Pensions in the private sector - an impossible goal

[Newmeagain]

I am feeling quite depressed about my pension and it seems to me that for most people in the private sector it is impossible to accumulate a decent pension.

it feels like we have three categories of people: people in the public sector who get really good pensions; people in the private sector with very high paying jobs; and then people in the private sector with less well paying jobs and it is this last group that have no hope.

I currently have a well paying job but for many years my pay was lower and I could not increase my contributions because I was a lone parent and had to prioritise living costs. I am in my early 50s and my pot is £135k. My googling indicates that even a £400k pot (which seems like an impossible goal) would only give me a very modest annual pension. I am single, so no one to share costs with.

Do you own a home with a mortgage currently? That will presumably be paid off before retirement.

The state pension will still exist - I'd ignore people that say it won't. There would be destitution etc.

£135k is well above average. The average private sector pension pot is £30k. It is only on here that everyone's husbands earn over £100k etc.

That would give you about £6k per year on top of the £12k state pension - so £18k - or £1500 per month.

Also, when not working you will perhaps use the car less, not buy as many lunches out etc etc.

You maybe have 15 years to accumulate more. Child related (Uni?) costs will also reduce.

Your pension provider will be better able to tell you your likely pension then google, if it’s got a decent website you can scenario plan different contribution levels and their consequences. Upping your contributions now will help too.

@topcat2014 yes, my mortgage will be paid off but my concern is that as a lone person, rather than part of a couple, I will not be able to afford any house maintenance costs or other costs. I guess I will probably never be able to truly retire and may need to try to pick up jobs until I am no longer able to.

I think you might be being too pessimistic, depending on what you and your employer are currently paying into your pension. I had a play around with https://www.pensionbee.com/uk/pension-calculator
(other calculators are available) - e.g., if you're 52 and retire at 67, and if you put in £350/month and your employer puts in £250/month, you'd be on track to have over £300k at retirement, from which you could take £12,600pa i.e. you could double your state pension, and expect not to run out till 98. (All at today's prices: plus, these calculators tend to use assumptions about investment growth that are very moderate, compared with what's happened historically, so this is probably an underestimate.)

It's worth considering stuff like, is your pension in the best available fund, and could you increase your contributions. Lots of free information online, for example the next round of Rebel Finance School is about to start, maybe google that.

While I sympathise, you need to bear in mid that people with low paying jobs (or on benefits) are generally used to living on a tight budget. Providing they qualify for a full state pension, then they don't necessarily need a vast sum in a private pension in order to maintain their living standards after they retire. When you consider that once you reach state pension age (or even before) you can get free prescriptions, free bus travel etc and that by then any kids should hopefully have left home, and any mortgage paid off, it's not necessarily as grim as you think it.

I'd add a fourth group. People with no pension who will get supported by the state in old age.

I worked with an incredibly dopey thick as mince, failed all their GCSEs type person in the public sector, at 20 years old they were on £31,500 a year with a local government pension that if they stick with their career in the local government will make that person more comfortable than most Oxbridge educated candidates can even dream of
The world feels a very unfair place at the moment

If you’re early 50s then you’ve probably got at least another 15 years until retirement age. If you’re in a better paying job now then it will build up more quickly. If your DC are now adult you can increase contributions or focus on savings.

This is a really, really horrible way to speak about someone. I hope you are nicer in real life.

She is a truly awful person in addition to not having very much to offer the world intellectually. So I only wish I could be more honest 😂

If I was you I'd try to work until early sixties (hope your health is ok) and then aim to spend your pension pot by mid 70s. Hopefully you can do some fun things but then you would be living off the state pension from mid 70s. Lots of people spend less as they get older so hopefully this would be a good compromise. Best if you can also be in a cheap to run house or flat by mid 70s.

The gap between public and private sector pensions is jaw-dropping and fundamentally unfair. I am surrounded by ex public sector workers (teacher, nurse, prison officer, police), all of whom retired at 55 and all of who have a very nice standard of living.
How the public sector is still convincing us they have uniquely stressful jobs and pathetically low wages is a mystery to me.
Last year, my dh applied for a job at HMRC where the employer's contribution to the pension was 23%! That's funded by taxpayers, most of whom can only dream of such contributions.
It needs addressing pronto, but as Labour are fast becoming the party of welfare and pubkic sector. I don't see it happening anytime soon.

I doubt that many nurses or prison officers will be retiring at 55 in future. Public sector pensions, like most others, are nowhere near as good as they used to be.

They absolutely will. Firstly you have to remember that everybody cuts their cloth accordingly so if you’re only on £31,000 a year at the age of 20 and you remain on a adjusted for inflation and remember they do get a pay rise every year no matter what it’s not performance related
Of approximately 2 1/2 to 5%
So if you’ve always lived your life anticipating that you will retire on 2/3 of your average salary. You’ll be in an excellent position by the time you’re 55. And it’s all relative.
Appreciate not everybody joins the Public Sector from 18 or even 16
But the ones that do will be in a very good position.
I was only in the local government pension scheme for six months. And it’s worth £6000.

My pension is the only thing that has kept me nursing in the NHS over 37 years. I’ve hung on and will be gladly taking the vast majority of it at 55 this year with no penalty.

It sounds like the bigger issue is being single, not having anyone to share costs with makes a big difference. Do you have any other single friends you might want to house share with in retirement (or sooner) to save costs?

The other thing is that compounding works its magic near the end of the period, if you have something like 15 years until you get your state pension then your pot could well have grown a lot in that time. If you still don't think it is enough you could then decide to work a couple of years beyond state pension age and pile that extra money into your pension pot to give it a good boost before you retire.

Are you counting a lump sum in that figure?

Historic accrual rates were 1/80 and 1/60 for 12m so your salary must have been several hundred thousand.

Most definitely was not £100,000
The transfer value after just six months is £5896 and 72p
Not a bad days work

Another big mistake I think people make towards the end of their career is overpaying the mortgage whereas it would be much more prudent to pay the money into the pension and then clear the mortgage with the 25% lump sum much later on at 67 When it’s had time to compound

Nor should they. Why should i have to contribute to 23% of someone's salary so they can retire 12-13 years before i can?
I know public sector pensions are not as good as they were. But they are still massively better than comparable roles in the private sector.

Wow.
Maybe they weren't academic but are good at their job.
Perhaps they are hardworking and reliable.

I have known oxbridge types who were as lazy as they come.
Obv capable but did bear minimum and often unreliable.
On the other hand had someone who stopped school after GCSEs. They were extremely hardworking and reliable.
It really doesn't matter what the background is. You don't know how they will apply themselves.

They weren’t good at their job.
I could write a book, but I’ll resist
You’ll just have to take my word for it

It is still an awful thing to say about someone.

Pension in both the private & public sector are nowhere near as good as they were, another example of the ladder getting pulled up.

Public sector is still better although many are linked to state pension age which is 68 now & will likely increase.

I moved to the public sector recently, the pension was one of the pros even though my pay is lower.

Why should i have to contribute to 23% of someone's salary so they can retire 12-13 years before i can?

@Katypp you are paying for the pensions of people already retired