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?

@SciFiScream its a local authority pension. I plan to return to LA work so it will just be picked back up i believe

Why would you assume that OP is calling those people who don’t have the means to contribute to a pension foolish and utterly stupid?

I think the problem is that there is an assumption that a significant number of people who don't have a pension can afford one but choose to fritter their money away. That the majority of people with no pension are foolish and stupid, with a small minority who aren't. In fact it's the other way around.

The reality is that our media likes to present this idea of the "undeserving poor" - those who are feckless and stupid and make irresponsible decisions and never work - and then the public perception is that anyone who "cannot afford" something sensible fits into this category.

The reality is very different. There are very few people who are wasting their money away and living recklessly without any attempt to secure their own future wellbeing. I'm sure there are some - but not many.

There will be some people who choose not to have a pension but invest differently for their old age - property, stocks and shares, shoebox under the bed, whatever.Maybe there is an argument that they are being foolish - but it's their money and their choice so that's up to them.

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.

The media convinces people we are the exception. We are not. We are the majority of people who don't have pensions, savings, investments, life assurance. And we are not stupid. We are - rightfully - terrified.

If you've paid off your mortgage then it's easy to live on £168 a week.

Pensioners are much better off than young families on Universal Credit.

You need 35 years of contributions to get the full state pension - I've got 19 years worth.

My goal is to pay off my mortgage and pay my stamp to get the full state pension. Then I will be fine.

There's no age limit on having a pension. You ddon't have to wait until you start work, or have a national insurance number. Our kids have all had pensions from birth, it's just another savings vehicle. £20 a month isn't much but over however many years until they retire it has the opportunity to grow considerably.

And there's no risk of them accessing the cash at 18 and blowing the lot.

Who decides what constitutes "frittering"? That word has been tossed around quite a bit on this thread and is redolent of a moral judgement about how people choose to spend the money that, for the most part, they have earned.

You need 35 years of contributions to get the full state pension

This is true, but if you don't have the full amount of years (and have no other income) it will be "topped up" to the full £168 with pension credit. So whilst what you're saying is true, it doesn't actually mean that anyone without the 35 years gets less. It just comes from 2 payments instead of one.

Some people cannot afford to buy houses. (They will be paying huge rent in their retirement.)

Some people cannot afford new or even nearly-new cars. (They drive old bangers that are less safe).

Some people cannot afford childcare so are obliged to take a career break (they will have decreased life time earnings and greater risk of poverty).

Do you really think these people are not aware of the risks they are running? Do you not think they would prefer more money and more options?

These are tough times. You are ridiculous to call people 'foolish' because they lack funds.

I imagine it’s because they’re a “ live for today type of personality “ and hope the welfare state will still be there to help them .
Of course there are those who are unable to plan 30 years in the future because they’re not earning enough to live now . It’s worrying !

I had access to a good pension scheme in my 20s, then changed employers in my 30s and spent ten years without access to a company pension, but with such low earnings that I couldn't afford a private pension - I did investigate several times but they always wanted minimum contributions that were just not possible for me to make.

I'm now in my 40s and have got access again to a workplace pension and I am paying about double the minimum contribution into it, and as my earnings increase I intend to increase that amount significantly.

But the bottom line is that I am doing that because I can afford to. I lived a very frugal life in my younger years so wasn't blowing my money on holidays and eating out, I was just scraping by mostly. It wasn't recklessness that left me without access to a pension for ten years, it was a particular set of circumstances.

I have a choice between a pension and my children going to university. I choose to try to help my children work their way out of poverty. I will die poor and probably also early due to the stress and other health problems caused by the hours I have to work.
But yeah, I'm just irresponsible.

I'd say if you are reliant on one single pension to carry you from the day you retire until death, you are being pretty foolish, OP.

If you have the means to do it, I would advise a multi-pronged approach, - varied investment, planning to ensure living costs are minimised, and a pension and/or savings.

Don't be congratulating yourself while sneering at others, though. You've no idea what others histories, circs and plans are.

Until I was in my 40s, I simply wasn't earning enough to have a pension.

I looked very carefully into private pensions at that time, and actually did the maths. It turned out that by starting so late, I would be paying large premiums which would return so little that I would have to live to 95 just to break even.

