To think that a lot of us will be in trouble when we retire...

[Fleetheart]

This generation seems very unlike the previous ones in that we take out loans for everything, buy holidays on credit, kitchens on credit, new clothes etc etc. And pension schemes are getting less and less generous. And most of us don’t understand them anyway. I’ve always earned well, but have split up from partner, so still have s lot on my mortgage, no savings, and really not very much in my random pension schemes most of which are money purchase schemes and won’t pay a lot. And I know many people of my age (mid 50s) who have no pension at all. And meanwhile the govt is being less and less generous. What will become of us all?

See I don’t really understand people paying £££ into a pension and not being able to afford any holidays or “luxuries” for years of their working life, as a pp upthread. I know people like this in real life. All they do is work in the hope that post 67 they can be off travelling and doing all the things they couldn’t afford before. That would be fine if there were guarantees in life but there aren’t.

I started travelling a fair bit when I hit 40 (as my kids were adults then and I had more freedom/money). I’m now 50 and already see a difference in my energy levels, how `I cope with long haul flights, even little things like sleeping in a different bed! I highly doubt I will want to be travelling off to the other side of the world at 70+ and that’s ok with me, as I’m doing it all now.

Of course it’s sensible to plan for old age but not at the total expense of enjoying life now, while you know you are alive and have your health. If I live past 67, that’s when I want to be “winding down” (I already feel like that now a bit!) pottering around in my garden or doing my craft hobbies, reading, doing some older people’s yoga or something! All these things are free or very cheap.

And most people who did factory work back then also worked overtime. It was easy in most places to pick up overtime. I was earning equivalent of about £25k in my factory job, at a time when there was no minimum wage, so some jobs were very low paid. So with overtime it was easy to make £30k or more. But the noise was incredible - the all male supervisors wore ear defenders, the people on the line did not. And it would have ruined your body.
Go back a few more years and health and safety was worse. My uncle along with many others died of asbestosis after exposure in a factory. A few years back it was the 4 most common cause of death in men.

Zero hour contracts are terrible and should be outlawed, but health and safety is way better than it was even 30 years ago.

Of course it’s sensible to plan for old age but not at the total expense of enjoying life now, while you know you are alive and have your health. If I live past 67, that’s when I want to be “winding down” (I already feel like that now a bit!) pottering around in my garden or doing my craft hobbies, reading, doing some older people’s yoga or something! All these things are free or very cheap.

I'm sorry but this is an astonishingly naive and privileged idea of what poverty in old age looks like. People in this thread mostly aren't talking about putting everything into their pensions so they can have luxury cruises, they're talking about having a pension at all so that they can heat the house in winter, afford a nice and varied diet. Pottering around your own home is fine - for lots of people retirement is going to mean living in a grotty and noisy flat that is all their housing benefit will stretch to - and I don't even know if that'll be there by the time that my generation, with our very low levels of home ownership, get there.

Money also buys you choices - including with the stuff no one likes to think about. I saw how enormously better it was for my grandmother to be able to employ her own carers to come when she needed them rather than relying on the council service. I saw the home she eventually went into vs the one she'd have had to go in if she hadn't had her own assets. Sure, it probably would have been more fun if she'd spent all that money on travelling in her 40s, but God was she glad that money was there later.

Deferring all fun until retirement is silly. But that isn't what most people are doing - they're just trying to avoid misery in old age. Remember, too, that if you're 50 it does look pretty likely that you'll get a state pension. I'm 32 and I'm not confident I will.

I'm paying a small amount into a pension just to try to avoid misery in old age. I can't afford to travel now and I don't plan to travel then.

I'm the generation after you (early 30's) My parents, much like you suggest, took out loans for everything, kitchens, sofas, double glazing. As a result interst on debt payments ate up most of my parents income and my childhood was spent eating Tesco value everything and going without a TV as the license fee was a luxury.
I have more in my pension at 31 than my mum does at 55.
My childhood taught me to be frugal and I am determined to save up before I buy anything. As an add- I am fortunate in that my earning potential is a lot higher than my parents. I grafted in school and decided to continue my education/training right through my career.

I seem to be an anomoly though. A lot of my friends (especially with children) don't have pensions. Whenever I speak to them about it they say they can't afford to pay into it. The reality is you can't afford not to. If you are struggling on £20k now and living in rental accomodation because you can't afford to buy the state pension will have you living in poverty.

I agree with Asta having seen too many colleagues deprive themselves for years and then die within a few, in one case less than a year of retirement.

A lot more shoukd be like you neither no children or at least less

I get the sentiment but if everyone did this we would all be in an even worse pickle with no taxpayers to pay for our pensions/housing benefit etc. That's the ageing demographic problem in a nutshell!

A balance is what is required, but for many people saving/pensions are genuinely not an option.

Of course I don't want to romanticise my DGFs experience completely, he did very long hours and had some awful respiratory problems which could be at least partly due to nasty exposure to chemicals at work.

Was it worth it? He had the dignity of providing for himself and his family through work which people on the minimum wage don't get today. He also had more security than most young men on the minimum wage today.

