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

We also need to look at people who deliberately refuse to pay into a pension because it will debar then from government aid! That's just disgusting. The rest of us pay for them. To me that's much worse than someone paying into a public sector pension.

And that public sector workers are tax payers. They have chosen a career which gives a pension but can’t choose to opt not to pay in to it. Others have chosen a job with a private pension and often opted to delay pension contributions in favour of other life style ‘priorities’.

You can opt out of public sector pensions, it might not be sensible but you can

Yes. A v recent introduction. You can decide to lack the foresight that so many do. And then moan about their poor decisions.

But even if not full on 9-5 (most aren't), if you've a lecture at 10am a seminar at 1pm and a tutorial at 5pm, you can't work during that day, can you? That's the reality. There may only be 20 "contact" hours per week, but if they're spread randomly throughout each day, and through the week, you don't have a long enough time gap for a job. So, you're basically just down to evening and weekend work, which is when the sports, clubs and societies, are run and which is usually the only decent length of time to do longer bits of study work, i.e. long essays, research in the library, etc for which the odd hour or two spare during the day doesn't really cut it if you need several hours of uninterrupted concentration.

Most working students just work in places like supermarkets, Argos, bars, McDonalds etc., where they can just pick up the odd random shift that they can fit in. A typical Uni student is no use for an employer who wants someone to work every weekday morning, or every weekday afternoon, or to cover every weekday 10-2 lunchtime peak, etc. Also not too much use for an employer like a bar or restaurant who needs say staff for the evening peak to start at 6pm, if they've a lecture or seminar or tutorial some weekdays that starts at 5, meaning they won't clear the Uni until after 6 and then need to travel to flat to get changed, travel to work, etc - they won't be there till after 7 - some employers are fine with that, many won't be.

Also remember the timetable changes every term, So if your timetable gave you every Wednesday off (no contact time) for the first term, which works for the employer, come the second term, you may have no days with no contact time, or your non contact time might be Monday morning and Tuesday afternoon, which may not work for the employer!

You really have to look at the practicalities. You can't just lazily say "only 20 hours contact time so they can work during the week" - You have to look how those hours are spread and then think about how few employers will be very flexible enough to want staff to work randomly, often with no longer term ongoing pattern nor commitment.

a lot of people will opt out because their salary is so low that the extra money is needed in the here and now.

I think your post lacks sympathy and understanding.

But for low earners, it's probably the most sensible decision they'll ever make. They'll never be able to save/invest enough to give them a good pension, and due to the pension credit rules, they virtually lose "pound for pound" the pension credits for whatever tiny private pension they manage to scrape together. When you also add in the benefits that come alongside pension credit, i.e. winter fuel allowance and others, it's a no brainer. That's not "disgusting", it's just common sense. Blame the system, not the person, We ALL make choices. It's no worse than the entirely sensible decision for people earning just over the child benefit threshold or the free child care threshold to pay more into pensions to get their taxable incomes back down below the threshold. It's no worse that people shoveling their savings into ISAs to avoid paying income tax. It's no worse than anyone investing in a private pension to get the tax relief. Anything legal is fair game. No sane person would invest a low amount in pension, i.e. a tenner a month for 30 years - just no point as whatever crumbs you'll get as a pension will be lost to reduced pension credits.

What's more disgusting are the ones who could work, but choose a life on benefits instead, either by playing the system or defrauding the system, or claiming benefits and then working in the black economy via cash in hand work, selling duty free goods, drug dealing, undeclared work such as taxi driving, man & van, takeaway deliveries, etc. People doing illegal things are far worse than those doing perfectly acceptable legal tax avoidance, tax planning, benefit planning, etc.

If you want to talk about the system that we're in, in terms of benefits, tax, pensions, etc., then let's have a proper conversation as a lot is counter intuitive, damaging and needs changing. But you really can't call people "disgusting" for undertaking entirely sensible, rational, and most importantly LEGAL, long term planning.

For people earning more than average over the repayment period of the student loan who will probably pay off their debt in full (including interest) it makes more sense to pay off the loan as quickly as possible to stop the punitively high interest rolling up (compound interest!). If you look at projections as to how the interest piles up, it's scary - compound interest does that!

Makes no sense to be racking up compound interest at a high rate, at the same time as over-paying into a pension earning a lower rate of interest (or risky returns if invested in stocks and shares).

Better to get the student loan cleared as quickly as possible, if you can, and then start shoveling any excess/spare funds into pensions.

