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?

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.

There may be people like that. But equally I have no TV or licence (so no watching iplayer either), cheapest contract phone going, 15 year old car that I share costs on, don't eat out and spend little on leisure. It is possible to be hard-working, frugal and poor. The idea that if you work hard and are careful you will be fine is something of a lie. Oh it helps and it will often work, but without a fair dose of luck it won't always work.

That lie is sold to us so that when we see people who are in poverty, we blame them for it instead of looking at the bigger picture. Political, social and economic circumstances can make it such that if you have a run of bad luck, it doesn't matter how hard you struggle you will be poor. Often the people least able to grasp this are those for whom the 'work hard and be careful' mantra has worked. They just don't get that it doesn't always work for everyone.

@PapayaCoconut which investments are more tax efficient and can beat the power of compound interest over the long term though. Without taking a risky gamble? Genuinely interested because pensions in effect give you free money to invest through tax savings and employer contributions.

I did vote YABU, for a couple of reasons.

Firstly, some people just do not have enough income to be able to afford to save into pension funds.

Secondly, some people do not trust them, having being badly stung in the past (Equitable Life, anyone?). Admittedly the legislation has been tightened up a lot since then so the money is safer but it may be a case of once bitten, twice as shy.

Thirdly, it may simply be that people prefer to invest in the long term future via a different means. I’m a SAHM and if you asked me directly whether I save into a pension fund, the answer would be no. However, I have paid into various government pension schemes in the past that will give a combined amount of £600 when I’m of pensionable age, and have a small house that I solely own mortgage free and gives an income of £600 a month. I also have stocks and shares ISA and prefer to invest in these rather than actual pension schemes because I want flexibility on when I can start drawing them, especially as DH hopes to retire early. I wouldn’t be surprised if the rules on when you can access designated pension schemes gradually increases in line with state pension age. That fact may also put others off.

Horses for courses, I guess. But although I agree that everyone should ideally make some provision for their retirement (assuming they can afford to), I disagree that a proper pension fund or scheme is the best option for everybody.

Summergarden pensions can be accessed from age 55. Flexibility to access capital and income before age 55 as the only real downside. This is the trade off the government uses. I.E. free money, but its on condition that its used for your retirement/old age.

If the purpose of the saving is an income/lump sum beyond age 55 is your objective, by using ISAs, property, cash deposits, premium bonds etc. you are missing out on free money in the form of income tax relief at 20%, 40% or 45% (an instant return at this level cannot be realistically achieved anywhere) depending on your tax band, and also in the form of employer contributions, i.e. schemes where they'll match, or even exceed your personal contribution.

Ever - the plan is to increase the age from 2028 to 10 years before state retirement age so 57 initially but that will rise.

Also the free money bit is more relevant for people who will be nil rate tax payers when they retire.

If you will be a basic rate tax payer at retirement then only 25% of the fund is tax free so the other 75% will suffer tax at your marginal rate. For basic rate tax payers this means that they get 20% going in and end up paying 20% on the way out with the exception of the tax free cash element. It is still an instant 6.25% return but not quite as good as it is for those who will be nil rate tax payers at retirement or basic rate but are higher rate now.

It is an an absolute no brainer for those well into higher rate tax/those who earn between £100-125k and lose their personal allowance and those who lose their child benefit due to earning over the £50k limit.

Some people just can’t afford it though. It’s that simple. S

OP we are not saying you will feel privileged Day to day, but that you have an inherent set of privileges that you may not consciously use but exist nonetheless. Ie a white person living in poverty may not feel privileged, but nevertheless has white privilege in many circumstances, particularly contrasted with a person of colour in the same situation as them.

You have been thoughtful and worked hard. No doubt sometimes you have put yourself in the right place for the good things in your life - but on occasion you will have simply been in the right place.

Some people with no pension with have been foolish. Others will not have felt able to reach for one at all. Cost, lack of education, these are all factors.

