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

The way some people are behaving on this thread is as if they think people who work in the public sector shouldn’t get a pension! People who work in the public sector do work and pay in you know, and quite high contributions. Their employer also pays in, just like they do in the private sector. They are not final salary schemes anymore and far less generous than they used to be.

But in the private sector, those same payments you make into your pension would produce a far small pension. That's the difference.

Retirement age will have to increase for many to fund the lifestyle they want but have not saved for

In that case i suggest everyone works for the public sector, gets a public sector pension and with the big influx of staff they will see it will also solve the recruitment crisis. Everyones a winner.

Public sector workers pay into their pension alongside tax and NI - i don’t understand why theyre getting such a bashing if im honest. They arent getting it for free.

Also public sector pensions are no longer based on final salary and havent been for a long time.

Have a guess at how much a local authority pays into a teaching assistant's pension each month. A part time TA at that working approx 25 hours.

People don’t think that at all but the difference in employer contributions is huge between the private and the public sector. I am a highly skilled professional that has worked for a variety of UK and global companies. I have never had more than a 5% contribution from an employer.

Public sector pensions are also, largely, Ponzi schemes. There is no sum of money saved in a pot to fund the pensions of future retirees. This is a completely unacceptable state of affairs. All public sector pension schemes need to be changed to direct contribution schemes.

@Pussycat22 You do not earn the money! The state puts in an average of 20% into your pension. For many private sector employers it’s 5%. What proportion of their salary do you think they get? Also just 30 years? That means in your early 50s! Who should get any pension in their 50s largely paid for by the taxpayer or borrowings? It’s just a huge entitlement no one else gets.

Firstly, they earn the money which is deducted from their salary to go towards the pension. Secondly, it's advertised as part of the renumeration - for every hour they work, they get paid a certain amount of money now, and a certain amount of deferred pay. It's all earnt.

@mrshoho. Assuming you are on the defined benefits scheme, (salary over time and years of membership) you get the same as other local government scheme workers. A decent deal. You are choosing to work part time, term time only, and that won’t give you a huge pension, obviously. It is better than many but not as good as me who worked full time for the whole year at a more senior level. If you want more you need to be full time and not term time only.

@CoffeeCup14 ALL of that comes from the state! All of it. There’s no escaping that.

Gilt yields are a huge contributing factor to this. When interest rates fall, the problem will be back.

Sorry for not being clear, I'm not complaining. I'm actually baffled at how on my low hours and salary my employer is paying over £300 pm into pension and I'm paying £80 pm on top. I'm only paid for 39 weeks pa but it is paid equally over 12 months. Do they base the contributions on a full time equivalent salary? I know i should know this but never have the time to look at it. When I worked in the private corporate world many years ago it was 5%ee 8%er.

Funny how they forget that when they compare their wage with private sector wages and conveniently forget the benefits such as early retirement, pensions, enhanced sick/maternity pay, etc etc that private sector workers can only dream of.

@mrshoho It’s all scaled down I believe. When I was part time, 2 years p/t (and I was exactly half time of a full time contract) was 1 year full time for my pension years. However that’s a while ago now and it was final salary. I know I’m very lucky! You could ask your pensions team for details.

Yes, it does all come from the state. I'm not sure anyone is trying to deny that. But it's available to everyone. Anyone can apply for a public sector job. It's not like there's some secret unfairness. And actually, for most public sector workers, the fact that the money being spent on them is public money is part of the work culture.

Do you want all public sector employees and retired public sector workers to stand on their doorsteps and clap you once a week in gratitude for being able to eat?

The NHS scheme is NOT a DC scheme. It is a DB scheme with enormous, unfunded liabilities.

@CoffeeCup14 No obviously not. However I don’t like the idea that state workers are the poor relations in pension terms. They are not.

My DH and DD are self employed. Well DH was and has retired aged 72. Apart from state allowing him pension contributions from his earnings before tax, (as everyone gets) he’s had no employer contribution and neither does DD. DH employed over 100 people. His tax contributions and DDs are used to fund the state. That’s ok as long as it’s run well and not profligate.

Of course we realise we need the state jobs to have pensions but it’s common amongst state workers to feel hard done by which really is not acceptable, especially to the self employed with no employer contribution at all. Having said that, neither DD or DH would ever work for the state. Not their style!

Schools do cover a lot of that in PSHE. They cover compound interest in maths. The problem is that most people don’t listen. There is more information and free advice available than ever. Endless website explaining all of the things you mention is simple terms. Auto-enrollment introduced, although the minimum rates are far too low. Adults can’t expect to be spoonfed about every facet of life.