Private pensions are a con imo.

I do think there are plenty of people who could pay towards a pension but feel their annual jolly in Spain or a new car or countless other things are more important.

As a self employed, single mum.......the money simply isn’t there for put into a pension

It's a question of priorities and life decisions. A lot of people who say they can't afford a pension could. They would need to cut back their current living standard now. If you're living on £18,000 and saying you're on the breadline I can guarantee there's someone living on £16,000 and surviving. You could put £2,000 into a pension. You might not like living the life of £16,000, but it's not impossible.

No one needs to buy an annuity anymore. So if you manage to save 100,000 you could have 10 years on £10k.

It's called pension freedom I think and applies to defined contribution or money purchase schemes.

According to some articles £100,000 if managed well could last until you were 80!

This might be out of date info so please get up to date advice from a professional.

I only have a tiny pension and 80% (so far) contributions towards the state one. My DH has over a million in his pension pots, if we divorce I’d get 60-70% of that.

YANBU. I didn’t start paying into my pension until Oct 2016 (when I was 38) but that’s because I’d bought a property aged 25 which was in London so has over doubled in value and, if I keep it (though it’s actually on the market for sale and if it sells I’ll put some of that in pension, separate investments etc) it will be paid off when I’m 50 so I’ll have the income from that (I have another house jointly owned with husband which we live in).

So I think it’s unreasonable people haven’t thought about/made provision for their futures, rather than specifically having not paid into a pension

It’s a shame that whenever pensions get discussed on MN the threads are in danger of getting hijacked by the extremes: people at one end of the spectrum who are very privileged and well off and have no concept of others, and those who literally live hand to mouth and don’t have a spare penny to put towards a pension.

The fact is, most people are inbetween those two extremes. And it’s also a fact that you can take two people in the same circumstances and they may make completely different choices. It sometimes seems as though it’s unpalatable to admit that on MN but it’s true.

As I said upthread, I have a small number of colleagues in education who have opted out of the TPS which I think is completely nuts; it’s about the best scheme going. And these aren’t all people who are struggling with young families - some of them are my peer group, they could afford to pay but their attitude is they’d rather have £300/£400 per month more in their pocket now. They are ignoring the fact that the employer contributions on top of their own are effectively free money and that come age 60 they’ll probably wonder why on Earth they opted out

And I’m very aware that these are all relatively privileged people - intelligent, in a secure reasonably well paid job. So poor choices aren’t confined to any one sector of the population - though as I’ve already said, it is mostly women who are under prepared financially.

Pensions are a hugely important issue and it would be good if they could be debated sensibly rather than the discussion becoming dominated by extremes.

A pp has already mentioned women who say it’s not worth their while returning to work after a baby because childcare will eat up all their wage- this is exactly the kind of issue that needs debating. Because of course, in the short term you may be no better off financially but long term you will be because you’ll still be paying into a pension scheme.

My children are now in their twenties, desperate to get onto the housing ladder but are in the trap of not having enough deposit and having to pay a fortune on rent- which really sucks. But I’ve told each of them not to skimp on a pension because by throwing as much money into one now will pay off in the long term

There does need to be far more open discussion, real proper Debate about pensions which would be far more valuable than the usual descent into just slagging people off for being either privileged or foolish.

But I mean only if they can afford to - there are obviously some who just can’t

These 'live for the moment' people are always happy to rely on the careful people who thought about the future when they fall on their arses aren't they

ONe thing I would say, if you can afford it, start a pension for your children, small amounts now could make a lot later.

posterWorryBadger this is simply wrong.

If you are basic rate tax payer and contribute £100 via salary sacrifice, £100 goes into your pension when you would have taken home £80 (ignoring NI for simplicity). You have achieved a return of 20% on day 1.

At retirement any growth you achieved during your savings years is tax free. 25% of the fund can be taken tax free. The other 75% can be taken as taxable income as and when needed. If you have no other income, i.e. before state pension etc, you can take up to your personal allowance, £12,500, again tax free.

Tell me a more tax efficient savings vehicle than a pension????

Highly recommend the following to those who are finding it tough to save:

Mr Money Mustache
Dave Ramsey
MSE Martin forums

And a jingle jar... to get started