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

Yes, pay them more and completely ban any other business interests, ban them getting "rewards" after they leave office by being given "consulting" roles in firms they've helped by influencing policy, ban any financially gain from lobbyists etc. Make it a career on it' own rather than a step to riches afterwards.

@taxguru I would actually not want career politicians. I prefer older people with work experience at a high level. Successful people in their own right. Preferably of running a business and in possession of a decent brain. Not followers of political dogma and people who just spout ideology. We have seen where this gets us. A government with little understanding of the needs of business to make money so we all flourish. Punishing business seems to be an entrenched political view.

We need people who can get to grips with our problems as a country, not just political cannon fodder who back any hare brained policy.

If they carry on with their successful careers after being an MP, so be it. I don’t care about that. What I care about is having the brightest and the best making our laws. We don’t have that and desperately need it.

Apart from the fact its not a final salary any more, its career average.

So the first 18 years when my taxable pay was between 19k and 37k drag the benefit down significantly.

Then, the final kicker, how many years of that 35-50k actually get paid out...?

As referemced, I absolutely have nit discounted the benefits we get in the NHS, its why I accept 1/6th the Pay i could earn elsewhere, plus the fact nowhere privately provides the type of work in enjoy.

The point is - take away the benefits and people will demand a comensurate imorovement in baseline pay that will hit the economy the moment it is implemented, any pension savings will take decades to be realised.

The other overlooked point is that besides last year pay has fallen behind inflation since 2007, this not only impacts take home, but devalues the final pension value as well - so a double hit, plus ive had final salary scheme taken away in 2008 and a second reform in 2015 that removed lump sums, raised the age at which it could be taken and increased the penalties for early retirement.

Over a career a consultant retiring at 65 now is around 40% worse off than they would have been on 2005.

@FixTheBone Nearly every single person in the workforce has started on a lower salary! Why do you think you are any different? Your pension payments from the government easily make up for this. How come you can multiply earnings by 6 if you weren’t NHS? That’s a huge multiple and barely believable. Most people would take that and shut up about their NHS pension being dragged down by being a junior doctor. Your job is still the best return on any degree at any university (source IFS) so most of us don’t resent what you get but do resent the moaning when you have a very good pension most can only dream about.

Just one question - as employers contribute to the LG pension scheme, (which is said to be fully funded) where does their contribution come from? Council tax payers? Loans? Investments? Anyone know?

I'm not moaning about my pension, or my pay.

I'm moaning that people think it should be lower, despite being already devalued in real terms by 40% over the last 20 years.

I was making the point you cant use 120k for your baseline calculation, over a career its about 90k

I showed my working on pay further up the thread. 120k / 52 weeks / 48 hrs = £48/hr. I earn £300+ doing medicolegal work that I'm currently having to turn away due to lack of time.

As an academy trust employee, the funding for ny salary comes from the esfa, which is from the treasury (so tax payers).

The irony is though that your salary that is nominally linked to pension each year is then index linked so could be going up at a faster rate than your wages, in fact if your wages are falling behind inflation, it will be going up at a faster rate. So if someone stayed in the same job their average salary pension would actually be higher than the old final salary pension.

It’s so difficult for most of us to really value the benefit of our future pension today. And after all if you die soon after retiring you won’t get the full benefit. That’s why I think it would be better for govt to require all jobs to be advertised as a “total costs” package so that it would be clear to everyone.

There was a school academy chain who tried to change their pension scheme so that new teachers could get a big boost to their salary today and a smaller pension. They reasoned that a lot of young staff have a lot of costs - mortgage, childcare - and would value more money today and less in retirement when their expenses will be much lower. It would also help the teacher recruitment crisis. But the teachers union went nuts - they just want the magic money tree to pay more salary and more pension. Oh well.

There’s no doubt that final salary pensions are extremely valuable and expensive and that’s why the private sector has largely withdrawn this benefit.

And to the poster above (several pages ago I think) who claimed that soon public sector pension funds will be in surplus. I’m afraid this is nonsense. Most of the public sector pensions are unfunded, there’s no pension fund as such (eg civil service, teachers, police, NHS). The main one where there is a fund is the local authority scheme. And there the present govt is trying to get the investment rules relaxed so that the funds can we used for the govt’s own pet projects and we know how well those go….

Ironically, the govt does get a positive inflow of cash today to help pay the teachers pensions other than taxpayers…... From private schools who do have to pay into the TPS as employers even though there is no fund as such. So on a current cash flow it’s beneficial to the govt but of course in real terms because they then get the same benefits as state school teachers it means the taxpayer is underwriting the pensions of private school teachers. It’s strange that no one ever gets upset about that …….

