NOT as per a PP a messy 20%, it’s more like 90% up to a cap of about 30k.

So what if you have a measly DC pension anyway? Say it’s £100 a month. Well that’s £100 a month on top of your state pension so is worth getting.

I agree the state pension system won’t be in the same state it now in 50 years but I would actually bet that people who save decent pensions will be the ones hit, so that if you have your own pension you are no longer eligible for any state pension (which will lead to people who have worked hard to save for a pension of say £12k a year equivalent just getting that and then people who didn’t bother saving getting the same from the government.) Anyway that’s my guess.