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?

When critical illness policies first became available they only covered a limited number of illnesses. By the time they became better I had a chronic illness not covered by earlier policy as it is a rare one. The illnesses they all used to cover were actually listed.

I thought 25% is tax free when you reach 55?

Correct. You can draw down a lump sum (currently 25%) tax free from a pension fund at 55.

Also, you very much get ‘free money’ when you contribute to a pension, in the form of tax relief at your highest rate, even if you are self-employed and don’t get employer contributions.

I’m self employed. It costs me 60p to put each £ of contribution into my SIPP. I get that 40% benefit almost straight away: the fund manager claims 20% basic rate tax and adds the value to my SIPP then I get an extra 20% discount via my tax return: I pay less tax in the year in which I contribute because what I put into the pension is deducted from my taxable income.

By throwing all of your money at paying off your mortgage early you buy a short term advantage but what about all those years when your pension contributions could have been working for you? Say you get a mortgage at 30 and aim to pay it off in 15 years instead of 25 (or even 30 - that’s the length of some mortgages now, which is propping up prices).

If you do it, you’re mortgage free at 45. Great. You start concentrating on saving for retirement. However, what you’re missing is that your contributions, boosted by at least 20% as I describe above, could have been growing and compounding for those fifteen years. It is very difficult to make up that ground without contributing enormous amounts.

The same argument applies where people stretch themselves to service a big mortgage, often by extending the term to say 30 years (a terrible idea, BTW). Buy a smaller house or live somewhere cheaper. Keep some money available for pension contributions.

One issue is people living too long when they are actually very sick beyond the point of no return with terminal illness and dementia. Maybe if we look to the thousands suffering wasting away day by day, m where each minute alone, abandoned in old folks home at the mercy of whatever career is in that day we should give healthy people the option now to say when they want to go!

I bloody know I would. There is no way I want to, exist, vulnerable, not knowing who I am or my children, whilst my whole estate is wiped out, funding the care home owners latest lamborghini re spray (true).

Why can't we treat our selves with love and respect we give to dogs.

I can't see why it would be hard? I goblinlo would like end of life to be given to me if I end up in care home, frail, vulnerable with dementia and don't know my dh or dc.

Finish me off!!

I've watched someone die at close hand for 3 weeks. Full mental capacity, terminally ill. Fucking cruel and un neccsary.

So that's my contribution to pensions.

Re actual pot, what does one need to yield income

Thats should read each minuet alone is like a year.

@iamthewombat

I have work pension and a sipp. I also have other income all well below 4o grand.

Are you saying the more I put into a sipp the less tax I pay on my other income?

I know two carers home bosses. Silver farming.

One owns several high end super cars, the other is also astronomically wealthy. They own several and do bare minimum.

I feel trip advisor ratings need to come out about homes and make them totally transparent.
I've worked in two years ago, one was the most expensive in my area, and they wouldn't warm up cold food.

The two owners are seperate to my other experiences of penny pinching and cost cutting.
Friend at toddler group said on one shift she had to call ambulance immediately for dehydrated resident, she was nurse. Owners had fat Bentley. She said it was shocking there as well.

Gerry Robinson did program on it too.

Euthanasia aside (which I don’t see as relevant to this discussion), a pp asks how much you need in your pot to yield income.

Brace yourself. If you have £100k, aged 60, and you want to buy an annuity for the rest of your life, you might get 4 grand a year. Do you want it to increase with the RPI? 2 grand a year. The younger and healthier you are, the worse the annuity. Of course it is. Younger, healthy people are drawing annuities down for longer.

Annuities are poor value unless you are, to be blunt, likely to die soon. Make heavy smokers get the best annuities for obvious reasons.

Removing the requirement to buy an annuity with your ‘money purchase’ pot of cash is one of the best things this government did to reform pension saving, along with restricting the annual and lifetime contributions for high earners.

Better to manage your own money: we’ll all spend less when we’re very old (>80) anyway compared to when we’re 60.

I asked before but perhaps it's not an issue. How will the younger generation find employment if the retirement age keeps rising?

And what about the research showing life expectancy is stagnating? Many people won't live as long as the current pensioner generation.

I suspect part of the reason the current pensioners live longer is the very ability to retire relatively young, the chance to have a slower pace of life before they burn out physically or mentally.

The lower paid tracking assistant type work, many people need to take less demanding jobs to prevent ill-health. I know more than one teacher who, after time off sick through work stress, has returned as a teaching assistant.

I also agree with a PP that very often it's not choice but because employers don't take on people with CV gaps (whether SAHP, illness, or redundancy) and/or people need the flexibility of part-time hours.

