To think we are heading into a pensions disaster

[She11y]

I asked ChatGPT what the median pension savings were for someone in their mid 40s and I got the below reply:

Ages 35 to 44: The median pension pot is approximately £30,600.
• Ages 45 to 54: The median pension pot increases to about £81,200.

This website has a similarly sobering statistic - average pension pot for 50-59 is £96k.

https://www.nutsaboutmoney.com/pensions/average-pension-pot-uk

These are averages and the number will be brought down by some people who have zero pension savings but it's still a very low amount.

How are people going to survive retirement. There aren't many jobs for people the wrong side of 50z

Even if you save, the future is so uncertain that it's not a guaranteed good income.. I've been saving since before my 30s, but am considering stopping and putting money into an ISA instead. It wouldn't build in anyway near the same way, but at least I could access ir without the heavy taxation. Part of my reason for this is the health service is naff, it has never helped me so far for relatively simple things, so I don't expect it to help me later when shjt really.hits the fan. The health service only really works for men and the middle class, and even thennir doesn't work very well.

If you put it in a S&S rather than cash ISA, there’s no reason you shouldn’t see similar growth to a ( DC) pension.

Except less gets invested because of the tax relief on pension contributions that isn’t matched for ISA investments. So you start with 100% in an isa compared with 125% in a pension due to tax relief grossing up (even more if a higher rate taxpayer)

I think a lot of higher earners are totally sleepwalking into poor retirements and wrecking the planet along the way with over-onsumption.

Nonsense. Higher earners will be just fine, and you've no idea what pension payments they are making. You sound resentful.

Many people want to enjoy themselves now in whatever way they can- lots won't make it to retirement or not in good health. Several members of my family died in their 30s, 40s and 50s. Two of my neighbours died of cancer at 50 and one of covid at 53.

I am no financial expert but wondered if anyone had any advice?

My kid has some grad offer jobs to start in Sept. They are deciding between a ‘big four’ accountancy role and a civil service London offer. They can sees positives to both. I would be interested in what people think is the best option for a 21y starting out..

Final salary pensions are being phased out. New employees haven’t been offered them for years. Do you propose removing them from those who have cast-iron contracts from years ago, saying that’s what they would get?

It’s a good thing they’re going though. It stops people applying for highly paid posts and doing them for a year, before retiring early, as a colleague of mine recently did. He can only just have really begun to function efficiently in that role.

Poor decision making also caused public sector workers in my parents’ generation to retire ridiculously early, when they were told they had to reapply for their higher earning jobs and were not guaranteed to get them back. We’re still paying for my dad’s final salary pension thirty years on and he would have happily worked ten years more, if they hadn’t pushed him out. We’re still paying for stupid public sector decisions taken thirty years ago.

@Chungai You are making an ok return in safe investments as you wont lose anything. We used to make risky investments, haven't for years now. The younger you are the more chance to recoup. You need nerves of steel though and it’s pure long game, DH lost 25k once on his worst ever punt, but it was about 20 years ago.

The problem with pension decisions is how long we will live? No one knows that, we have done 30 years projected income and outgoings taking in to account inflation, all can be adjusted at the tap of a button and it takes us to age 95. The other issue with decision making is state provision of any description. There is most definitely a type of pensioner now who by having a tiny pension is worse off than no pension as pension credit is a gateway benefit but who knows if it will even exist in years to come.

As the population increases and resources become more scarce could be end times in very few generations time. We may be long gone by then but I think quite a dystopian future awaits our descendants purely because there are too many of us.

Accountancy is meant to be particularly prone to AI automation. I’d go for the civil service.

Yes, that’s my feeling. But they are attracted by the lure of the City. Thanks.

I've thought about this a lot. I think the quick answer is means testing, but I think that really disincentivises people who can only build small amounts to bother at all and it means those who don't get it feel disenfranchised from the system.

I think the value of it will erode, so everyone gets a small universal pension. but the pension credit system will expand to top up people who only have a state pension to liveable. Possibly in a way similar, to universal credit where it tapers with part of it if you have your own money it tapers so noone is worse off for having saved v not having saved.

I don't think it eill be scrapped as in "no one born past 1980 gets it".
It will simply by on sly by pushing pension age until point when... Well... We are all dead.
I can absolute, hand kn heart, imagine without hesitation the politicians moving my pension age to 80 by the time I get there. It already moved and I still have 40 years to go.

I think it’ll be means-tested.

Really? I find that astonishing. Have they just accepted they’ll have to work until their late 60’s and then survive on a pittance? I wouldn’t be able to sleep at night under such circumstances.

@PriOn1 It’s not necessarily final salary that’s the issue. It’s the huge contribution the government makes. Far more than employers make. NHs government contribution is 23.7%. Employers won’t pay this. The tax payer does and we have £5 trillion of liabilities. People are paid pensions that are too high when compared to their own salaries.

