I don’t trust pensions

[Orangepolentacake]

I’m in my mid-30s and, for the first time, in a decent position to properly save for the future, pay into a pension, invest.

I also have some medical conditions, which means it’s possible I won’t live to see mid-70s, if that.

I know pensions come with tax and employer matching benefits but, hear me out:

I don’t trust pensions partly because the goal posts keep changing. Minimum access age for pensions is currently 55. This will soon increase to 57. It could keep increasing and increasing until it matches state pension age. What’s to say it won’t? What is certain is the average person won’t have much of a say in this.
And state pension age could be almost 80 by the time I reach the current retirement age of 67.

then there’s the matter of inheritance. I can nominate a beneficiary but, depending on how I choose to access my pension, the beneficiary won’t have access in case of my death. Who knows what perceived priorities I’ll have at an unknown age in the future and/or minor mistakes with drastic consequences I’ll make. The goalposts can just change along with access age and all my savings are then lost into some ether and my family isn’t able to access them. I don’t think the latter is that unlikely, given ageing population and need to fund longer lives with long term conditions etc

AIBU? What is the best and safest way to save for the future?

There are a lot of downsides to pensions but you can’t argue with the tax aspect of them

I plan to take the tax free 25% at 57 and then start drawing it down and putting anything I don't need into a more accessible ISA

Pensions work if you start young, I opened the kids pensions at birth and mine will have about £30,000 a year to retire on without contributing a penny towards them. All thanks to compounded interest.

Sooner you start the better.

What do you mean by ‘beneficiary won’t have access on my death’?
A (DC) pension is paid out completely tax free (whether lump sum or as income) to beneficiaries if you die before 75 and at their marginal tax rate if you are over 75.
If you choose to buy an annuity with your pension pot then it can be inherited, unless you opt for higher payments and it dies with you.

Pensions get a bad rep because they can be complicated. When you say you don’t trust them, do you mean the tax rules, the providers, individual policy rules or the underlying investments?

Some people might have chosen to put money into property to fund retirement and are now stung by tax changes on that, whilst the tax rules on pensions have just become even more favourable.

People choosing to stick it under the mattress because they don’t trust any of it have lost out to 10% inflation.

Tax rules on ISAs or cash savings can and do change, pension age benefits and topups could change, as could State Pension entitlement so I don’t think private or workplace pensions are particularly risky in that respect.

I don't think I'd realised you could open a pension on someone else's behalf (DDad was an IFA 😕).
Do you mind saying roughly how much you save per month per child?

I have a few different pensions pots from jobs when I was younger but I wouldn't have a clue where they are with and how much is in them.

How many people are in the same situation as me and what happens to all these mini pensions pots. It is utterly confusing.

£100 per month per child.
I've topped it up a bit to even everything out to the tune of £5000 each.
But that's it now anything they choose to pay is a bonus, I'll be looking after them forever more beyond the grave.

Currently there's no way of tracing them, which needs resolving urgently. In other countries you type in your national insurance number and up they all pop.

@BorgQueen if I get an annuity, rather than drawdown (let’s say I don’t want to leave my pension invested as things are looking bad with the markets) then the ‘income’ stops when I die and the beneficiary (whoever they may be) doesn’t see the rest of the money.
and these are current rules. these rules could be changed.

@3BSHKATS good point. Guess time isn’t so much on my side as I’m 36.

No that's not the case unless you specifically purchase a pension in which you agree to that clause.

You've got 30 years for goodness sake, get on with it !

Because the system relies on you keeping track of things. I've moved all my old DC pensions into a provider of my choice. This way you only have to keep track of your current one + one other. (I have one defined benefit and one with protected rights, so I got 4 to keep track of).

You need to be in charge of your own financial affairs and not blame others or ignore them.

This is a very serious problem and part of my distrust when it comes to providers

@3BSHKATS I am getting on with it, hence this thread where others may bring up things I haven’t considered/am unaware of, to weigh my options! 😃

Could I ask how you calculate £30k a year from that? It is undoubtedly true that compound interest means starting early is incredibly beneficial.

you can trace old pensions

www.gov.uk/find-pension-contact-details

You can mistrust banks too if that's a case. It's really not complicated in seeing what your pot of investment is worth. If you don't like pensions, then don't use it. You can put money in a savings account if you like. Or invest in buy to let. If you are right enough, you can be investing in football clubs and gin distillery too.

3BSHKATS Did you see an IFA regarding your children's pensions or are they a more 'off the shelf' type product?

The 5k oth groelwth sounds a really good pension. Mine are teenagers but I'd love to get something set up for them, but the last, IFA we used was shifty about the fees and when he moved dh's (not massive!) pension we were gobsmacked when we saw what had bern deducted from the pot as a fee!

@BeastOfBODMAS yes, it is true that anything about anything can - and often does - change and no option is perfect.

I distrust policy, providers and tax rules. The lack of control over investments is a problem, but neither do I know enough to go about investing large amounts of money on my own (planning on learning at some basics around it!)

They could be changed, but that will have the effect of reducing already low annuity rates. They are a way to smooth out the cash between the people who die early and those who live to 100.

also for anyone wanting help with pension basics

www.moneyhelper.org.uk/en/pensions-and-retirement#

Honestly you don't come accross as very bright. You donlt trust pensions because you don;t understand them. By all means miss on out on free money from your employers (from their contributions) and building up a tax efficient nest egg for retirement, because you don't trust penions. Enjoy getting by in old age on the state pension and having no choice but to work until whatever the state pension age is in the future.
Me personally, I'll be building up my pension so I've got choices when I retire and hopeflly if I can build up sufficient funds that may be before state retirement age. Even if its not, I won't be just scrapping by.
Pensions are flexible now when you draw them, so you certainly don't have to purchase an annuity which if you don't build in guarantees will die with you (though you can still chooose this option), you can access your funds flexibly via drawdown and whatever is left in the pot on your death can be left to your chosen beneficaries.

I’ve only recently started paying pension, as I realised how much i was missing out on the employer contribution. Wish I’d done it years ago.