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?

Wow. I’d love some spare money to be able to each month. Some people are so blinkered.

I'm torn between sticking more in my pension, paying off my mortgage (lost a home before don't want that to ever happen again) and keeping my money in the bank

I was in this position and spoke to my financial advisor. They recommended I put the over mortgage payments in a pension as I can take my tax free sum to pay off the mortgage at the same time in life my mortgage would be paid off if I continued to overpay. Plus I'd have more money in my pension pot overall.

I'd recommend anyone to take to a FA

The Conservatives brought in the 'triple lock' on state pension increases a few years ago. The now increase by the rate of inflation, the % rise in average wages or 2.5% whichever is highest. Next year they will increase by 3.9%. If you are 40 and you get your pension when you are 70, this will make a big difference to how much the state pension will be in 2050. This is assuming whichever government is in charge doesn't screw pensioners over again, and lower the increase rules.

I pay £600 a month into my pension including my employer's contribution. Been paying in for 15 years- I'm 39. My predicted income is 3-4000 a year assuming I keep paying in at the same rate. How is that going to keep me going! Hardly worth the bother unless you have defined benefits.

So you’d have to live for 25 years after retirement just to get a payout of what was put in. That isn’t very likely. You’d be better off saving the cash then if you die you can pass it on.

You can pass on the £750,000 in the pension.

To illustrate, I estimate an all Europe index tracking fund currently has a real return of 4.8%. If you invested your 750K in that and drew 1% of the balance each quarter, presumably not minding that your income would fluctuate with the stock-market, you'd get an income that started at about 30K a year and on average increased faster than inflation, and with average luck, when you died your pension balance would be higher than when you started.

Unlike the 750K in cash you mentioned, the 750K in the pension won't be subject to inheritance tax. And since tax relief on money going in is likely to be far more than tax on money coming out, you wouldn't have had to save as much to accumulate that amount in a pension as you would have to accumulate it outside.

I didn't have one (NHS) had to opt out as contributions too high
I have a small one with a previous employer which I've just transferred to PensionBee after reading this thread! No minimum contribution so I can add to it, and I have an employer one now
20 years of NI contributions (I'm 36) as well. Mortgage should be paid off... hopefully that's enough

Also, I'm not great with understanding pensions and this is clear as mud to me

Can anyone advise if my work one is any good?
It says I contribute 5% of my earnings and then

X company funds the Scheme with the intention of
providing you with:
a lump sum, for each year that you are an active member, equal to 16% of your "pension name" earnings in that year
AND
a fixed interest (2.5%) increase on that lump sum, for each complete year that follows, up to your Normal retirement age

Then it says "pension name" earnings are your earnings than you pay contribution on and earn pension on

I've got £5k with an Aviva pension - is that transferable anywhere anyone know? What is pension bee?

@bodenbeaut
https://moneytothemasses.com/saving-for-your-future/pensions/pensionbee-review-is-it-the-best-way-to-find-and-consolidate-your-pensions

@Happygirl79 why didn’t you get a share of his pension? Did you take a greater share of another asset (like house equity) instead?

It is OK for those who have public sector pensions, but the ordinary folk don’t get those perks. Private pensions have been stung with obscure rules and fees, employers stealing the money, etc, the risk is entirely that of the person, you have to choose what funds to invest in. I’m of the endowment mortgage generation where we were promised that our mortgages would be paid off with an extra lump sum. A load of tosh. Instead we had to pay off the mortgage with savings and there was no extra lump sum. Dabbling in the stock market would be seen as gambling in other terms. I’ve had my fingers burned by being advised this way before. No final salary pension. Workplace sticks in the least they can get away with but the entire risk is mine. The gig workers or forcibly self employed have little spare money. Most people I know are forced out of their jobs in their 50s and never get employed again.

Pensions are so confusing, we had a FA to give us some advice, I never realised you can leave all your pension pot to your children when you die tax free. Make sure you pay into your state pension by NI contributions, if you’re a stay at home Mum, make sure you claim child benifit even if your partner earns over £60k, you don’t receive the payments but the government pay your NI contributions.

I have only been paying into a pension since auto-enrolment started, before then I wasn't offered one. I earn below an average salary and since my employer started contributing to my pension my wages haven't gone up at all since then. I can see why a lot of people have to opt out, there is no point in worrying about the future if you are short of money now.

Financial education in this country is woefully lacking but as this thread demonstrate there are people out there who know the value of pensions but simply cannot afford it

That is a very concise and accurate summary Figgygal. If any government commissioned an inquiry into pensions, that should be the first line of their report. The problem with the 'too foolish and feckless attitude' is that (apart from being innaccurate and lacking in empathy), it stops us thinking about the structural problems Deathstare referred to up thread. At the same time, we have an overlapping but separate problem with financial education.

The other thing that is a huge problem is the impact of misselling on attitudes to pensions. This is still going on, eg all those people encouraged to take pension draw downs which led to them investing in something dodgy or ending up with huge tax bills.

I don’t earn enough for auto enrolment

I’ve always thought of my pension as an essential & never considered opting out. It’s a LGPS and very generous. However, I do know that some of my colleagues have opted out and have foolishly made the decision to have £300 extra now each month instead of £650 going into their pension each month. It’s very short sighted & these are people who holiday/eat out a lot, drive nice cars etc.

