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

Oh yes, fully agree, especially with the fact that public sector pensions are heavily subsidised (but all taxpayers!). I personally think that at one point state employees will be told that actually their pension is going to be less than what they expected.

The question is which political party will have to make that decision… but then I guess that they could phrase it as ‘pension age to go to 80 for everybody or we keep the current pension age but pensions for the state sector are cut’

I think there are many jobs, particularly at the lower end of the pay scales, where physically being able to carry on to mid 60s is a lottery. DH(60) works in a physical role in a supermarket and is putting a lot of work into staying fit enough to carry on.

Of course workers in the private sector on the lowest wages tend also to be on the lowest percentage pension contribution.

I have been advising my DCs to pay attention to employer pension contributions when looking at different jobs. I'm fortunate that I changed jobs a few years ago and went from an employer contribution if 4% to 12.5% on a significantly bigger salary. It's late in the day for me but not too late.

It's virtually impossible to take away pensions that have been part of an employment contract for decades, so I think we have to accept paying for the gold plated ones and also the reduced silver plated ones, for which contributions have been being made in past decades.

The only real answer is to tax the pension payments. I.e. reduce the tax free lump sum, or at least impose limits on it, and either increase the rate of income tax or impose NIC on all income so that it's payable on pensions as well as wages.

There's more than one way to skin a cat.

Well, yeah. Obviously not much point people going to university and incurring that debt for low quality, pointless degrees. But those who do worthwhile ones at decent universities are the ones who end up paying it all back and funding others to pointless ones, in effect. If you’re building a decent career them the 9% kicks in pretty quickly at a fair low level of earnings now, below the starting salary for many grad schemes.

I agree that far too many people are going to university and it’s helping nobody. We need to make university for the top 10-15% and fully funded, and reinstated decent polys, technical colleges, apprenticeships with proper links to business and genuine routes into permanent employment, and stop pretending everybody is academic. Also funded evening classes etc to enable people to retrain midlife.

But this is one reason why, as I said in an earlier post, the UK healthcare system and public sector and state pensions systems should be the urgent priority for reform. They are bleeding the country dry. These systems simply do not and cannot work in their current form and the longer it takes people to accept this mathematic fact the less likely it is that the UK will be able to reverse its declining living standards by investing in young people (the whole education budget should be doubled), infrastructure, cheap energy, technology, and look to the future. Nothing will improve in the UK until all of the ever-increasing tax revenue is being siphoned off to pay for elderly people who made no provision for their retirements, despite living through the period of the most favourable economic conditions in the entirety of human history.

£140bn on pension, £160bn of the NHS cost spent on the same cohort, and £100bn on the debts they ran up. That’s before you even get to the off-balance sheet unfunded public sector pay schemes. It’s just not feasible for it to continue. They didn’t pay anywhere near enough tax in their lifetimes to cover the costs of the welfare and services they are extracting as a cohort (averaging £200k per person above their inflation-adjusted lifetime tax payments), nor did they provide such pensions and healthcare and long retirements to their own parents and grandparents. It is financially crippling the country and every government passes the buck as they don’t want to be the one to do what needs to be done but it won’t be long now before they have no choice, which will be far messier than transitioning to a sustainable system in an ordered and phased manner.

It won’t be pretty, but the maths simply can’t be made to work so it is inevitable that before much longer one unlucky government will be left holding the hot potato, which is now roughly the temperature of the Sun.

Anybody relying on state pension being roughly the same as it is now with the same eligibility and real-terms value when they retire, unless they’re doing so within the next decade or so, is being very foolhardy.

@SinkToTheBottomWithYou The other issue is contributing years and how many retire early. They can because of equity in homes. There’s lots of reasons why some need to work and others don’t. My DH is still doing a bit of work at 72. It’s his brain and experience that count though. By so many retiring early and not paying NI it leaves far too much for younger workers to pay and massive pension debt we cannot service.

This is worth looking at, to see the reality of the situation. It’s obvious that things won’t go on like this because the country would go bankrupt.

@TheCastleDoesNotReply

I agree that far too many people are going to university and it’s helping nobody. We need to make university for the top 10-15% and fully funded, and reinstated decent polys, technical colleges, apprenticeships with proper links to business and genuine routes into permanent employment, and stop pretending everybody is academic. Also funded evening classes etc to enable people to retrain midlife.

Agree with every word of that. We desperately need to reverse the damage of the 90s and 00s in terms of obsession with university to the detriment of our previously world leading further/adult education system.

i was going to say! Either somebody’s built a working delorian and travelled here from 2022 or they are confused.

But yes, it’s a big problem that Governments continue to try to treat people’s retirement funds as their personal piggy bank. It destroys public trust on the system. They’ve been told time and again that they need to do is simply make no more changes to the tax rules around pensions/ ISAs and provide a stable platform so that people have the confidence in the systems, but every time a Chancellor is short of cash they raid pensions/ savings again. Idiotic if you actually want people to save for their retirements and be self-sufficient, which the country desperately needs them to do!

But that only helps the country if they have less reliance on the state, and to get there, we need to means test the state pension. A bit pointless using taxpayers money to line the pockets of someone's private pension, AND then give them a state pension on top. It's double dipping.

