Not contributing towards a pension is at best foolish and at worst utter stupidity?

[BHouse19]

I was really surprised (and concerned) having met with a large group of friends last night that some of them aren't contributing towards a pension (two stay at home mums for two + years and one who has opted out of her work place pension).

So I'm just wondering, if you're not contributing, how are you planning to survive during your retirement? Projections tell us that the state pension (if it still exists as we now recognise it) is in no way going to keep up with inflation.

Your husband or wife may be contributing to one but if the marriage breaks down the value of this to you is going to dramatically reduce for you as a single person

AIBU in thinking that saving for a pension is one of our most important financial responsibilities?

Midgey I think - depending on your choice of investments obviously - you can currently expect around £4,250 to £4,500 for each £100,000 in your pension pot.

So to get £30,000 you probably do indeed need around £700,000 but your liabilities will hopefully be lower by that stage - especially if you own your own home (fairly crucial!) and have paid off your mortgage - and you should also get the state pension eventually, which is at least better than a poke in the eye with a sharp stick.

Just because you are unlikely to come close to £30,000 from your pension pot alone, that's not a reason not to save. Ideally, it should be part of a mix of savings e.g. money from downsizing maybe?

I've only got £140,000 in my DC pension pot at 55. £140k sounds like a lot but it's not - and it's based on retiring age 67. It's all a bit of a worry really.

It’s a ticking time bomb sadly. People just bury their heads in the sand when it comes to retirement planning.

What @Midgey91 has flagged is another issue - just how much you need to have built up to receive even £30k pa., it's silly numbers, £750k is a massive amount of money for anyone to save. No wonder people are put off and don't think it's worth bothering with.
I've been paying into my pension since I graduated, and although it's a healthy size pot it's never going to be £750k, so illustrations like that make me feel a bit depressed about it!

I started a SIPP for DD when she was 4, precisely because she's going to need that kind of figure when she retires!

Please do tell me how I'm supposed to contribute to my pension when I have no money coming in. Apart from the £82.80 I get for my child.

I don't plan on staying at home forever. However to assume someone is stupid because they're not contributing is rather hasty.

I am aware of it. I'd love to add more to my pot. I can't. Not stupid. Just unable.

I've only got £140,000 in my DC pension pot at 55. £140k sounds like a lot but it's not - and it's based on retiring age 67. It's all a bit of a worry really.

When would you like to retire? Do you live an expensive lifestyle? If you have another 12 years to save and you own your own house surely you will be OK.

This might be a stupid question but what will happen to those of us in our 30s if younger people can’t or won’t pay into pensions? Would that put our pensions at risk?

’it's silly numbers, £750k is a massive amount of money for anyone to save’

But that was my point earlier; I think people look at the numbers and run scared! But of course with a work pension you’re not saving. £750k yourself... you’re having money deducted from your wages so you don’t even see them and your employer is paying in too. So when you consider a working life of 40 years you’re talking a considerable amount.

(Disclaimer: I know some people are self employed, and therefore don’t get employer contributions but then they will be paying considerably lower NI so presumably could chuck the money they save there into a private pension.
And of course some people can’t afford to pay anything in to a pension. I’m talking about people who can.)

Thanks for explaining how stupid I am.

Pensions are not universally wonderful things. They are not universally efficient, protected and worth it. Work in the public sector? Marvellous, grab it with both hands. But private pensions are not remotely comparable. The risk of poor returns is very real. It is not the only option, nor is it, for some people like myself, the best option.

I currently have a pension pot of around £12k at 28 and agree that although £750k is an awful lot of money it's so so important to have my own private pension. Im very fortunate that DP and I bought a property last year and we have a mortgage of £250k with another £235k to pay off.

My employer has a generous pension scheme where I contribute 8% and they contribute 4% however I have only just joined this company and hope to stay here for a while. My DP has been at the same company since graduating and has similar contributions and so has a larger pension pot.

It really does depend on your situation though and I can understand why some people don't have private pensions. My dad is in this situation and I worry for him

I don't understand private pensions at all.

It depends on the individuals situation.

I have a friend who didn’t realise that he would receive tax relief on his pension contributions, so as a lower rate tax power he could pay into a private pension without taking home a lower income each month. He could have been making contributions for 13 years which would essentially cost him £0 due to tax relief. Yes, he is only paying 4%, but his employer is contributing 12%, so while it won’t be a huge pension, it will certainly help him.

