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.

Jesus, are people really that hard of reading?

Whether public sector companies (with unfunded pension funds) put in 2% or 23% makes not a lot of difference, it is all coming from taxes and the pension amount is defined.

Companies shed 100k of jobs when NI went up. Do you really think another 23% increase in employing someone will help the economy.

Doubtful.

Yes. I realised I was paying my mortgage off with income that had been taxed at 40%. I withdrew 25% from my largest pot at 56, paid off the mortgage and have done some home improvements. I’ve now upped my pension contributions massively which is very tax efficient.

I know this will lose the compounding on the amount I withdrew but I used AI to model which was the best approach and am happy that it hasn’t been detrimental.

Plus I have the joy of a mortgage free home that’s nicely decorated.

Well it's not all coming from taxes is it? Public sector workers are paying in contributions.
We don't get a free pension. The pension schemes have been made less beneficial over the years in comparison to the old schemes, are they good, yes but they're not going to see public sector workers retiring with millions in their bank accounts. They also use the db pensions as an excuse to keep the salaries lower in the public sector than the private sector in many cases
We also pay council tax and income tax like everyone else

I think you need to significantly up your payments if you want a bigger pot.

you said your on £135k per annum. Put the £35k each year into a pension. The tax level for over £100k is at 60%for the first 25kover 100 anyway so put it somewhere tax feee where it will benefit you in the future.

doing that for 15 years would add an addition £525k to your pot even without interest and growth.

you can then take 25% out tax free to ensure everything is paid off and have Luxury money as well as an income

My message was in response to someone saying companies/public sector employERs should make bigger pension contributions.

Your points are valid but entirely unrelated to my points.

She said her current pot was £135k, not her current salary.

@Popcorn76thanks, my mistake sorry

Nobody gets bonuses in the public sector, and salaries are definitely lower. The pension is to make up for that.

Everyone I know in the private sector at a certain level seems to get these lovely bonuses every other year that add 10 or 20% to their salary, not to mention other perks like car allowances or private healthcare none of which you get in the public sector.

Anyone envious of these amazing public sector jobs is welcome to apply for jobs in the public sector

Loads of people in the private sector don’t get bonuses or private healthcare etc. Some people in the public sector do get private medical but it’s far less common now.

I have had overtime paid in the public sector but never in the private sector despite working longer hours.

OP if you want some practical help with this then you can get free impartial advice from Pension Wise, it’s funded by government to help people understand their pension and plan for retirement. https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise
in your early 50s you have another 15 years or so before state pension age to build up your pot, which is still quite a long time. With the state pension, and potentially lower living costs if you are mortgage free in retirement, it may not be as bleak as you think.

DB scheme for 25 years, no AVC’s.
Transferred out into a SIPP 8 years ago
Started a new DC scheme with new employer, paid in the absolute minimum the employer would match.
8 Years later SIPP worth £1.1m, and DC scheme worth £70K.
Retired at 54. All private sector. Part time for last 10 years.

I have worked in both sectors so can directly compare without all the hyperbole

My public sector pension is good but at the time, I was also definitely not earning enough for the responsibility I had. I would also say, I worked in the public sector at the beginning of my career. I have since worked out that if I had those contributions in a private pot, they’d have been worth more given the amount of years they would have had to compound. The bulk of my pension will be due at 68- if I die, most of that goes with me. There isn’t that much that will go to a spouse. I think people forget that. The actual best way to have a DB pension is at the end of your career.

My public sector contributions were high. Lots of people with private pensions moan about their pot but never put in more than 5%. I have consistently been putting in 10% into my private pot and it will be my private pot that gives me flexibility, will allow me to retire in my 50s etc. my public sector pension wouldn’t have done that. With a private you need to be starting young and prioritising contributions.

At all of my private sector employers, there have been pension briefings saying people aren’t maximising the employer contribution and basically giving away free money. Over time that really starts to make a difference if people aren’t maximising employer match.

But this discussion is based on the premise that you have to buy an annuity with your pot.
I dont have a massive pot but I intend to.supplement the state pension by drawing down on it as needed alongside my savings. I am married so if we both use our tax allowances wisely and make good investments with our lump sums i think we can have a reasonably comfortable retirement.

Is it a DB or DC pension?

Why on earth did you transfer out of a DB scheme? And how did you get that over the line - it's almost impossible because it's never in your interests to do so.

Believe me, there are very few inflated salaries in the private sector. Minimum wage has killed that one off.

I’m single so a DB scheme would die with me.

That must mean you were on a salary of £588,000 per year for those six months - wow!

But what if you live to 100?

I’ve got £1.2m in my DC pot and no debts, think I’ll cope!
Better than staying in a DB scheme that only grows with CPI not RPI.
Had over 80% growth in 8 years from my original CETV

Your maths is shit, never go into actuaries you won’t last the day

It's daunting OP, and I think private pensions, while still representing good value, are not rising in value as much as they used to.

Get some forecasts from your provider, save like mad as soon as your mortgage is paid off - it's any gap between when you want to / have to stop work and state pension kicking in that is the killer.

I too am a single woman and it does make a big difference when you have almost the same major overheads but only one pension to cover it all.

I certainly do not have a big DC pension having worked in the arts / charity sector and only in the last few years of work received any employers contribution, but it is manageable.

There are also options for some such as downsizing or moving to a cheaper area once work is not an issue.

Quite the opposite. The current accrual rate in the LGPS is 1/49. Meaning that whatever your annual salary, you accrue 1/49th of it in pension.

So, let’s do the maths!

You state you were in the LGPS for six months and accrued £6,000 in that time. Annually, you’d have accrued £12,000. Times that by 49 to get your salary for that year (alleged!) and it is £588,000.

Someone’s talking rubbish alright but it’s not me