Pension actuaries have to make assumptions about how long people live. In 1950 it was 69! So pensions didn’t need to last very long for half the population. We know we live much longer now but want the same benefit. It’s obviously not sustainable with millions not working and paying enough tax and NI to fund it.

By employers, I meant private companies.

One thing to be aware of, not everyone puts all their eggs in one basket.

Ive got a respectsble pension pot for my age (about 300k & still got over 20 years to go) but am also keeping a separate ISA with a big chunk in, and a cash savings account, because I worry about the control the government has as to when I can access a private pension. I don't want to be forced to work longer than planned because they decide they need older people staying in the work force longer. So a proportion of my overall "pot" is not reflected in my pension but in reality, the most likely thing is I'll use that money to bridge between the age I want to retire (which might for example be 60) and the age i might be able to access my private pension (which could be 65 etc). I doubt i am alone in doing this.

There are also a lot of people who plan in that they will downsize from a larger family home to free up capital.

I do worry though. I talk to peers and younger staff and they've got fuck all saved, they just bury their heads in the sand about it. They don't realise just how much you need in a DC fund to get an annuity worth a damn. Annuity rates are about 6%, you need 335k to get 20k p.a. which isn't that much when you factor in a risk that state pensions get means tested or inflated away.

My MIL has a negligible private pension. She wfh freelance. She does have a london house but wouldn't downsize. I think she thinks she will always wfh freelance even at 80.

I have a public sector pension which yes is very good but it is not as good as those from the past, and my contribution rate is also high. I am very appreciative of it and it was a conscious choice to take a much lower paid public sector role with a good pension. I also pay over 1k a month in tax and NI fingers crossed will have contributed significantly every year of working life other than 6m maternity. Pensions are a long term issue that need addressing but I've certainly earned and paid for mine

Bookkeeping and data processing - yes. But lots of other areas, nope. People have been saying computerisation and automation would replace accountants since I started in the 80s. It’s not happened. Where jobs have gone is the drudgery of adding numbers, book keeping, ledger work, etc - the low skilled work. Tax planning, analysis, tax consultancy, business development etc is in the rise. My work is completely different today compared with 40/years ago, but there’s no shortage of work. I see automated system, I set up automated systems, I use them, but they’re really not all they’re cracked up to be and won’t be replacing accountants any time soon. I’d not have hesitated recommending it to my son, but he’s gone down the actuarial career route which likewise everyone says is in danger from AI, but he says it really isn’t - he’s in his second year and days so much of his “number crunching” is too subtle for AI - he uses it on a daily basis to help him, but it is a too, rather than showing any sign of replacing actuaries. I’d be recommending people, if thinking about accountancy, to get into tax consultancy, insolvency or business development rather than audit but even audit still needs a lot more than what AI can currently provide.

The saving grace for many millenials will be inheritance from their parents. As long as they don't have to spend too long paying for care and the gov don't take too much in taxes.

What do those with a public sector pension class as a ‘high’ contribution?

@Lincslady53 They won’t be getting much from the millions who rent. Sweeping assumption that house prices won’t rise too and that their jobs are paying enough to get a decent mortgage to buy. We already know many people aren’t having children due to renting and saving taking too long. They won’t have great pensions either.

Meanwhile our falling birth rate won’t pay the pension liabilities we have because fewer people will be working. It’s ok if your parents have £millions but a cheap house between 3 dc won’t go far and they might be 55 before they inherit - then there’s care fees! Inheriting is a very long game.

@Cumberlandsausagedog It depends on the sector. Generally between 5-12%. However the state pays double their contribution. It’s too high.

Pps are right. If they dropped pension, they will have to up the salaries to private sector levels. So same money or even more will be paid out

It's so frustrating that any discussion of pensions always ends up criticising the public sector. Cutting public sector pensions will not fix the pensions crisis.

Take someone working for the NHS for 30 years for £30k pa. They'll personally pay 8.3% contributions. From SP age they'll get an NHS pension of around £16k pa. That seems fine to me- that's the sort of level of pension we'd want someone to have, surely? It's a lovely thing to have that guaranteed income but it's not excessive.

Someone in a DC scheme would need a pot of around £320k to get the same income, which they could easily achieve by putting £300 a month into a pension (between employer and employee)- about 12%.

The solution isn't dragging NHS workers and teachers down, it's ensuring that people are saving enough. How many people are paying as much as 8.3% for the employee part? Not many. We need to normalise saving enough and starting early and normalise people considering the size of their employer contribution as part of a job offer. Too many people failing to make any provision for themselves and then grumbling that people who have made provision for themselves are going to get more. No shit.

Auto enrolment is going to do a lot to fix the issue, and this stuff should be covered more in schools- I'm constantly appalled by how little people know about it all (esp public sector workers on here complaining that their pension is only £15k or whatever 😭) But there's a cohort- my cohort- who were too late for DB pensions and too early for auto enrolment, and I agree with OP that the shit is going to hit the fan in about 20 years.