To think workplace/private pensions will be used like this in future?

[themaskedcat]

Many agree the state pension as it currently works is not sustainable. When it was set up it was linked to life expectancy and there were many workers for every pensioner, but these days it's the biggest cost from the welfare budget and there aren't enough workers for every SP recipient.

The age is going up to 67 soon, and will be 68 for anyone born after 1978. I'm in my 30s and expect the age to be into the 70s for my generation.

But while people are living longer, that doesn't mean people are going to necessarily be healthier and able to work into their 70s. I believe that for many, they will have to use their private pension to 'bridge the gap' from the time they can no longer work until they get the state pension (whatever age that will be). So private pensions will need to be used 'before' rather than 'alongside' the state pension. And that's I think that's why there's such an emphasis on them these days, so people in their 60s will have something to fall back on.

I ‘retired’ recently - ie quit my job and live on private pensions until my state pension kicks in several years, so yes I’d already a thing.
However I know two 2women in their early 60s who quit their jobs and live on UC so unfortunately that is also now a thing

Yep! This is happening everywhere with me too. Those of us without private pensions are bridging the cap with benefits. Thats another reason the benefits bill has increased. How the fuck a 60 year old carer is meant to roll a 30 stone man to reposition and hoist is beyond me. I'm out of it now, can't physicall do it.

Myself and husband have done this for 10 years until state pension kicks in.

I think state pension will be means rested at some point in the future.

It's exactly the same proportion. 8% on £low gives the same pension as a percentage of annual wages to 8% on £high. If say, it equates to a pension of half your average earnings, then you get half your low wage, just the same as half your high wage.

Yes, I agree OP. I’ve paid into a pension since I was in my mid-20s (now late 30s). I’ve now reached the point where I’m able to make some additional contributions but I am focusing on savings I’ll be able to access at a younger age (LISA etc).

I won’t get the state pension until 68 at the earliest and although I could claim my private pension before that it would be significantly reduced.

By the time I retire I suspect the pension age will be at least 70. I think that even if life expectancy doesn’t continue to rise, the current model is unsustainable so the government will still have to increase the pension age.

The trouble I have with this is many private pensions are tied to state pension age. Mine is and every year I want it early is a huge penalty, plus you can only have it so many years before state pension

I think your point is around how people would fund living costs up until SPA. But your private pension is accessible (currently) from 55 rising to 57 (pretty immediately if not already).

This is why it’s so important for people to save from a young age, because then you have more time to build something up.

The social challenge is that young people are more likely to prioritise saving for a house deposit, and leave their employer pension contribution on the table. Which is fair enough when the housing need is immediate, and the retirement further away than the years you’ve been alive yet.

My occupational pension is tied to state pension age. I am wondering whether I should stop paying into and find another method to save.

Is your pension a final salary plan though? Or Career Average? The final salary pensions are the gold standard. It’s usually still accessible from 55/57 unless there’s a specific provision in the plan rules to say otherwise. The reason the benefits are reduced is because they’re expected to be in payment for longer. 60 and living to 85 = 25yrs payment vs 66 and living to 85 is 19. Your total benefits have a value, and if you’re trying to access that over a longer period, then there’s less available for you each year.

The idea of retiring is changing, with many people working on past the trad date. They are healthier and more fulfilled. So maybe that will help

If this is a money purchase plan, and you have an online account, you can change your retirement age.
It just changes the underlying investments and the dates the de-risking starts to move your investments into lower risk asset classes slowly over time.
Irrespective of that you could still retire at normal minimum retirement age 55/57. It would just be smart to align your investments with when you plan to retire.

Big issue is fewer people will own their homes upon reaching retirement age

This is exactly what I'm planning for and opting to do this over moving to a bigger home and increasing our mortgage. DH and I are born in the same year and would both like to retire around 62. I'm hammering my workplace pension and also saving into ISAs. I have a SIPP on the side too. Just £50 a month into that in a high risk fund but that's my 'round the world' trip fund!

pensions schemes are also far less generous these days for younger entrants.

I wonder if in future they will be thought of in the same way as current retirees with lower pensions because they opted to pay Married Woman's Stamp or opted out of SERPs.

At the moment when you look at these how much do you need to retire on for different lifestyle guides the state pension is about half of what someone would want (depending on if they are a couple and what kind of lifestyle they expect) so even if we are happy to wait to 67-71 years old to retire we need to at least aim to match the income of the state pension.

Being able to target that, and beyond that to a retirement younger will depend for some people on what resources they have and for some people will depend on what current luxuries they are willing to forgo.

My SPA is 68 for me (born end of ‘78 so missed out on the 67 age - gah!), I could claim at 58 with reduced amount. I’m not sure what is currently in the pot would be enough to live on from ten years (or even more in the age rises again). I’m not sure I can pay more unless I stop saving for DC’s. I do wonder what Gen X’s (and below) retirement will look like. I’m ‘fortunate’ that I have had a pension since 21 and been able to save for DC since birth. How many of my age haven’t been able to do that?

@MrsMurphyIWish Things changed a few years back, and providing certain earnings thresholds are met, employers have to enrol people into a pension plan. If the earnings aren’t met, then they have the option to join. Inertia sees opt out rates are really quite low. Whether the current contribution structure provides adequacy for retirement remains to be seen. I suspect not, and my issue with the latest NIC increases is that money would be better invested into pensions in the form of increased minimum pension contributions. Therefore helping people be a little more self sufficient.

Yes! Long gone are the days where you could work your life somewhere and retire on a final salary from them. The system has changed, and people are expected to be more independent with their finances. It’s a shame they haven’t updated the curriculum to reflect that and help the next gen be more self sufficient.

It's one reason why I am stopping at one (dh getting vasectomy) as it means we can live in a flat more easily (and in London, flats are 50% the cost of houses). People say downsize to fund retirement but my MIL who only has state pension isn't even doing that despite having a 700k house. We need to be mortgage free in our 40s ideally.

The other side of the coin is inheritance. Few of my generation (1940s boomers) inherited much. As we retirees are the biggest cohort of homeowners, their value will pass down as we depart. Our DC are likely to inherit our home, and the homes of their inlaws unless we all need to move to care homes. This should help future generations, both individually and via IHT going into the public purse.

If you have a public sector pension you can’t take it until state pension age anyway

The system has changed, and people are expected to be more independent with their finances. It’s a shame they haven’t updated the curriculum to reflect that and help the next gen be more self sufficient.

Very hard to be more self sufficient on less see wage stagnation.

The other side of the coin is inheritance. Few of my generation (1940s boomers) inherited much. As we retirees are the biggest cohort of homeowners, their value will pass down as we depart. Our DC are likely to inherit our home, and the homes of their inlaws unless we all need to move to care homes. This should help future generations, both individually and via IHT going into the public purse.

Not really because not everyone will inherit.

Care costs are only going to increase.

Who is going to buy all those bigger, family sized, expensive homes that come onto the market at a similar time?

It would be far more economically productive if people could earn enough through a decent wage & the ratio of prices/wages was lower rather than rely on future inheritance

Yes, I think that's exactly what will happen OP. Agree with other posters this is part of the reason for the tax incentives and nudges.

Incorrect. Yes you can.