Whats the point of private pension if youll never own a home?

[Queenoftheuniverseandgalaxy]

Im 30. I will never be able to buy a home (health reasons, salary etc)

Ive been putting a lot of money into my pension.

I was just talking to my friend and he said im making a huge mistake, that theres no point in me saving into a pension as a forever renter, because all that money will just be eaten by private rent and also, state pension might become means tested, so its just a waste. Private pension is only worth it and great if you will own a home/paid off mortgage he said. And that if i have little/ no private pension, just state, i at least might get help from gov paying rent or social housing? He said im setting myself up for poverty in old age by having a private pension.

He says i should opt out immediately

Is he right?

Is there a point of saving into pension if you're a forever renter?

Unless things get very screwed up you should always be better off with your own pension

Your friend is probably right.

Do you really need to rule out buying your own place? I've just bought at almost 40, average salary, saved hard for a decade. I moved across the country to do this in order to buy a flat I could afford and got a different job. I made buying my mission for long term financial security.

If you want to live in complete penury and be happy for other people to support you knock yourself out.

I feel the same sadly.
20 plus years in nhs and now local council.
Rented for 26 years and don't earn enough to buy as a single person.
So the private pension will push me over getting much help once retired but at least I won't be a drain on public money I guess.

Personally you are better of saving your money for your home or for whatever else you want rather than locking most of it away in a pension especially if you have health problems.

There are people I know who have ended up buying houses or even in a couple of cases inheriting them when they were in their late 40s and early 50s. They have been able to buy due to meeting someone else, being given a large bonus at work or getting an inheritance.

And that if i have little/ no private pension, just state, i at least might get help from gov paying rent or social housing?

And you might not, meaning you’ll need your private pension to cover your rent.

Not making your own financial provision on the basis the government ‘might/should’ provide for you isn’t a good basis for not paying into a pension, why does your friend think the general tax payer should pick up everyone’s housing costs?

Gosh. That's a tricky one. I normally fall on the side of saving into a pension.

However I'm developing this sense that those in the middle are squeezed financially

The very, very wealthy will always be okay. Probably have huge assets and passive income.

The very, very poor might also be okay BUT this always depends on policies, the Government etc. The welfare state is a risky thing to have to rely on for income and housing.

Those in the middle are not wealthy enough to never worry and not poor enough to qualify for anything.

Not saving for retirement puts you at the mercy of the prevailing politics and policies of the time. Is that a risk you are willing to take?

I think you should sort your long term housing out before deciding. You say no mortgage, what about securing a lifetime tenancy?

If you can do that you could then get advice about pension planning.

Are you absolutely sure you'll never afford to buy? Can the money you're saving into your pension be put towards a deposit instead? What is your salary and how much are you paying into your pension?

Humm well, I'm normally firmly on the side of being responsible for your own finances. However, having seen the way this government are planning to treat pensioners, my current thought is bollocks to saving, your better off on basic state pension and benefit top up. The sensible side of me though still says save for your retirement!

Your friend is assuming that you will get enough in benefits to afford the same rent your private pension would cover - this is extremely unlikely.

Your friend is ignoring that many landlords find ways to choose tenants who are not on benefits, regardless of legal protection.

Your friend is assuming no benefit cuts in the coming decades (and probably has no genuine understanding of benefits now).

Your friend is ignoring that you might choose to move oversea and live on your passive private pension income in a beautiful place with a warm climate and liw cost of living for all or part of the year - with a good private pension you might well qualify for a retirement visa giving you permanent residence in a country where you will in return pay your way and have a high quality of life - can't do that on UK housing benefit.

Your friend is assuming you'd rather deliberately choose to live on benefits than pay your way even though you don't need to - which implies that either your friend would also rather take all he can and give as little back as possible, or that he doesn't think much of you.

Your friend is ignoring the myriad of ethical and psychological/ mental health and as well as practical (individual freedom and choice, better standard of living) reasons for being financially independent in older age if at all possible.

I find this a really tricky one. Having always been told to ensure I have a pension, and I have 15 years paid into public sector pensions, I actually opted out three years ago to enable me to put that into savings for a deposit instead. I decided that putting some eggs in having a home was worthwhile and I couldn't manage both.

I haven't opted back in yet, but I think I will after a bit of overpaying the mortgage.

I just don't think it's as simple anymore to do the pension/savings/homeowner thing consistently anymore for most people on middle incomes. I am certainly not planning on depriving myself heartily now to ensure I can treat myself when I retire. I'll be working until my mid sixties regardless. I have changed my mindset to doing my best and enjoying what I can in the present moment.

So if stopping your pension will allow you to save for a deposit for a home, that sounds sensible to me. If you're stopping it to blow it all on shein and Uber eats, probably less so.

What's the point in owning your own home if you can't afford to live in it when you retire?

The point in having a private pension is that by the time you come to claim state pension there will be nothing left in the pot as it's being drained quicker than it's filling.

So good luck if you plan on waiting on the state pension.

There are no guarantees for the future. For all we know the uk could be a third world country with no money for welfare in 40 years time!

No, it's not.

The point of a private pension is to have a decent standard of living - the state pension only provides the very minimum.