Also - relative to the population - consultants are well paid and their pensions are massive. That’s one of the main reasons why the cap on pensions had to be removed as so many Drs were reaching the cap (which I think was around £1.25m) and then having to pay a penalty, like other people with large pension funds have to do. There was a huge fuss about it. The (conservative) govt tried to find a work around where they could exempt Drs from the charge but in the end couldn’t find one so lifted the cap for everyone. Labour opposed the lifting of the cap but have not reinstated it because they would run into the same problem.

I don’t doubt that your pension is likely to be lower than people ahead of you who have already retired, but this has happened to everyone in the private sector too. And most of them have been moved to much lower defined contribution schemes where there is no guaranteed income at all and the cost of buying an equivalent annuity is far higher than the implied multiple used to value defined benefit schemes.

@EveryonesTalkingRubbish And also suffered the Liz Truss effect! No NHS employee had that worry.

@Frowningprovidence I assume you are not a local government employee technically then?

No, I suppose not. I dont know if academies have to be part of the lgps for support staff. Obviously in maintained schools the staff are local government employees.

That’s understandable. Dropping to 3 days sounds like a good idea. Out of interest, what is your job? I also have a very cognitively demanding role

I lost a shed load when Equitable Life collapsed - again, NHS workers don't have that worry.

Everyone starts a career on lower pay than they finish (assuming a successful career). Everyone has lower contributions in their early years to the higher paid years. Only the the most generous public sector pensions guaranteed a final salary pension, index linked with generous widow benefits, funded by the tax payer.

Private sector pensions are not only DC rather than DB but are subject to the movement of the stock market and the risk of pension companies ability to survive and grow in uncertain economic times. Many of those due to retire around 2008 found themselves with a much smaller pot to retire on than even twelve months previous and had to defer retirement or take additional work in retirement. It is the same every time there is a stock market reset or a recession. These are risks which public sector pensions simply don't face as well as being far more generous for the level of employee contribution.

Its reasonable to say that public sector employees may sacrifice salary for better pensions, holidays and in some cases much better T&C than their equivalents in the private sector. That's a choice. Its not reasonable to make that choice and then complain about the pension not being quite as gold plated as it was 30 years ago.

Easy solution to this problem is to work for the government. NHS, teachers, etc., all get great pensions, with employer contributions hugely subsidised by the minority who work in the private sector. For REALLY good pensions, which are completely non-contruibutory, join the military 👍

It's not really that great any more. Local govt is 1/40 th of your salary for every year worked. It's actually a lot less than my pension from an insurance company I worked for, where my salary was £20k more than my current more difficult role, 20 years ago. My salary in a professional role is less than national average (it's under £30k). I'm a graduate. I choose to work for local govt because I like the people there. But the majority are like me. They'd have to work there 40 years to get a £25k pension. Most women haven't with caring duties.

People are totally deluded about what they need in retirement to have even a modest standard of life. An elderly aunt and uncle have saved all their lives and have a joint monthly income of £5,000. However both are now in residential care and their joint fees are over £14,000 a month- that’s £170,000 a year. When it runs out I dread to think what will happen as the local authority will only pay half of that.

You think government employees have great pensions 🤣

Yes a good chunk goes into our pensions - but we get less right now. Government pay is not on par with private pay.

Not being funny but what's wrong with an income of £25,000 in retirement?! Sounds very comfortable to me. Obviously once you're that age you hopefully are not paying rent or a mortgage and as a couple I know that we need around £15,000 a year to live on. Once I have my state pension in a few years time, our income will be around £25,000, therefore we'll have £10,000 a year spare. That's just under £1,000 a month! We've never had that kind of spare money whilst bringing up our children and paying a mortgage - can't wait!

I agree. We can live on two state pensions as our income isn’t much more than that now when working. Mortgage paid off, adult child self sufficient, no car leases, our overheads are low.

Occupational plus state pension is pretty similar to working wage for public sector workers with lots of years of service. Nothing to complain about.

This is MN. You’ll be freezing and living of baked beans on less than 100k

As I’ve said previously I disagree with the blanket “public service jobs pay less” statement. A friend works as a finance officer in education. She’s a glorified data-entry clerk, her job is solely to input invoices. She’s on £31K + excellent pension. Nowhere in the private sector would pay more than NMW + 3% pension contributions for that role, and most likely SSP only.

Though this is MN so I expect everyone is a high flying executive, not your average Joe.

Nothing. But you'd have to work full time for 40 years to get it.

100% agree, plus the profit on your main residence is completely tax free