To think pensions are just a scam to stop people realising how broken the system is?

[WryAmberRaven]

We’re all told to invest in pensions like it’s gospel. But by the time most people retire, inflation, policy changes and unstable markets eat half of it. AIBU to think pensions are just a con to keep people docile?

What are you investing in to serve you in your old age?

What 'system' are you referring to?

Do you keep your cash in the mattress?

The problem with Investments is that 'you may get back less than you put in' ☹️
Only the very wealthy are guaranteed a comfortable old age, the rest of us just have to fight amongst ourselves for crumbs ☹️

Tell me you know nothing about pensions without telling me you know nothing about pensions.

And now that you know this, are you planning on rising up against the system?

The wider pension system - the way governments, markets, and employers set it up so your future depends on decades of policies, inflation and market swings. That’s what I meant.

I’m not sure that’s true at all. Are there many whose pensions are worth less than they put in? Even ignoring the tax benefit? Looking at the people I know, drops in value have been temporary (eg the impact of trumps tariffs) and have only eroded growth and not original capital.

I think saving for when you can no longer work is an extremely sensible premise.

I'd also like to know this.

You could educate OP, or point them to fonts of knowledge.

What do you think is a better system? And you don’t think the tax benefits of a pension significantly offset the volatility of investment?

Ah OK. I'm not sure I agree. The majority of people will see reasonable growth in a pension fund over time. I think a key issue is that some people seem to have no idea how much they will need to live on after retirement hence we're going to have a growing number of people with a shortfall. This will become an increasing problem as people live longer, but not necessarily in good health.

What would be your answer then? Just keep working until we die?

The state pension looks to cover about half of what people need so it seems a good idea to aim to match that or use it to go part time when it kicks in, but I wish the government we more honest and tell us that directly.

Not true.

I've always earned a decent salary, not huge but currently about £60k. I'm 62 and have paid in 3-5% since I was 22. I've worked full time for 40 years.

My pension fund has been through the recession in the late 80s, the global crash, Brexit and the pandemic so hardly uneventful.

I will retire next summer on more than the minimum wage, which given I won't have a mortgage or dcs to feed, should keep me comfortably.

Absolutely this! A typical pension these days (defined contribution) is really just a tax efficient savings wrapper conditional on not accessing it before 55 (going up to 57 soon).

Any form of savings whatsoever is vulnerable to inflation risk and markets, but these can be mitigated through the form of investments you are in, and by phasing out of more volatile funds as you approach the age you want to start taking benefits. All regulated pension providers have to have a default investment strategy which is designed to do exactly that so the average saver will be better protected against these risks by saving into a pension, not worse.

The industry definitely has an image and communications issue but spewing misinformed stuff online rather than trying to learn about the issues is clearly not going to help you (or anyone else) OP.

I work in pensions (I don't lead with this at parties!).

I work in pensions (I don't lead with this at parties!)

😂😂

So what's the alternative @WryAmberRaven?

Should we all just become immensely wealthy so that we can be fully self-sufficient when we want to stop working and can get by for potentially decades without a pension?

Or will there be a magic money tree to generate income if we don't have wealth or a pension?

Or shall we all have non-consensual euthanasia when our money runs out?

Waiting to hear your plans.

’unstable markets’ affect short term investments, they’re nothing like as relevant for long term pension investments. The old problem that used it exist of having to buy an annuity as soon as you retired even if the market was in a temporary low has fortunately been removed.
what other way is there of saving money which provides better returns over the long term, to guard against inflation? Bank accounts don’t.

public sector pensions otoh… they’re not funded by proper investment, and are becoming increasingly unaffordable. That’s the broken part of the system.

What’s the alternative - don’t pay in, sit with the begging bowl later?

massively OTT to say your (or even the average/any) pension is halved due to market moves - stock market declines (which would be a portion of a pension, not its entirely) has happened once during the GFC and on average has recovered and generated an extended return outstripping other assets. Most pensions would mix other financial instruments too. Additionally, as a pensioner you wouldn’t be withdrawing the full amount at that fixed point of time (ie the market low), so you’d participate in the subsequent market growth/recovery.
inflation is more corrosive if you stay in cash - which if the recent ISA discussion is anything to go by the majority of the UK want to do and won’t be told otherwise…
of course your pension will be dependent on decades of input but hopefully too will support decades of output. How else is time meant to work? The earlier one starts investing into it - little and often - the more potential for compound growth.

I’m an actuary (pensions) @WryAmberRaven you aren’t correct, this is a good thing! Pensions are a positive thing for virtually everybody, even if we imagined a pot didn’t grow, you pay less tax and your employer contributes, if you opt out you are literally losing out on money!

YABU. Pensions should not be eaten by inflation. That's the whole point of investing in a Pension instead of keeping cash under the mattress or whatever 'system' you think would be better. I retired at 55, thanks to having a SIPP. I only really started to sort this out in the last few years (an outcome of covid, for us, was the decision to really focus on finances) but the system, tax incentives and all, allowed me to make it a reality....

Goady MN threads, one every single day from this poster. There must be some reason for doing it.

I think the endlessly changing policies are problematic.

Hard to plan for the future when the rules keep changing eg lifetime allowance.

I do invest in a pension but prefer to put money in my ISA as I have more control over it (and no future tax on it).

They could or course change that too - although I think suddenly taxing existing ISAs is unlikely.

I never understand this mentality that lots of people seem to have these days that everything's a scam and everyone is out to get them.

That I do agree with.

If the state is asking us to spend 45ish years putting our own money in to something, then it feels like they break the social contract by moving the goalposts while we do it.