You don’t think anyone realises this? Really? You think you are the only person who understands this 😂

Like so many things in the UK, terrible planning with nobody thinking through what the consequences would be in terms of skills shortages in trades, and lack of available jobs for graduates from pointless degrees at non-universities. And if people are meant to work until they are nearly 70 then how can there be no access to retraining? Yet this country won’t even decent primary and secondary schools (or even appropriate provision for disabled children!). The results of totally inadequate investment in current and future working generations are very predictable.

The UK seems unable to produce a single political party which is vaguely competent or has any interest in anything beyond the next election, or even next week.

Excuse all the typos!!

I paid my DC university fees and costs upfront. Better for them to be able to put into their own pensions as soon as they started earning rather than being saddled with a loan

Tax “relief” on pensions is just deferred tax. There’s actually a huge tax risk now because tax rates in the UK are only heading one way therefore taxes on withdrawal may well exceed the tax deferred at the point of contribution. They just work the opposite way around to ISAs with the tax paid at withdrawal rather than up front, but with additional uncertainty… granted there are some additional benefits like not paying NI on the money, and the tax free lump sum, but who knows if that will persist? And with money in a pension the Government can change the rules after you’ve contributed and planned for decades, move the date when you can access the fund, impose so punitive taxes on the money. In the absence of any cross-party commitment not to do so and with all the evidence that they do continually try to raid these funds, it is certainly not risk free.

As for state pensions, it’s inevitable really that they won’t remain universal and that they will need to be phased down to a safety net only. Public sector pension schemes will also have to be significantly changed because the liabilities are not payable given demographic projections. Sadly, no Government will mention these basic facts. They distract people with nonsense while refusing to acknowledge the large-bottomed grey animal taking up most of the room. Perhaps someone should let some mice go next to Downing Street and see if that prompts any reaction?

@ThymeScent Most people cannot pay £9,500 pa fees and £12,000 living expenses though. It’s very much a minority who can do this. Also employers are auto enrolment into pensions. Not much choice unless you are self employed regarding pension payments. Whether it’s worth paying up front is a moot point if the job secured is minimum wage. If it’s medicine there’s work but not all grads make enough to pay any grad tax.

@Newtess. The maintenance loan gives just about enough if it’s the max loan. Some poorer students get bursaries too so can get at least £12,000. Yes they might need to look for cheaper accommodation but it’s doable and they can work! Also the old grants were means tested. Many students worked back in the day too and parents were expected to make up the difference as now. As now some didn’t! It’s never been the case that parents weren’t means tested.

Why is this thread about university fees? I’m confused!

YANBU - I think about this a lot. There's going to be increasing numbers of people who have rented all their life, never been able to save much or anything for a pension and when they finally can't work anymore they won't be able to afford anywhere to live, or we'll start seeing couples in their 80s on bedsit rooms bc it's all they can afford.

DH and I not doing that brilliantly on pensions front but we do own our property outright in London so could downsize and release about 500k but that's not necessarily loads if you might have to spread it over 2 decades. I'm assuming working until I'm 70, but of course health issues could arise before then.

DH and I not doing that brilliantly on pensions front but we do own our property outright in London so could downsize and release about 500k but that's not necessarily loads if you might have to spread it over 2 decades.

@Echobelly I think that's ok if you're in London - free transport, free & cheap culture, competing food shops, decent hospitals.

It will be a worry for a lot of people who have prioritised house deposits, rent, paying for childcare and a high cost of living

So paying for a place to live, food, gas and electric are necessities to live. Childcare is need since two wages are often required to pay for a place to live, food, gas and electric. Not sure how I can prioritise these basics over a pension? What is my other opinion live in the woods and forage for food?

Because people don’t want their kids to spend their working life paying off their student loan twice over and still owe what they borrowed. It’s effectively an extra 9% tax rate, with an interest rate twice that of my mortgage.

I’ve been paying my student loan back for 20 years. It’s only the last 3 years that the amount owed has started to go down rather than up or staying the same. I’ll be paying it for the rest of my working life, unless I suddenly become able to pay it off all at once.

I would rather my kids were able to pay that money into their own pension or use it to pay off their mortgage. I’ll do my best to make sure they don’t have any student loans.

Completely agree! And since we are now clued up about pensions (which I wasn’t in my 20s) we can advise them to pay into their pensions from the outset.

@AllThePotatoesAreSinging You do not actually “owe” anything. No one is coming after you at age 60 to pay off the balance! It’s not a bank loan. The repayments are based on earnings. If you don’t work, you don’t pay. Some people work part time under the threshold. They don’t pay. Most people need the loans and a good degree from a good university should get you a better paid job.

Repayments are taken from my salary. They don’t have to come for me at 60 because they come for me every month.

I was a teacher. We would be pretty stuffed if no one went into teaching or nursing because there are better paid jobs.

@countingthedays945 People are saying this awful student debt stops them saving for a pension and another poster says they stumped up £27,000 fees and all living expenses (which can be £12,000 pa easily) so dc can make pension contributions. So firstly only the rich do this and secondly all employees must make pension contributions. Only the self employed have options.

Fair comments except for the "deferred" tax on pensions. Lots of people are saving up to 62% tax on their pension contributions if they're higher rate taxpayers and in the £100-£125k tax band. If they draw down their pensions at 20% basic rate, they've massively benefitted from tax savings. If they draw pensions in the years before state retirement age, some of their pensions will be tax free under the personal allowance. Your point is only really valid for people who are basic rate taxpayers putting money in and basic rate taxpayers when they draw it out again. (And of course, there's no capital gains tax on the increase in value of the underlying investments/assets which is another tax break).