Obviously all depends on your earnings forecasts over your working life and if your employer pays in a higher percentage to match your own higher percentages! If you're a lower earner who'll never pay off your student loans, it's best just to stick to compulsory repayments only and put spare money into investments (which may or may not be pensions as there are still better options such as lifetime ISAs, save to buy ISAs, etc - depending on what's available at the time as these things change on the whims of politicians).

We've crunched the numbers for my son, for example. With his employer, if he only pays in the minimum workplace pension percentage, then his employer only pays in the minimum percentage too. But if, say, he pays in an extra 5%, then his employer double matches it, so pays in an extra 10%. If you have an employer like that, then it quickly becomes a no brainer to max out what you and your employer will pay in, as the extra employer pension more than makes up for the punitive student loan interest rate!

There really are no hard and fast rules with anything concerning personal long term financial planning. You really have to crunch the numbers based on the most likely scenario re future earnings, working life, etc etc and make a few assumptions.

Re student/Uni costs, I don't think people realise how much it costs the student, not just in terms of rents, food, clothes, etc., but also study costs, i.e. text books, stationery, printing & photocopying etc. My son's Uni didn't provide any paper lecture notes - it was all online, and with some modules having lecture notes spanning a few hundred pages, it cost a small fortune for the students to print them out, same with progress exercises/tests, etc., Not all text books are available in high enough quantities from the library, so you will almost certainly have to buy some of your own. And the books aren't the kind you buy from Waterstones for a tenner - some of my son's books were £70/£80/£90 per book. And no, it's not all online these days either - some of these books aren't available on line, and even when they are, a lot of students still prefer a paper set of lecture notes or a paper text book, rather than constantly trying to flick between screens on a tablet or laptop. I think we added up that our son spent something like a couple of thousand on stationery, copying, printing and textbooks during his 3 years at Uni. It's not like school where everything is provided! So, yes, they need to draw down all the loans they can get, AND still need to work, AND still need parental support. It's really not like it was a few decades ago, and not like they make it look in TV shows and films!!

We will be lucky to live to get a pension at the rate they keep upping the age. It was 60 when I started working and now it’ll be 68 if not higher by time I retire.

Single parent, I’ve lived day to day most of my working life on fairly low pay. I’ve not had the money available to put into a private pension so I’m going to end my life as poor as I’ve lived most of the rest of it.

I currently pay 10.7%.

the employer contribution is used to pay current pensioners, and the rate is set centrally.

from the pensions website ‘Employers are required to pay a scheme administration levy, in addition to the employer contribution rate, to cover the cost of the scheme administration. This levy is 0.08 per cent of pensionable pay and will be collected at the same time and in the same way as normal employer contributions. In practical terms, this means employers will pay 23.78 per cent of pensionable pay.
Employers are responsible for paying 14.38 per cent of contributions, with the remaining 9.4 per cent being funded centrally.’

so the employer contribution does not fund my pension, until I retire. There is no public sector final salary scheme, they have all been changed to DC.

my qualifications are specialist, and I could absolutely command a greater salary in the private sector. However I believe in the NHS, and salary isn’t my only motivator. If it was, and also for my colleagues, there would be many parts of the NHS that wouldn’t have the correct staff to function. They barely do now.

we need to remember that if we want public services to remain, there is a financial cost to that. Also, I am a tax payer!

I meant the system allowing it was disgusting, I really didn't mean the people were disgusting. For now it's legal,but the whole' jing bang' is unsustainable so eventually folks with no pension pot will be given a subsistance allowance and that will be it! You may not agree or like it but its what's going to happen. Look at the cuts on disability/ PIP already.

Exactly, more so with the inflation and cost of living crisis we're in today, not to mention the insane cost of housing. I think most sane people would prioritise actually living in a flat rather than a hostel or putting food on the table and turning the heating on, rather than shoveling cash into a pension. That's the sad reality of today's workers earning anything less than average wages, especially if they're on their own or a single income family.

Yes, the whole system will collapse eventually, but the ones who will suffer will be the ones who've made provision for themselves as ALL benefits will be means tested so they'll probably lost state pension. Those on benefits with no provisions won't be given a "subsistence" - they'll continue to be the ones who benefit from full benefits, like they do now. We're never going to take away the benefits from people who have no other incomes. It's just not politically acceptable. So, like now, the feckless will be fine, it's hard workers who'll continue to have to pay for them, and not even get the benefits for themselves.