As for it being drained quicker than it's being filled - that's not how the state pension works.

OP, what is your financial situation? Are you sure you cannot buy? If so, are you in social housind? Do you have a secure tenancy? I would be worried about privately renting as a pensioner, but if you have a secure lifetime tenancy in a council house, I would absolutely continue to save into my pension.

I have two private pensions (also in a nursing/ teaching type job in terms of both pay and working conditions, so they're not huge pensions but help with the fact I had some part time years due to kids). One of the private pensions has the option to pay out a lump sum. DH and I don't own but plan to use our lump sums plus savings to buy a two bedroom flat when we retire.

We would be really stretched buying a house the size of the one we rent and are not inclined to downside whilst we have three teenagers at home (though we're non UK and live somewhere where renting is a secure option and sometimes makes more financial sense - our landlord would need to give us nine months notice to move out, and even then there are restrictions on the reasons he can do so. We also have to give him nine months notice should we wish to leave. There are also legal restrictions on how much rent can be increased by each year).

So I'd look at something with the option of a lump sum payout if you want to buy when you retire. Obviously there are pros and cons and you should probably take good quality qualified advice from someone not primarily interested in selling you a pension!

Don't forget that when you're no longer tied to work you can move somewhere cheaper!

If you don't save into a private pension you are taking the risk that in the future you will be very very poor in old age. You might not be able to afford to retire until years after state pension. If you just get full state pension, if it's still paid when you retire, then you'll be living off of £11,502 or whatever inflation has put it at then. The government don't guarantee to pay things in the future. At the moment you'd get help with rent but who's to say this will happen in the future? In Australia they have a system where you have to pay a lot in for future pension. The UK might gradually follow suit. The fact NICs hav been reduced might mean government are looking to drop it but also over time drop state pension.

Surely it’s worth it to have a better standard of living? The state pension is not exactly generous. Would you be happy to live on it?

I sort of agree with your friend. I'm also in my 30s and I view mortgage/owning a home as more important than my pension at the moment. When and if that's paid off I will start to prioritise pension. Renting in retirement would be stressful for a whole number of reasons.

There is no real answer because we don't know what the future holds.

I have my own home, mortgage free. I didn't claim my pension for an extra year so I would have more coming in. Big mistake, poverty trap ... if I had less coming in I'd get lots of passport benefits. If I rented it would be paid. Owning my own home there is no help towards necessary insurance, maintenance, boiler cover and other things. But who knows about the future.

You have no idea what things will be like in 40 years when you retire. With the aging population there might not even be a state pension.

I would err on the side of financial independence however that might look.

because all that money will just be eaten by private rent and also, state pension might become means tested, so its just a waste.

If state pension is means tested, do you think it’ll be enough to live on? Do people on UC get enough to live on or are they literally scraping by? There might be enough social housing when you retire that you can easily find a secure tenancy, there might not, but even if there is, it doesn’t leave you without a lot of choice does it? It’s the place that is available when you’re the top of the list. Maybe you’ll get a great a location but maybe you’ll be out of town and reliant on intermittent public transport or in a dodgy part of town. A private pension will be eaten with private rent if you don’t buy but at least that affords you choice.

I would look at decreasing your pension contributions to try and build up a deposit. Our pension contributions are the bare minimum at the minimum while we build up equity and reduce our mortgage term. We hope we will be able to increase pension contributions when the mortgage has decreased a bit and childcare costs have eased.

I ended up on the other path after unanticipated divorce, property but virtually no pension. At 30 I could not have guessed some of the twists and turns life would take. What seems sensible is if you can't do both property and pension do the one you can do, don't do neither iyswim.

Imagine someone retiring today with a pension but no property. Current rules say they can take 25% of their pension pot tax free so if their pension pot was £300,000 to £600,000 they could potentially buy a flat like one going under shared ownership for £56,000 40% share (£140,000 full price), 2 bed flat (just looked on Rightmove www.rightmove.co.uk/properties/144108188#/?channel=RES_BUY. )

If retiring their choice of location might be different from during working life.

I suppose what I'm saying is if you can't choose property now or in the forseeable future having the best pension pot you can will give you choices in retirement although a crystal ball would be needed to know what there will be to choose from!

Another thought is that, if you haven't already done it, joining a housing register or housing association waiting list might be worthwhile as a very long term plan if you are able to. It is potentially putting down a marker that, in the very long run you hope to qualify for social housing. It may never result in direct help but might mean you are alert to affordable housing options including new shared ownership in your area. SIL lives in good social housing in London in retirement and is happy there, she never had the opportunity to buy so has always rented.

My neighbours own their home outright but their only income is state pension plus pension credit top up. They live quite comfortably on it (by their own admission) - council tax is paid, they get other financial help like PIP and carers top up on their pension credit, free public transport (which covers almost all their travel as they are in London near good bus and tube routes), warm home discount, winter fuel allowance, free prescription and health costs.

So I can see where your friend is coming from. They've always had low living costs as they were never high earners so living frugally is normal for them, and their current income is fine for their needs. If you were used to a better standard of living, meals out, regular holidays, always using the car, then you'd find it miserable on that income.