to think too few people worry about pensions ...

[redskyatnight]

Was chatting to a group of friends (and friends of friends) the other day when the subject of pensions came up.

Only about half the people there (all in their 30s and 40s) had any sort of pension. Quite a few of those said that they didn't pay in as much as they ought to.

Of the others, the reasons for not having one varied from - not wanting to think about it, assuming the kids would support them, relying on inheritance (!), wanting to spend their money now and let the future take care of itself etc.

Maybe I am unduly worrying (I was in the "have a pension fund but don't pay in as much as I should do" group) but I'm astounded that so many people have effectively closed their eyes to saving for their old age. The state pension isn't going to be much to live on, and can we really rely on other sources of income just materialising from nowhere?

I do appreciate some people genuinely have no money for a pension after essential bills, so am talking about the people who do have disposable income but choose to spend it elsewhere.

LittleMissMummy, Grimma is right.

It is almost impossible to time the market. The stock market falls and recovers ahead of the real economy by many months. Bull markets tend to take investors by surprise and by the time you, the man in the street, finds out about it, the market would already have gone up substantially.

Did you know, for example, that the stock market has been rising significantly and steadily over the last 6 months? It has not been falling at all. Of course whether or not this lasts is the 64 million pound question, but if you had put money into your pension 6 months' ago, you would be laughing today.

Better to start your pension now, today, a drip feed it in over the months and years. This is called dollar cost averaging and will smooth out any volatility in the market.

The key thing to note is that, unless you are near retirement age, pensions are a long term investment. It does not matter than the stock market rises and falls if over the medium to long term, they rise, which historically it tends to do.

And the younger you start your pension contribution eg 20s, you need to contribute substantially less per month to achieve the same pension pot at retirement, than if you started in your 40s, because your pension has had 20 years to grow in the meantime.

You're right in that people should be more concerned if they want to have a lengthy retirement.

My parents' generation have final salary pension schemes and so expect to retire when they hit 60. Personally I think it is pretty shocking that we have reached a stage where people expect to work for only half of their lives and think that contributing hardly anything towards doing so is ok. Looking at it objectively, if you want to spend half of your life doing nothing you should probably be saving at least 30% of your income.

I just think that by the time I retire it will be a case of retiring 10 years before I die, rather than planning an extended retirement. That is how private pension schemes started - you retired, your employer made you a generous gift and agreed to help you for the rest of your life and you were lucky to last 5 years.

Leningrad - iirc (and it's possible I don't) at the moment you have to take your (private) pension pot by age 75 and buy an annuity with it, otherwise there are tax consequences. So you have until then to contribute. Having said that anything could change by the time we retire!

Just realised you were asking a different q Leningrad - forgive me, the baby has eaten my brain.

'Did you know, for example, that the stock market has been rising significantly and steadily over the last 6 months? It has not been falling at all.'

Blueshoes - no, I didn't know that, buts that cause I've been on maternity leave since March!! But thanks for the info, will come in handy when I go back to work

blueshoes - your post is a bit misleading.

Yes, the stock market has risen siginificantly since March, but that is after a near catastrophic drop from September 2008 until early March 2009.

While it is true to say that money put into a pension 6 months ago would be worth alot more today, it is also a fact that the same amount of money put into a pension 12 months ago would be worth alot less as it almost certainly would have decreased in the 'crash'.

The stock market has rebounded - absolutely - but it is not accurate to say it has recovered. Most people (and companies) who had long term investments still have an overall loss.

I worry a lot about my lack of pension.

Feck all I can do about it though.

I've been paying into my final salary pension scheme since I was 25. Have no idea what it will actually mean I end up getting though

Just know that civil service pension scheme is worth belonging to. Thought I'd sign up first and ask questions later (this was 6 years ago )

Earlybird, you are absolutely right about the movements in the stock market over since Sept 2008, the time of the Lehmans collapse.

I never said the markets had recovered, though the steady rise over the last 6 months is a fact. I made it clear that the 64 million pound question is whether this will last.

The point I am making is that amateurs can never time the market, where even professionals falter. I am not advising anyone to sling their life savings into their pension now. Except to start saving steadily over the years out of your salary sooner rather than later because dollar cost averaging will even out peaks and trougs in the market and the long investment horizon will reduce the risks of short term market volatility.

You say that LeninGrad...did you know the govt have been asking questions of the EU about their legal position if they stop paying public sector pensions?

Scaryteacher - I knew there was trade-off with a reduction in salary=pension contibution but I didn't know the percentage.

We've so far resisted moves to sign on for the new scheme and convert the pension as all the printouts they gave with the offer to switch showed us how much worse off we would be under the new scheme.

The pension is absolutely gold-plated and one of the reasons many of our friends are staying in until their sixteen-year point. We reach that point in 5 years but my husband is probably going to stay in until the end of his Reg C.

Earlybird: "The stock market has rebounded - absolutely - but it is not accurate to say it has recovered. Most people (and companies) who had long term investments still have an overall loss."

I had been putting money into my pension steadily since 2000. I am still quids in by a fair bit.

I don't have a pension and that is a conscious choice. I will not get a pension.