Saying that my beloved grandad paid into a pension for his whole life, stayed with the same company too, he got stuffed when the owners children took over the firm (about 50 years ago) and essentially sold off/spent the pension pot so he was left with no pension for him or my grandmother

I think it's the absolute worst white collar crime to steal a pension like this from someone who has contributed all their lives. It's just unfathomable how people who do this can sleep at night.

They sleep at night because they are predators who have no regard for the damage caused to the prey

@PapayaCoconut I put £1000 into a pension and overnight it is £1500 (higher rate tax relief). I have a pension with low charges, and I choose the funds that I invest in. Added to this, I get about £1000 back of Child Benefit that I would have lost.

I will have to wait 2 years to access it, when I’m 55. Probably longer as I don’t want to draw down and trigger a limit to future contributions. But that’s all very transparent.

When I draw it down, I’ll get 25% without paying tax. The remaining 75% will be taxed at 20% - but I gained 40% relief going in. And it’s grown above inflation so that helps too.

Can you please ask your husband which bit is the scam please? I sure would like to avoid that.

I’m in my late 50’s and had it drilled into me since I started work.

@ellisandra

Can you explain if people who pay lower rate of tax will benefit? Will they be taxed on 75%? Or will they be able to take out £12,500 pa tax free?

I pay such little tax that the tax benefits mean nothing to me. A pension may pay £4000 a year. I may as well have a passive income making more than that.

Havaina I'll take @ellisandra's place. If you have zero taxable income, yes, the first £12,500 is not taxed.

People with no income can also contribute £3600 gross pa and attract basic tax relief.

Thanks @Everanewbie

What do you mean by ‘zero taxable income’?

As pensions screw over future generations, to not partake of one by dying on retirement is the best option for society.

Don’t worry Labour are going to get in and they are going to award everybody big fat pensions on top of their four day weeks! Would be absurd to pay into a private pension as well – especially because Labour government is going to kill private industry and value of shares will drop significantly!Don’t worry leave it I’ll going to get in and they are going to award everybody big fat pensions on top of their four day weeks! Would be absurd to pay into private pension as well-especially because Labour government is going to kill private industry and value of the shares will drop significantly

Stupid dictation doesn’t always work properly!

I suspect quite a lot of people are in a similar situation to me - if I paid into a pension I wouldn't be able to meet my basic loving expenses. I'd be lying if I said it doesnt worry me but I really don't have any choice - there is literally nothing else I can cut from my expenses. I try not to think about it bit when I do, I find myself hoping I don't live to pension age because it will be years of destitution if I do!

In a perfect world, No, YANBU.
But it’s not a perfect world! For some it’s a damn hard struggle just getting through next week/next month, let alone having enough funds to put away for X years time,
So yes, in the real world, YABU to generalise and assume that everyone is in the position to save for their pension and to cast them as “stupid” or “foolish” if their not.

Best to start straight away as soon as you start earning - that way you won't miss it.

I admire your optimism OP. That you believe global warming, the rise of the far right, limited supplies of oil and natural gas is going to allow the sort of future you’re saving for.

@wheresthewine36

I wouldn't be able to meet my basic loving expenses

I thought love was free?

Havaina Depends who you're loving I suppose Smashed screen is my excuse for all the typo's

There are two categories of people.
Those who have savings, and pay 8nto a pension scheme.
And those who never save, and will rely on their State pension.
The second group will qualify for Pension Credit, which is means tested, and which will top up their State Pensions considerably.
They will also receive all sorts of benefits that will also be means tested very soon, like the Freedom Pass, free eye tests, free dental, free this, and free that.
People who have savings will be penalised.
So, to answer your question : it is probably easier to rely on State benefits in Britain, than to work hard, lose a high percentage of earnings through taxes, save what you can, and try to own your home.
The result of today's election will have a massive impact on people who work hard, pay mortgages, save, and try to support themselves.

So, to answer your question : it is probably easier to rely on State benefits in Britain, than to work hard, lose a high percentage of earnings through taxes, save what you can, and try to own your home.

Well that's ... fairly startling but inadvertendly hilarious.
Do feel free to give the "easier" option a whirl & report back @lindsayincroydon.

Or maybe not, 'cos if it's that good & you spill the beans, we'll obviously all want to do it.