Some people can afford to save but choose not to, everyone in my team is a higher rate tax payer, some are mid 50’s, renting and have no retirement fund. Those people are idiotic. But someone who cannot afford to save most definitely is not idiotic.

Most pensions die with you. Its why so many people prefer to invest in property, a tangible asset you can pass on to your heirs.

Yes to planning ahead but I can see why people have thought through alternatives to a traditional pension / annuity.

HalloumiGus bit of a half truth.

An annuity can be established that provides guarantees and/or a spouses pension. Many final salary pensions provide spouses pensions

HOWEVER!

A defined contribution pension that has not been converted into an annuity can be passed on tax free if you die before age 75, and at the beneficiaries' marginal rate of tax if after 75.

I wonder OP, how you expect people to pay into a pension who earn very little?

I've not paid into a pension this year as I have been working freelance although I do have a couple of savings plans. I also have the pensions from 20 years of employment.

I actually don't think many people who can afford to pay into pensions, don't.

Also, savings rates are rubbish. Even if you have a million pounds in the bank you are unlikely to get more than about £20,000 a year in interest. Annuity rates are little better. I can see why people don't think it's worth bothering and rely on the value of their house.

The state pension has not increased in line with inflation either. However, few people recognise this and even if they do they have very little spare cash to save.

It's increased faster than inflation.

WorryBadger. Risk of a poor return can be there with any investment or savings. Interest rates are low. Investments don't always deliver high returns. A pension is just a wrapper for an investment, and a wrapper with a generous tax regime. Do your own research, don't just repeat stuff you've heard people say.

Demonising something you evidently don't know a lot about might put someone off making adequate provision for themselves.

Because a lot of people are incredibly stupid that's why

Also most people will never be able to retire which is fine if you are healthy but odds are against you in that department

what kinds of jobs will people in their 80's be looking for, what if there just isnt any suitable work?

Do your own research, don't just repeat stuff you've heard people say.

ODFOD. Where did I say I'd repeated what someone else told me? Where is it written that a private pension is the best, most tax-efficient means of providing for one's retirement in all situations, for all people, throughout their lives?

I have looked at multiple options. I have chosen something other than a private pension. Who the hell is anyone else, who knows nothing about my circumstances, to tell me my choice is idiotic?

OP

Are you against people having personal savings in lieu of a personal pension?

As a young woman I had no idea what pensions were, how they worked. The example I had at home was DGF brought home wages on a Thurs, put the housekeeping on the mantle and DGM budgeted out of that. They had state pension and he had a small pension, never discussed. DM worked until after I was grown up with DC of my own. I have no idea if she has a private pension. Finances are not and have never been discussed.

DH is now retired, he has only a state pension. I am younger than he is. I pay into a pension through work but the projections mean I will have not gained much from doing it.

I had DC and was SAHM and carer for the GPs and when DC were teenagers started working FT.
I'm now 53 and expect to work until I drop. I rent from council so have no assets. I still have no idea about financial investments/pensions. I do worry about if my health starts to fail but I'm never going to earn enough to make a difference now.

This is such an interesting discussion; judgment aside about who is "foolish" or not. Living for the now versus thinking of the future isn't just about financial demands, it's also about values.

My SIL is the same age as me and does not have a pension, she has always had a really good income but would rather do stuff like take a year off work in her late thirties to travel.

There's something to be said for this, i think. I'm a big believer that although I may regret the money wasted spent on possessions, I've never regretted what I've spent on travel. My parents are working class, former manual workers. Scrimped and saved when we were kids, even though there was very little to save. As kids we often went without. They are now retired, with a fully paid off house. And my Dad has asbestosis and what little traveling they've done isn't likely to continue. I often think I wish they'd not been so keen to save and pay off their mortgage and actually enjoyed their money while they were young and healthy enough to do so.

Interestingly, my brother lives his life in the opposite way. Lives in a small terrace in an "unfashionable" part of a crappy town, but follows his football team across Europe, weekends away whenever they like. I doubt his pension provision is up to much but I know which lifestyle would make me happier.

@Everanewbie really useful posts