This is the same as talking about employing people in their 70s. Its completely possible in theory but the realistic match to actual jobs and actual employment is much lower

I lost my job at uni because even though it was zero hours they wanted someone with more availability. I dissappeared for summers ( not enough hours to be able to justify not being in term time housing), and the day I was available changed every few weeks. I also dissappeared off to do placements for upwards of 6 weeks at a time (some required me moving to different cities, others hours long commutes that weren't compatible with working a full shift at placement then being home in time to be else where).
I absolutely had spare hours, but often not enough of them linked together in a pattern employers wanted

Its the same with people working into 70s. There are lots of people fit and capable at that age but lots would need a career change. Huge amounts of the care sector, health care sectors for example would be looking at late in life career changes.

A senior member of my job has aged out because she is struggling with the pace of it all, she is below retirement age but has worked in health her whole life. Its unlikely that she could suddenly move careers, let alone find one with a comparable salary. Currently we have large numbers of older staff who partially retire before retirement age, and significantly reduce their hours. I can't think of the last time where we had someone who worked full time till retirement

Even things like retail now are much more physical than previously.

Who will want to employ older people with a lifetime of experience in manual roles (often with physical issues because of that) in a new office based role?

That's not even getting into the hidden childcare crisis that would be uncovered. Lots of people 60+ retire early or on retirement age are caring for grandchildren and facilitating children's careers. If those people were locked into fulltime employment till 70 then that would unravel

They won't keep raising the state pension age. They'll means test the state pension, or scrap it completely and reform the pension credit system. Maybe a couple of decades away, but that's the end game. We can't afford the NHS AND state pensions for all. Something has to give, and I think most people would prefer to keep the NHS rather than keep an automatic state pension.

Those more savvy than me, I have a final career type pension that I have been in 7 years and expect to retire on a salary of approx £100k. I am 40 and before this didnt prioritise pensions, so my private pension only has £32k. My question is should I be paying into my private one to boost it or use the money to overpay the mortgage?

I've probably got another 30 years of working, though will retire earlier if funds allow.

I do wish I had paid more attention in my 20s and I do think financial matters should be taught at school.

@taxguru I think what you are saying about people having to make the decisions which are best for themselves is right but I think this is also a problem.

We are being given freedom to make choices but we don't always have the knowledge/foresight/understanding to make good decisions. Also hindsight can make seemingly good decisions bad ones.

For my DFiL there were fewer choices. He paid his NI and paid into SERPS (State Earnings Related Pension Scheme a form of state DB scheme). His quite reasonable pension was paid until he & DMiL died.

The world has changed, we live longer and not always in the best of health. One of my concerns now is that most of my marital assets are in my name. If I need to go into a care home/need care will my pension fund be stripped to pay for this leaving DH with very little to live on?

I’m in my early 40s and started late , I pretty much gave up on worry about my pension , I know my “ pension “ will need to be an investment elsewhere . Probably a house abroad as an investment that we can airbnb as a holiday home until retirement and will be increasing in price .

makes me want to give up

It may be worth taking some independent advice on this.
I am older than you but was told to prioritise pension saving over mortgage, because the returns were higher than the mortgage interest rate. May be different for you depending on what your interest rate is though.
I will be able to pay off the mortgage before I retire using earned income which is the important thing, I.e not any lump sum from a pension or dipping into savings.

Because my kids education always comes first. Very surprised at this question

Yes, the World has changed and it's more complicated to navigate real life due to choices etc. But that's exactly why we need to radically change our education system to teach things like personal finance, pensions, contracts, etc. 50 years ago, people generally did what they were told and didn't have choices - most things were simple. Over the decades, we've now got choices and complications but we, at a population level, havn't been given the "tools" via education to make informed choices nor even understand them nor the implications. I'd advocate for personal finance to be it's own standalone compulsory GCSE to include all "lifeskill" aspects of money, finance, payroll, law, contracts, leases, mortgages, etc. not at a particular high/complex level, but certainly to cover all the basics that virtually everyone these days will come across in their normal life.

And if it doesn’t pay off given the hideous jobs market and number of graduate kids on here out of work? Wouldn’t a flat deposit be more practical use to them right now?

@Wildflowers99 People always think a degree gets you ahead financially but grad starting salaries have flatlined in many careers for years. Getting up the greasy pole takes forever too. Degrees in some subjects from some universities do help of course but there’s huge differences between elite and lower 1/3 university degrees and job destinations. Sacrificing £60,000 for an average degree from an average university with below average earnings and no chance of saving for a deposit is not a great decision. If you have the money for both, that’s fine. Having the loan if you don’t earn much is always the best route. Paying it off quickly when the ace job is secured with £150,000 salary is great too but most don’t achieve that.

@taxguru I agree about the need for lifeskills education.

But it needs to be good quality. I remember a course my DD did at 6th form. A fine idea but too much of it was out of date or factually inaccurate.