There was an article in yesterday’s Observer about the FIRE movement - Financial Independence, Retire Early. The basic premise is that you live as frugally as you can and save the rest of your income into long-term investments. Once you have built up a fund of 25x your annual spending (not income), you can then stop earning because using the 4% rule, you can take an annual income of 4% from a diverse portfolio of equities and it will still grow in line with inflation, providing you with an income for life. The most aggressive savers aim to retire at 40, although the article does say that the 4% rule may not be adequate over many decades and would leave you vulnerable to a market crash or recession, so those who get to 25x and stop may run out of money.

Of course the spending you’ve had during your earning years is what you will have available in your non-earning years, so unless you want to live on nettle soup your whole life, you would be wise to either factor in some fun in the early years, or build a larger pot.

And retire doesn’t necessarily mean completely or for ever. You would have the financial base from which you could experiment with different kinds of paid work, and if it didn’t suit you you could leave without worrying that you would starve.

I acknowledge that for many people this is pie in the sky because they don’t have the slack to enable them to save. I have nephews and nieces in their 20’s and 30’s who, despite being in what appear to be well paid jobs, are still renting. I have no idea if pensions enter their heads. Or children, for that matter. Or committed relationships for most of them.

" seem to be an anomoly though. A lot of my friends (especially with children) don't have pensions. Whenever I speak to them about it they say they can't afford to pay into it."

I see this a lot too, and I wonder from the people I know how many genuinely can't afford to pay into it (not people here), friends who still manage to prioritise what I'd call luxuries. For me pension has never been optional, I've always viewed it as compulsory as tax, NI and student loan. Even when we were at our financially most difficult with 2 in childcare I never for a second considered reducing or stopping pension payments to alleviate the pressure temporarily, I didn't realise people did this until later. Pensions also get forgotten when weighing up the "can I afford to work" debate when it comes to SAH vs working with young kids. A friend of mind gave up work when she felt £200 a month wasn't enough after childcare (not an opinion I agree with but I digress!), but completely ignored the substantially higher loss of her civil service pension contributions.

That said I hugely advocate balance and in my 30s not currently going above beyond what for me in my situation are the basics: work based pension, mortgage and life/illness insurance. Will reflect more on retired lifestyle and planning for that when kids have grown up, which for me is only late 40s!

I think when nest increased minimum contributions from employees from 3% to 5% a lot of people may have opted out. if you're in a low paid job, finding an extra 2% out of nowhere may be impossible for some. I think the should have given people the option to pay in 3% or 5% (or more if they wanted). But removing the lowest option of 3% will have meant some people pulling out and putting in nothing.

Okay, I have read most of the posts and most people seem to be of the view that contributing to a pension is a better idea than using btl property as a pension.

I have contributed to pensions in the past when my employer was also contributing, so I am not against them as such, but would like to point out a couple of things.

If you buy a rental property you only have to contribute the deposit, the rest you borrow, so in effect you are making money with someone else money, not your savings. Let me give an example, and this is realistic because I have been doing it for many years. The figures are simplified for ease. So, you buy a property for £100,000. Your money is used for the £25,000 deposit, you borrow the remaining £75,000 at 2.5%. You get a return of £7,000 / year and pay £1875 on the interest of the mortgage (2.5% of £75,000). So actually your return is £5,125 per year once you have taken the mortgage costs off. But, that £5,125 is return on your £25,000 investment, which is a 20.5% return on investment! Do you get that on your pension? Also of course there are other costs, but there is also capital growth on the property when the prices go up. So to my mind it is a really good investment. You are using someone elses money (the banks) to boost your savings.

Second reason is when you and your partner die, who gets your pension? With property investment you can pass it on to your children.

So, in my view btl beats pensions every time.

Completely agree with NewAccount.
Even if someone is happy to ‘Potter around’ in retirement, enjoying the garden, reading etc it’s going to be far more enjoyable to do these things in a pleasant home, in a peaceful area, where you can afford to put on the heating, eat good food and not be panicking about the boiler breaking down. Just living costs- particularly if you want to do it somewhere nice, without the stress of getting a repair bill. And I certainly won’t be relying on the crappy state pension to provide that for me.

I don’t think most savers are expecting to eat out every night or go on round the world cruises. They just want to enjoy a decent standard of living.

clariana how do the change to taxation on rents (the fact you can no longer deduct mortgage costs) affect your calculation? We have zero interest in BTL as an investment but we were considering letting our house and moving into rental (we want to move areas but not forever) and the current tax situation means we'd make a big loss if we rented out the house.

Such a scary thought. I put 20% of my salary into my pension and my employer puts in another 10%. If I keep doing that for another 25 years, then my annual pension at age 65 will be half of my current salary (we will have paid off the mortgage well before that). I’ve touched on this topic with female friends and hardly any of them have their own pensions (most have been SAHM to be fair). They are totally screwed if their marriages break down, but that’s just catastrophising on my part I suppose if they aren’t worried themselves 🤔

@Clariana, to me that just doesn’t add up. You have to pay tax on your rental income, whereas pension contributions are, not only tax free, but also made by your employer. The tax man takes 20% of the mortgage repayments too. BTL might have made financial sense once, I’m not convinced it does now. And £600 a month rent on a £100k house doesn’t sound very realistic either.

