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?

@Acciocats ,@spingly
Who said I wanted a pension in retirement. I wanted to make a personal investment in property which provide better returns than a measly pension. I wanted to take 100% of my own money and invest it myself rather than get 'know nothing' financial advisors grabbing at your money from fees. As from having you sacking me, I wouldn't trust your advice because you have nothing credible to say. I've looked after my own finances all of my life since an FA lied to me just to enhance his commission. My investments work, my portfolio is excellent and I can realise my assets when I want. Property never fails to show growth and premium bonds pay a good rate of interest in the winnings you receive. Use them as a piggy bank and watch the returns grow.

You are absolutely clueless! You have no clue about investment or the rules around pensions and you'll lose out of the tax benefits..... you enjoy that CGT and let your dependents enjoy the IHT bill... now that is 40%!!

And commission finished in 2013, it no longer exists! But hey why not just spread more useless and wrong information?

If you've looked after your finances all your life why did you use an FA? Why have you asked numerous FA how to strip out your pension funds? I think you're telling two different stories here, one of them can't be true!

Property never fails to grow... I presume that as you're at retirement age that you'll remember 1987......

@Ated if you're that financially savvy how the hell did you not know that pension income was taxed as income.... I mean that is basic! You clearly didn't understand the first FA and went to several
more......?

People saying they “lost” money when their DB schemes were changed, should also be honest about what that really means. It’s not helpful to scaremonger that pensions were lost.

I was very lucky to have 10 years in a DB FS scheme. I had to pay 7% of my salary. Then, I had to pay 9% for the exact same benefit. Was I happy about it? Of course not.

Guess what though? A guaranteed pension, index linked, death in service benefit and 50% pension for my husband? It was a bloody bargain at 9% too. You could almost never realise that amount with a DC pension.

So yes, I lost out because I had to pay more - but nobody ever promised the scheme rules wouldn’t change. Better that than no pension at all.

Then, a few years on, it changes again. Now I’m paying 9% but instead of getting a % of my Final Salary back, I’ll get a % of my Career Average Related Earning. So, the average since the change to the rule was made. I still have my first 10 years locked away.

Again, it’s still a really good deal. But yes, I’m getting loads less than the old scheme rules. But I didn’t lose actual money. My projection changed.

A few years on, and another change. I still have a CARE element, but that’s called to the first £35K of my salary. Thereafter, I just make a DC contribution (and luckily, so does my company).

Is that going to be less than I was projected?
Yes.
Is it still better than DC only, a good deal, and a fuck of a lot better than most people I know?
Yes.

The previous elements of FS and CARE are still locked away for me. The salary I had for each of those will be increased (approx by inflation) each year.

When we first went from 7% to 9%, some people said “fuck that”, in my team -we were mostly late 20s then. Now, the CARE element is locked to re-joiners. Some of them still work with me and are gutted at what they threw away.

Just because a projection is lower, doesn’t mean that you don’t still have a good deal.

And if you “lost” money in the way I describe, it’s really unhelpful to make less informed posters think that money from a DC pension just disappears in puff of smoke overnight. People should post responsibly.

There are other retirement planning options, a pension isn’t the best one for everyone. But we should all be fair in our representation of our pension experience, and not scaremonger.

@Ellisandra so well said!

The measly pension comments are ridiculous, if you pay in a measly amount you won't get much back.... it's not rocket science.

Just buy property...... oh yeah because everyone who can't afford to contribute to a pension has 20% sitting in the bank for a deposit 🙄.

I find the misinformation and scaremongering on these threads breath taking.

The more she has posted the more I’ve thought that Ated is a fantasist describing the excellent investments and portfolios she wishes she had. She’s chatting so much erroneous shit.

@Acciocats what you mean an average 1.45% return on premium bonds is not bloody amazing.....it's not like it's down to chance, winning must be guaranteed.

I'm off to buy some now, why have a balanced spread of assets within a portfolio! Property and cash is the way forward.....

@Ellisandra precisely!

You sound very similar to me. My Pension contributions have hiked up from 6 to 9 to currently just under 12% of my salary. Do I like that? Of course not. I’d much prefer to have a few hundred more ££ in my pocket each month. Of course I’d prefer to pay only a few percent and get just as much out.

Would I opt out of my pension scheme? Hell no. With employer contributions over 20%, death in service benefits and my dh will get half if I predecease him... just because it’s not as good as it was projected when I joined thirty plus years ago does not mean I’ve lost money.

@Acciocats and @Ellisandra I only have DC schemes !

@spingly Ated financial advisory service.
Steer well clear

*Ated financial advisory service.
Steer well clear *

Genius!!

@spingly and that pisses me off, that people with remnants of DB schemes who are already in a much better position than you, post scaremongering crap - so that someone less informed than you, could end put off pensions and in an even worse position.

Pensions are not the only options - but they should be understood correctly so that informed choices are made.

I expect that @Ated spent too long with a “wealth management” firm like StJP, without doing her research.

I hear you @Ellisandra agree many wrappers should be used, pensions included.

Also agree re SLP!

I'm glad I started paying into a pension in my early 20s, with compound interest & the free contributions from my employer, it all adds up over the years !

I also have some other investments

I've been fortunate to be able to save

However, I have friends who have not contributed to a private pension, due to different circumstances.