@Gobbolinocat you ask whether you get more tax relief the more you contribute to a pension.

Broadly, yes, provided that you don’t contribute so much that you have no taxable income left.

Example: your salary is £30k. You contribute £200 a month to your occupational pension: £2,400 total. That’s a ‘charge on income’ and reduces your income, for tax purposes, to £27,600.

Your personal allowance is £12k. The £15,600 difference between that and the £27,600 is taxed at 20%. Contribute another £2k to a SIPP and the fund manager claims 20% tax relief for you - £400 - and puts it in the SIPP alongside your £2k.

However, if you had a windfall of £20k and contributed that you wouldn’t get 20% relief on all of it because your remaining taxable income, pre-SIPP contribution, was only £15,600. So £4,400 wouldn’t attract tax relief.

Also note, everyone is restricted to contributing a maximum of £40k or their salary in any one year.

MALE heavy smokers get the best annuity rates, not MAKE heavy smokers!

My husband is 55 and has just been made redundant, he has a redundancy package that will cover us for about a Year, we are so lucky we have nearly paid off our mortgage but also have £500k in our pension pots so can take 25% tax free if needed, i’m hoping we won’t need to and he will find a job soon. It’s not just about when you retire, you can start to get health problems after 50, you could be made redundant and it’s not so easy to walk into another role. While you are fit and able, yes enjoy life but also save for tomorrow.

SIPPs are good and relatively modest on fees, unless you choose to invest in anything "exotic". Ours is in industrial development land and commercial property, which is deemed non-standard. So while it's not very liquid, it's let and generates cash. But the annual fees are quite high and there's a fair bit of admin to keep it running. If you own a business, the alternative is a SSAS which has lower charges and can work well. You will need a proper independent financial advisor unless you are very savvy, plus a professional trustee to provide the tax wrapper.

We have a SSAS and there are pretty significant costs in keeping it running. My understanding is that you don't need a professional trustee now, but you're leaving yourself open to problems without one.

There are also limitations on what your investments can be, which can be a little frustrating. Many financial organisations won't accept SSAS investments.

There’s nothing so exotic in mine! Mine has low cost tracker funds in it (I find Vanguard funds very good, and cheap: 0.1%).

There are fees for running a SIPP but mine are very low. All my provider (Barclays) do is provide the platform and reclaim the tax. I decide what I buy and sell.

To be clear: SIPPs are cheap and easy to run and all the big providers do them (Hargreaves Lansdown, the big banks).

SSASs are for specialist investments, like XingMing’s development land, and need specialist advice and guidance. The cast majority of pension savers would never need a SSAS. Don’t let it put you off. Investments are much simpler than investment professionals let on.

The VAST majority, grrrr, not the CAST majority.

@OriginalRiceCake 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

That will go further than you think, though, because

1. you are currently living on 80% of your salary, because 20% is going into your pension
2. your mortgage will be paid off
3. you won’t be paying NI.

Better to manage your own money: we’ll all spend less when we’re very old (>80) anyway compared to when we’re 60.

Will we? If you end up in a care home the fees make travelling round the world look like the cheap option.

We're investing in property. We both have separate pensions and we're paying off the mortgages asap.

No we do not spend less, unless you spend a lot of money on extremely expensive holidays.
Lots of people buy ready made meals as they can no longer manage cooking that involves slicing vegetables up and similar. Also taxis, home carers, mobility aids, it all adds up.

@Gobbolinocat Totally agree. I would much rather decide when I want to go than have it dragged out so I'm technically "alive" but not "living".

Definitely don't want my assets being used to line the pockets of "care" home owners. Would much rather book a one way trip to Switzerland.

I am in my sixties and what I realise now that I didn't know when I was younger is that you get tired out and need a rest. So please prepare to stop working at some point. I am.lucky in that I can finance my life by working part time, but I would really struggle if I had to work.full time now.

If you are in a care home at the end of your life, you are scarcely in a position to travel the world, so contrasting care home fees with the cost of world travel is pointless.

Yes, care is expensive. What’s your solution?

Re spending less when you are very old: speak to any decent professional actuary. They will tell you that for years they were arguing for annuities to be ‘front loaded’ to match spending patterns. When you are 65, you are more likely to want to go out for dinner, participate in sports, go on weekend breaks etc. When you are 85, not so much. Your lifestyle changes: people don’t want to do as much because most people slow down.

You can still buy your pre-sliced vegetables when you are 85, if you want (is it just me who finds this example bizarre?). You just won’t need as much ‘lifestyle’ money as you would have 20 years previously.