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?

I'd probably stick my money in a LISA if I were you. You might buy one day and can use it as a deposit, if not it'll be a nest egg for you in order age and you can choose how to use it...rather than it being a pe sion and subject to all the beurocracy that surrounds that.

Yes. Government give 25% of whatever you save each year which can help towards a deposit. I received an extra £2k for free by using a LISA.

I save a lot into my pension - I can't buy and never will be in a position to do so. If I want to maintain my current standard of living after retirement, I need a decent pension. If I die in service DD gets a very big lump sum that I can't give her from leaving her a house and seeing as I'll be working till I drop that's very possible.

There was a thread on here, started by a worried daughter about her mother who had been widowed. The mother had never really worked and was dependent on her husband for money. They had always rented. She applied for social housing and was given a lovely one bedroom retirement flat and housing benefit covered the cost of it. That and her state pension with pension credits meant she was fine. There were a lot of comments along the lines of why have I bothered working from lots of posters.
There are always far more local authority retirement units than family social housing. I have seen financial advisors telling older council tenants not to buy their council house because they become liable for maintenance. Sadly, I think hard work and saving doesn't always pay for older single people.

Well, state pension happens at state pension age.

Our friends are mostly around the 55 to 65 mark and many of them are knackered. Several are already retired, others eyeing up their private pensions so that they can stop work a few years early. It gives you options.

I think you shouldn't take financial advice from a friend or strangers on the internet. Book yourself in with a proper financial planner and go through your situation with him/her in detail. Then make an informed decision based on that conversation.

At the moment your friend is probably right, which I find incredibly frustrating.

But who knows what the situation will be in 30 years time.

Agree you should talk to a financial advisor. Nobody knows what your situation/the country's situation will be in 30+ years' time but pension and/or LISA does give you options about what your life might look like.

I agree with your friend that saving up money during your working life to hand over on rent when you retire is pretty pointless. But you might not do that. You might start taking your pension before you're 60 and work part time. You might spend some of the year (winter!!) overseas during that time. You might have enough to buy a share of an over 55s property. You might have a kid or two and give some to them. You might hit 57 and decide to go to Ibiza and take loads of drugs for three months every summer. You might be able to drop your hours at work and pick up a meaningful hobby. The age you get your UK state pension is now pretty old. If you work full time until then you won't have a lot of chance to do much until one of the ills of ageing stops you from doing anything at all.

What about saving into a LISA? If you save £4k a year the government adds £1k, you can use it as a first time property buyer and/or when you’re 60 so you can keep your options open.

Your friend is being wildly optimistic about the generosity of future benefits!
In a way though, I've followed his advice: no pension, but a cheap house abroad which I now live in. I've never earned enough to get a mortgage in the UK, let alone a pension as well. You don't have a crystal ball and you have to do what's best for you. I think this would probably be focusing on housing, as you won't be retiring for another 40 years, but you need a secure place to live right away. Also, you're young, why not see if you are eligible to work abroad? Either in a country with very high salaries so you can save, or one where salaries are the same as the UK but housing cheaper and tenants better protected.

By your own admission the government aren’t treating pensioners well, what makes you think there will be a benefit top up available?

It gives you the option to downsize to something more affordable and have money left to invest.

A small number of pensioners who rent and have a low private pension might currently be worse off than if they had no pension but most will be better off as a result of saving into a pension.

Given the tax relief on pension contributions you would be daft not to pay into a pension.

Why plan to have a future of poverty when you could do better?

If you are putting extra into your pension beyond the amount needed for matching by your employer then you might want to consider whether you can put the excess in a LISA instead so that you can access it to buy a house if things change.

Save into the private pension and amass a large amount. Move to Costa Rica or similar when you retire and live happily off your pension income in the sunshine.

If you’re not going to be able to afford a house here, Why would you stay in rainy and cold England anyway?

also - the state pension will be decimated in the future. So don’t count on it being there for you.

Its worth pointing out that if you are going to receive the full state pension, you won't be entitled to pension credit.

If they get PIP & carers then the state pension is not their only income, it?

Who knows what successive Government's will look like.

None of us are the complete architect of our own design, I would certainly change some stuff if I could but what you are considering seems a bit like self sabotage.

Who is this beacon of financial advice situation anyway? Is he an economist, a financial adviser?

If you have long term health issues are you claiming PIP?

Also if you need adapted housing because of your health you could go on the waiting list for a council property.

Housing associations also have rentals and you could look at shared-ownership.

I really don't think that being a life-long renter is a good plan...it is very insecure and expensive.

That's true.

Save to buy a studio flat in a cheap part of the country not into a private pension.

Donkey's years ago when I worked in a benefit office, it was not worth having a small private pension. I doubt the overall principle has changed:

You got the standard pension based on contributions, and if your circumstances warranted it, you got a means-tested top up.
If your contributions were low, you got means-tested pension up to the same amount - so someone who had paid in nothing got the same as someone who paid in all their life - because the standard pension was so low almost everyone got the means-tested top up.
Those who had small private pensions or workplace pensions of a few pounds a week got a lower top-up (the means test meant the top up was reduced by an equivalent amount to the private pension), so they also came out exactly the same as the others.

The only ones who were better off were those with full standard contributory pension, and a big enough private pension that they were above the level for means-tested top up.

So get a really big pension, or don't bother. A tiny trickle of private pension just reduces your means-tested entitlement.

What has changed since then is that the standard pension is higher, so far fewer pensioners get a means-tested top-up. Under the old system rent was paid separately by Housing Benefit, so that didn't come into the calculation.

The benefits and pensions system has changed a lot, but the principle remains:

if you can't save up a significant-sized private pension that will eventually pay out a decent amount more than your rent and the state pension each week, don't bother.

Rent a room payments!

Your house can earn you money.

Privately renting in retirement is not a good position to be in. I would focus on buying property before investing in a pension.

Another one not convinced about private pensions. You have to have saved a lot to get even a basic annual amount and that money is tied up.

I think maxing out ISAs is possibly a better way to go. Although personally the post important thing is to own your own place, only then do you have security. Even if you buy somewhere cheaper and rent it out. Frankly anyone who is looking after themselves and doing the right thing saving for their future seems to be getting shafted. No wonder the current trend for youngsters is to just live their life now rather than just save save save save.

You might not be able to own where you live currently but there are still areas where housing is relatively affordable. It may not be your dream home, might have to be a flat or even a place on a residential caravan park but you could own something. Many people around my way move into residential caravan / mobile home parks and like it, obviously not a great resell factor but it's home and more secure than renting

I've brought this up so many times with various people. I am mid 40s will never own a house. I pay what feels like a huge sum into my NHS pension each month and I could really do with the money now. The way things stand my pension will go on paying my rent when retired, whereas with no pension I would get help from the government. Feels like lose lose to me. Yet I keep getting told not to opt out of the great NHS pension...I'm in the 2015 scheme and only have 10 years, so not that great