The best advice my Dad ever gave to me when I started work as a teacher was to pay extra into my pension. I was single at the time and living at home so really did not miss it. I kept up the payments when I married even though many woman stopped when they married. I took out an additional stakeholder pension too as children grew older and now I have been able to retire early at 56. It takes forward planning and determination as there were times I could have done with a bit of extra money and could easily have stopped my extra contribution. I went without what I could not afford like taking cheaper holidays and less meals out etc. Now I can help my children with deposits and childcare too. I have sat all of my children down and spoke to them about budgeting and pensions just like Dad did to me. I really wish schools covered financial budgeting and pensions.

What happens when we have millions of people with no pensions, too old to work? Who is going to be employing people in their 80s when over 50s can’t find work?

🤷🏻‍♀️

@Ellisandra, you really should read posts completely and understand what is written. I don't care how or where people invest their money, that is an important issue for them TO DECIDE. I'm more concerned with my monies and that includes factual experiences and 'professional' advice from 'FA's who just wanted to milk commissions and pension advice and rules are no good if you want to control your own money. If you only have a minimal pension that just helps to get by then you won't have a problem but if there are funds over 100k or so then you cannot access your own money to spend it how you want because HMRC will want their contribution after the 25% and limited tax allowance. I wanted 100k cash to spend on my investments which would guarantee me a higher rate of risk-free return with low tax rates. I do not need a weekly drip-feed of a few pounds and have been making my own investments since my late teens when £8.00 was a good wage. I advised a good friend about investing and pensions back in the early 80s and now he has assets of over £1m and no pension pot.
If I bank my complete 75% of my pension pot I have to pay 40% according to my HMRC office a few days ago and I would rather listen to them rather to faceless opinions.

@Ated you will pay tax at the marginal rates applied to your income, why can you not understand that?

If you cross tax thread holds then the tax increases over £150k and you will pay additional rate tax.

Why was your statement "you pay 40% tax on pension income", it's simply wrong! why was pension income being taxed such a shock to a supposedly knowledgeable person.

How about the other taxes your mythical friend will pay on his investment?

They will pay tax on dividends
They will pay tax on interest
They will pay tax on income from property

All investments (excluding ISAs) are taxed!

And if your mythical friend has £1m in ISAs (assuming they're not AIM listed) when he dies (I'm assuming he is an older person) suddenly he will be leaving not £1m but potentially only £600,000 fabulous rate of return that is....... the taxman will be rubbing his hands in glee!

And @Ated how can anyone understand this statement?
. It doesn't matter if you are a high rate taxpayer when you are retired and after any 25% allowance and a paltry allowance for tax which makes negligible difference it all gets added to any existing income and you will get hit for 40%

It is utter gibberish! Telling PP to read your statements 🙄

Some interesting post subjects coming up today.

@Ated ffs there are at least 3 experts on here telling you that you are misinformed, why do you persist? I don't argue with Brian Cox about physics, or Richard Dawkins about biology, why the hell do you keep arguing with qualified professionals over matters of fact, not opinion?

My faceless opinion is in exact agreement with HMRC on the 40% for your situation. I have a good grasp of pensions for a lay person. Enough that my IFA asked if I worked in a related industry. No - but I do love the MSE forums!

It is you @Ated who needs to read their own post “completely and understand what is written” 🤷🏻‍♀️

At 22:18 yesterday you said, ”no control over your money when you want it unless you want to draw it out and pay 40% tax on it”

With all your FA meetings, and your personal expertise in successfully advising your friend, please tell me...

Do people have to pay 40% on their pension income?

The answer, by the way, is “never on all of it, and in the vast majority of cases no in any of it - but in my specific set of circumstances - i.e. wanting to make a £100K withdrawal in a single tax year, yes”.

Withdraw £25K 25% tax free now.
Take £37,500 on 05.04.2020
You’ll pay only 20% tax on £25000
Take £37,500 one day later. 20% tax on £25000 again. (probably less if personal allowance rises)
Hey presto, all your money, no 40% tax.

Of course, I’m sure that won’t work because you’ve already take some or all of your 25% TFLS. Though doubtless you want double bubble

You know, I don’t think that people shouldn’t post on MN if they have more than someone else.

But with a statement like “paltry allowance for tax which makes negligible difference” you can piss right off @Ated.

That “paltry” and “negligible” allowance is £12,500. Which is a far higher amount that anyone who has basic state pension as their only income now.

You need to give your head a wobble, though you’ll need to pluck it out of your arse to do so

YANBU in principle, but some of us can't afford to pay into a private pension scheme because we're barely making ends meet as it is.

So by your way of thinking @Ated if you wanted to sell one of your properties because you wanted to make a different investment.

You pay solicitors fees
You pay CGT on the gain at 28% over the allowance
You would need at best around three months for the transaction to complete, maybe a lot longer.
You pay estate agents fees

When you buy a property

You'd pay stamp duty
You'd pay solicitors
You'd need a 20% deposit

All these costs and including tax on the gain let's not forget you don't get any tax relief on the money going into the property as you do on pension contributions and if you're a HRT payer is 40% so for every £60 you put into the pension the government add £40.

But you think a measly "pension" isn't worthwhile?

Nah, you're right I'd better get my coat and leave! 🙄 Buying property is much more tax efficient!

Ated you sound like you Keep running off, frantically scouring a few articles about investments and then come back to post another story about a ‘friend’ or another ‘portfolio’ of yours. What you’re saying is simply wrong. None of it adds up.

The truth may be that you’ve made some poor financial decisions in the past but please don’t take your frustration out by making sweeping statements which are just wrong.

People need to be aware of the importance of pensions and securing their future for when they cannot work any longer. Your misinformation is not helpful