There is just a small flaw in your plan, in that the public sector is funded by the private sector, so if “everyone goes to work in the public sector” then nobody is getting paid at all.

Should private sector employees be able to eat in retirement? Why should the sector that is being funded by everyone else receive far better pensions, funded by others who cannot access such generous schemes even if they made contributions themselves equivalent to the huge amount taxpayers are paying as contributions to these schemes plus the employee’s contribution: if they paid these amounts into a DC scheme fully self-funded they still wouldn’t get the same amount back in retirement that public sector employees do, or anywhere close to it.

It simply isn’t sustainable and given the demographic changes the liabilities simply won’t be payable. Private sector retired people won’t be able to fund it for you. Neither will your children because they will be shouldering such an enormous tax burden already with the falling ratio of workings to retired people, plus the enormous costs of other problems coming down the line (climate change, geopolitical instability), and the massive national debt interest.

How ever much you think public sector employees “deserve” these pensions they categorically have not paid sufficient money to fund, it is not going to be possible and the schemes will have to be changed to something more realistic. The longer our governments continue to deny this basic economic fact the more unpleasant dealing with the problem will become. It is very unfair on those being promised these pie in the sky amounts when it’s so obvious that it’s not going to happen in reality. It would be much better to be honest with people now so they can make appropriate provision for themselves while they still have a good chunk of working life ahead of them.

It’s totally irresponsible for our politicians to be ignoring this completely foreseeable situation but sadly ut UK politicians don’t care about their citizens or the future of the country, just political optics and the next election, so obviously as usual nothing sensible will happen to put long-term plans and a functioning system in place, just like with every other area of UK economic and service management, hence our declining living standards.

The contribution made by the vast majority of public sector employees to their pensions is a fraction of the benefit received.

The exception to this is the local Government scheme which is I believe funded.

So yes they do get most of it for free.

Take for example @FixTheBone the NHS Consultant on 120k who posted previously.

Each year they work entitles them to (1/54) of their salary inflation linked in retirement. Let’s call it 2k pa

The value of that benefit of 2k per annum is valued (using Government actuarial rate) at 50k

They only contribute c.10% so 12k to this.

Thats leaves 38k they are getting for free or about 30% on top of their salary

As @Badbadbunny points out is, this and the other benefits are always ignored.

They also don’t pay tax on the magic 30% unless they are at higher earners, like the doctors, but they are OK as they can go on the news and claim they are victims loud enough and refuse to work until the rules are changed.

I do agree with you to a certain extent.

But I would like to see some kind of talk from a financial planner or pensions expert introduced into companies induction schedule somehow. It is clear from quite a few posts on here that the understanding of how pensions work, the tax reliefs, compound growth, methods and taxation of the various pension benefits offered/provided is not great. You only need to listen to the misconceptions and broad statements about sustainability, ISAs, property etc on here to appreciate the knowledge gap. Then people accept the MN version of the pub bores' idea of the 'facts'.

People would have much more trust and be more likely to save for their retirement if they understood it better.

I was about to say im.in the LGPS which says it's fully funded. So my contributions are supposed to be invested. The employer contributions are high, but more 14% than the 28% of the TPS.

I think the unfunded schemes will change eventually, but it's a very long term solution as the existing liabilities still have to be paid.

The problem with, say, compound interest, is that it's taught in algebraic mathematical terms, so not accessible to large numbers of pupils who struggle with algebra. See something expressed as an equation is VERY different to seeing real life number of a real life relatable example.

If we follow your example of only "teaching" things that kids are interested in and that they'll not learn anything else, then we should apply that to everything and stop teaching most of the what's currently on the curriculum.

Personally I think the PHSE lessons are often regarded as "dossing" lessons because there's no homework, no tests, no end of year exam, no GCSE, etc., so pupils just don't take it seriously. And truth be told, schools/teachers don't take it seriously either, for the same reasons - often done by "cover" teachers. That's why I'd love to see a new GCSE to cover it.

Do your parents not tell you to save when you were younger? Mine did. Firstjyvto skests have at least 3 months money saved at all times. That is 3 months of your salary. You build that up and keep that for rainy days (emergencies)

then once you have that pot (and you ought to build that up with a year), then you start saving for retirement. Keep adding. Every time you get a raise or increase in salary, % goes to retirement so you’re never “missing” this money. Bonuses, gifts if mines fir your birthday or a holiday such as Xmas, etc same thing. Spend some but always put some away.

we aggressively started saving in our 30s for retirement

big lesson is not to live beyond your means. Always put some away. That “away” also needs to be evaluated as the savings gets bigger.