The state pension is currently £80 a week (plus income credits to £120). now, I know this may be cut, but the liklihood that it will go below an inflation-adjusted £80 is a lot lower than the likelihood that my private pension will crash and burn as so many have. what government will get away with that?

I could live on £80 a week if I had no mortgage (and I intend to have some savings)

plus they are bad value. after the investment co has had its cut, you've almost lost the tax saving.

likewise scaryteacher - the government won't stop paying public sector pensions.they would be lynched, and anyway quite obviously it would be illegal. it's possible they asked the EU about the possibility of changing the terms, but that whole story sounds apocraphal to me.

blueshoes - wouldn't it be fab if we could time our investments for maximum growth?? No doubt you are still 'quids in' if you have been putting money away for such a long time, but I imagine alot of the gains evaporated when the market imploded (hopefully you're well on the way to rebuilding).

For the next week or so it looks as if we're due a significant dip in the price of shares - hard to know if that means it is a perfect time to buy as shares are cheaper, or time to stay out of the market just to be safe.....

Maybe it's better not to keep up with it too closely!

I agree with the OP, and also with MrsHappys post.

I don't find pensions a thrilling topic, but it's one of those things people should think about, unless they genuinely won't mind spending the rest of their life after they stop work in poverty.

As MrsHappy says, things have changed a lot over the last few decades. People used to work until 65, then potter in the garden for a few years, and then die. Now, the proportion of time spent in post-retirement is massively bigger - people are likely to live longer AND their expectations have changed - they want to travel, eat out, spend more money basically.

I'm in a final salary scheme and its been a key factor in remaining in my job full time. Much as I love my job, there will come a point when I want to stop and I certainly don't want to be reliant on a state pension.

I agree that too many people bury their heads in the sand and don't even think about what they are going to live off once they stop work.

Damn right, OP. And the worst 'offenders' are usually women, who live longest.

Gordon Brown taxed my dividend income for my pension as soon as Labour came to power. Most people don't seem to have noticed this. It reduced the value of my fund by a lot.

So that was a great incentive for being prudent and self-sufficient.

Earlybird, if you talked to me in mid-2008, I would have been minted. Now, I am only rolling in it. I do not even know whether I was quids in or not until I checked my pension account yesterday. That any gains have 'evaporated' recently does not even cross my mind much, nor does thoughts about 'rebuilding'. They are just paper gains and losses.

The fact is, my pension fund, is still on today's share prices, worth much more than I put in. And it has built up over the years to a significant pot because I started young.

I am more than 2 decades away from retirement. It does not trouble me at all how my pension account is doing until much closer to retirement.

7 years investing in a pension is not at all a long time. In fact, when I first started, the market went up a bit and then plunged down and down. But I see bear markets as a good thing. For the fixed sum of money I was putting in every month, I was getting more units for it because the price was getting lower. I have got the rest of my working life for the price to recover.

Tbh, if you are not a professional investor with time on your hands, the better attitude to take when it comes to investment in shares, whether through pensions, ISAs etc., is to choose a decent fund (talking about money purchase schemes, not final salary ). And then just leave it, but if you can be bothered reviewing with your financial adviser every 2-3 years or so.

If you are inordinately bothered about prices falling in the short or medium term, then your risk profile is such that any form of investments in shares is not likely to be suitable for you, be that pensions or otherwise.

It makes a lot of sense, particularly for a higher rate taxpayer, to have some part of their retirement fund in pensions, not just for diversification, but because the tax breaks are significant (20-40%!) and the employer often tops up, sometimes to around 10% of annual salary.

Now you don't see those upfront gains from any other investment. Helps you to build up a pot early on to grow over time.

jcscot - there was no advantage to us in changing to the new scheme. In fact, most of the Supply Officers (sorry, Logisiticians) I know stayed on the old scheme.

I don't think these things get changed for the benefit of the services, but because it's cheaper for the govt. They are banking on people dying soon after they start drawing the full pension anyway.

SP - not a story - saw it in the finance pages of the paper.

Of course it was a change for the goverment's benefit. ;)

Yes, there was a higher payout once the pension was claimed, but the big differnece for us was that while my husband would still be be entitled to a pension after 16yrs reckonable service, he wouldn't see a penny of it until he was 55. Whereas, under the old system, he gets his pension as soon as he retires (which could be as young as 40).

That's fifteen years payouts that the govt would save right there. The finance apparatchik who tried to explain to M why it would better for hims to swap pensions really tried to sell it to him but, because he had to be clear about what it would cost us, there was no way it was going to happen.

The only benefit he sould come up with was the fact that if he died and I was in receipt of the widdows allowance, I could keep it if I remarried. Under the old scheme you lose it, of course. My husband said that he was sure that I would have the good sense to remarry someone with enough money to support me and the boys.

Very few people we know have signed tehir pensions over.

"They are banking on people dying soon after they start drawing the full pension anyway."

There's a scary statistic floating around that 60% of personnel who serve a full career die within 10 yrs of retirement.

I agree with Senora. I want to control my own investments, not sign my decision-making over to some administrator who takes a big %age of my money every year in fees. And there are too many Govt restrictions around the when and where of converting the savings into pension income. I would only consider a SIPP.