I want to have choices about where and how I live in retirement. I don’t want to just “make do.”

Not aimed at those who can't afford to pay in but there have been a few misunderstandings on this thread.

• Most DC pensions (not final salary ones) you CAN pass onto your family if you die before retirement. And there is no inheritance tax to pay. So in the unlikely event you do have a £750k pension pot, your kids will be better off than you having £750k in the bank

• You get basic tax relief of 20% straight away added to your contributions, plus any employer contribution, plus over time pension funds have grown faster than cash so you are far more likely to build up a pension pot of £750k than cash savings of that amount. (Same applies for more modest sums!)

• You don't have to take an annuity. You can do flexible drawdown or a combination so you're not stuck with a £750k buys a £30k pension pot any more. You may well decide that you want more £ in the earlier years of retirement than you will want as you age - more travel etc. And you can choose that.

There are pension drawdown calculators on the Hargreaves landsdown site that you don't need to give them your details.

Money advice service has a pension calculator (though this is based on buying an annuity) too www.moneyadviceservice.org.uk/en/tools/pension-calculator/

What a lot of people don't realise is that if you are forced to retire early due to ill health or s life limiting illness then you will be able to access your pension early.
That's worth s lot, although its something no one wants to have to use.

The real problem is that our media leads us to completely under-estimate the size of the working poor. People like me (and many others on this thread) who work hard, spend carefully and still are poor. We aren't in this situation because we are foolish and stupid. We are in this situation because of a combination of high house-prices, low wages, a job-market that makes us easy to replace, high childcare costs, a useless child maintenance system, and a generation above us terrified of the costs of their own social care (so no inheritances even for people who may otherwise have had a small inheritance). As well as many other factors.

This. Being privileged doesn't have to mean earning hundreds of thousands a year and/ or living in a mansion. It is acquiring a different meaning. You might not see it as privilege, but perhaps more as having some advantages. Life is easier if your mental health is good. My MH would be better if I hadn't been bullied at school and if my father weren't an alcoholic. Life is generally easier if you're white. It's not necessarily easy, but all other things being equal, being white confers certain privileges over being from BEM groups.

Life can throw all sorts of chances your way and it can also bring plenty of bad luck. I've tried to make good decisions but there are things you can only really see are wrong with hindsight. I couldn't predict being made redundant. I couldn't predict that, having picked myself up from that and got off to a good start in a 2nd career, I'd be bullied out of a job.

And the trouble is, the system we live within is geared in a certain way so that if you've missed chances to get on the property ladder, you quickly fall behind others. No spouse or partner to buy with? No help from parents? No inheritance? Sure, with hard work you can overcome these things. But it has to be hard work plus a certain amount of luck that the decisions you make turn out to be right in the long run. It's not always an entirely about hard work. Luck is involved, particularly when the system stacks the odds against you.

What about people who can’t afford it? People who are surviving on the minimum wage, having to house, feed and clothe families on that? Some people in work can’t even afford enough food for their families that night, let alone worry about contributing to a pension they won’t be receiving for 30 years.

DefinatelyAWeeGobshite

My pension is from the NHS, I had to leave due to disability. It took me 10 years for them to accept my claim but when they did they back dated it for 10 years.

But because it was ill health retirement they doubled my contribution years.

I know the pension has changed a lot but do discuss with your FA what happens if you become ill / disabled?

I know there are other ways to fund ill health but don't dismiss your pension as just for old age.

The principle of needing 750k to get 30k a year is talking about buying an annuity. (When you buy a product that promises to give you 30k each year for as long as you live in return for your 750k.) There will be winners and losers taking an annuity depending on if you live a long or short time. I wouldn't buy an annuity with this money as I would be too worried about living only a small number of years and losing 600k plus that I could leave to my family (if I instead chose income drawdown).

We started pensions for our kids. (Stock market trackers with Virgin Money). We started with £20 a month for our eldest who is now 10. We chose the option to increase contributions by 10% each year and now he is 10 we are paying £47 but we could put this back down if we ever needed to.

We have started a pension recently for the youngest (nearly 2) straight in at £50 a month.

I see this as the most important thing we can do for our kids due to the compound interest benefits of starting early.

If you have a frugal lifestyle and can't afford to save anything then I am sorry and I hope that your circumstances improve.

We don't have sky or any subscription tv etc (saving maybe £30 a month compared to people that do)

We have second hand mobiles and pay as you go sim (saving maybe £20 each over new phone contracts so £40 between us).

We both drive 10 year old Kia Picantos costing about £2.60 each in monthly road tax (saving £15 each month in tax compared to a bigger/more guzzly car so £30 between us in tax alone as well as savings on cosy of newer car and cheaper repairs than many brands)

There are little things too like having a chippy tea sometimes but cooking our own fish to save a tenner on the cost.

We have no savings of our own and some debt but do pay into our work pensions.

If you can't save anything but do have pay for tv, a contract phone or expensive car or spend a lot on leisure and eating out it might be worth you thinking about how you prioritise your spending.

I will go without a lot of luxury to save for my kids but obviously I won't go without any necessities and would stop payments if they affected basic groceries, heating, basic clothing or even the kids participation in school and out of school activities.

The saving I do for my kids is for their University education rather than for a pension.

DH works in banking and says pension schemes are an absolute scam and not a good way to invest at all.

PapayaCoconut did your husband say why he believes this to be the case?