@Clariana don't forget inheritance tax. That's quite a large percentage you pass on to tax man when children inherit property!

And capital gains tax when you sell. BTL is now the HMRC wet dream, the gift that keeps on giving.

and stamp duty. Plus does it not ever need repairing etc?

If you are struggling on £20k now and living in rental accomodation because you can't afford to buy the state pension will have you living in poverty

I live on less than half of that. I am resigned to continuing in poverty throughout my retirement years. On the plus side, I've learned to manage on very little. But it's why I can't afford to pay into a pension (other than that I pay into at work, which might give me 50p a week when I retire).

@OriginalRiceCake: ‘I’ve touched on this topic with female friends and hardly any of them have their own pensions (most have been SAHM to be fair). They are totally screwed if their marriages break down, but that’s just catastrophising on my part I suppose if they aren’t worried themselves’🤔

They should be worried, not simply in case their marriage breaks down. They would have the happiest marriage in the universe, but if their husband dies first (and statistically that’s most likely) do they realise they won’t just carry on getting all his pension? If he has a very good occupational pension, if they’re lucky they might get half. Quite possibly not even that.

I too know a lot of (intelligent) women who really haven’t thought ahead and planned adequately. It’s a crisis looming and women will be hardest hit

BTL absolutely is the gift that keeps on giving...to HMRC and letting agents. We just paid off the mortgage on our BTL house and I wouldn’t buy another now that tax relief on the interest is restricted and you have to pay a stamp duty surcharge.

The problem for me is this. I rent from a HA so when I retire, HB will pay my rent or, if I have enough money, I will have to pay. That's fine, I don't mind paying for as long as I can past 67. I may well still do so. My job is all online so potentially I could still do part time work (one of my pt colleagues is retired) and I may well have a lodger. However if I can't work due to failing health, or the work dries up or goes to younger people then I'll not be able to do that.

Say I have 30k in the bank. I know some savings are discounted but with the rest, the government will calculate how long that should last me. I understand that's so that people don't fritter away their life savings in 6 months! But the calculations they use don't give you a good standard of living. I will be no better off than if I just stay within the threshold of what you're allowed to have saved and just claim the HB. I won't have a "nicer" life for having that extra money in the bank.

So there is literally no incentive for people like me who don't own property or can save/invest large sums, to save a few thousand. Because it just counts against you. Yes you can argue housing benefit is unsustainable and if I were a lot younger, I'd be looking at it differently. But I'm not. And, to be honest, I would still need to claim it once my savings ran out anyway. I also do think the state pension will become means tested at some point.

I do understand that younger people can't rely on these things still being there when they're retired. At whatever age it is pushed up to by that point! But I have to make my plans based on my current age and the current system.

Private renters need to think about this even more so than SH renters. Private renters can claim HB also, but there will be a local amount and it will be dependent on other income. So again, unless a private renter can save a substantial amount, they're better off not saving much at all if they are already over a certain age. Otherwise they will find themselves worse off.

@Asta19, like the woman near here who saved £38k out of her pension, doing without God knows what to achieve it, only to have it all taken away and with a charge of fraudulently claiming housing benefit. Saving was her worst enemy.

I am a 62 year old WASPI woman and have another four years to go to 'collect'. I had to retire early from teaching due to stress and had my not-very-large pension actuarily reduced by a quarter. Then the DH was made redundant and could not get another job. After 18 months he found a three day a week post which helps us with the bills.

However, we have always lived frugally and saved what we could. We also replaced the boiler when he was working and paid for some work done in the garden to cut down on labour when we became too frail to do it.

Officially, we fall into the definition of 'poverty' but in my head I am managing and living a very good life where my happiness depends on what I do, say, think and read, not what I spend. Had I 'lived the dream' and spent on holidays, meals out and other ephemera I would have been truly snookered when tighter times came.

My DH and I grew up in times so poor young people would not believe them: ten to a two room house, no electricity, no bathroom and an outside loo, no benefits, living in a caravan and so on. These were all actual experiences our grandparents and relatives endured.

I am certain that things will work out fine for the youngsters of today. They need to plan ahead and live sensibly.

Private renters need to think about this even more so than SH renters. Private renters can claim HB also, but there will be a local amount and it will be dependent on other income. So again, unless a private renter can save a substantial amount, they're better off not saving much at all if they are already over a certain age. Otherwise they will find themselves worse off.

But if you keep paying your own private rent you can stay where you are. Look at what HB rate will get you where you live - where I live it's nowhere you'd want to live, perhaps especially as an older person (and especially especially if you live alone or are disabled and so might feel more vulnerable), or it's a property in a better area but a terrible state of repair. Again, money buys choices - and from one perspective spending your own money might seem like a waste, from another you've bought yourself a much better standard of living which is surely exactly what money is for?

I appreciate it's different if you would live in the exact same property either way. But that's not the situation many private renters are looking at.