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Can You Afford To Retire At All ?

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This is a question that has been chucked around my circle for some months and we have come to the conclusion, that we need to grow up.

The world is changing, it seems by the day. One day, we hear "green shoots" and the next "double dip".

How can you filter out the wheat from the chaff.

Ermmm.... You cant not unless you have crystal ball and mystic meg is nowhere to be seen.

The banks are not trustable.

The pension funds are not trustable.

Heres a shocker. Houses are not trustable.

So what do you do.

In essense, forget about getting a pension and retireing at 55. Its not going to happen for most of us. Simply keep working and dont bother. Have a bit put by for a rainy day and spoil yourself now. Ensure you pay all of your NI stamps especially if there are any gaps (Class III National Insurance) and keep money in an ISA.

Accept the fact that if you dont want to live out the remaining years in poverty, you will need to do some sort of work.

Now take a deep breath. Have you accepted it. Now live for today.

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It's all academic. Swine flu will have us all in the end. It's now reeached pandomanic red alert ultra phase - more than one person has died. Failing that, don't forget (and you can't if you watch the news, it's mentioned once per hour by law) cancer is within you, you are already a dead person walking, haha. And failing all that, don't forget the terrorists. Woe betide he who forgets the terrorists! (disclaimer, terrorist = freedom fighter if bourne in your home country, or romantisized by Hollywood). Should any of us actually make it to retirement age (and congratulations, the Queen will no doubt be in touch soon) have a good one! You are one hard case to have survived the terrorists, the credit crunch, the global warming, the flu (again), a few more colds (again), terrorists again (persistant bastards). You suffered wave after wave of shockingly pointless governments, you outlived MJ, and when you finally die, you can proudly state on your headstone that you well and truely beat the rest of us in the human race. God bless you.

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It's all academic. Swine flu will have us all in the end. It's now reeached pandomanic red alert ultra phase - more than one person has died. Failing that, don't forget (and you can't if you watch the news, it's mentioned once per hour by law) cancer is within you, you are already a dead person walking, haha. And failing all that, don't forget the terrorists. Woe betide he who forgets the terrorists! (disclaimer, terrorist = freedom fighter if bourne in your home country, or romantisized by Hollywood). Should any of us actually make it to retirement age (and congratulations, the Queen will no doubt be in touch soon) have a good one! You are one hard case to have survived the terrorists, the credit crunch, the global warming, the flu (again), a few more colds (again), terrorists again (persistant bastards). You suffered wave after wave of shockingly pointless governments, you outlived MJ, and when you finally die, you can proudly state on your headstone that you well and truely beat the rest of us in the human race. God bless you.

+1

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You can start by: Freeing your mind, and not listening to the mainstream media

as anything other than a gauge of sentiment.

THEY dont know what they are talking about - that should be rather obvious.

So dont listen to them. There are many people out there who are miles ahead of the media

+1

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This is a question that has been chucked around my circle for some months and we have come to the conclusion, that we need to grow up.

The world is changing, it seems by the day. One day, we hear "green shoots" and the next "double dip".

How can you filter out the wheat from the chaff.

Ermmm.... You cant not unless you have crystal ball and mystic meg is nowhere to be seen.

The banks are not trustable.

The pension funds are not trustable.

Heres a shocker. Houses are not trustable.

So what do you do.

In essense, forget about getting a pension and retireing at 55. Its not going to happen for most of us. Simply keep working and dont bother. Have a bit put by for a rainy day and spoil yourself now. Ensure you pay all of your NI stamps especially if there are any gaps (Class III National Insurance) and keep money in an ISA.

Accept the fact that if you dont want to live out the remaining years in poverty, you will need to do some sort of work.

Now take a deep breath. Have you accepted it. Now live for today.

debtfree,

good advice there but if people are young enough they can still learn about making their own investment decisions and manage their own portfolios, at least giving themselves a chance to pack up work a bit earlier. I despise rip-off pension funds and tied financial advisers at banks pushing people into cr@p investments so learnt myself, sometimes the hard route losing a few quid along the way.

Yes shares have had a bad 11 years or so on a "Buy and hold" basis but by spreading risks like using commodities and short-selling etc, it has been possible to make money. The alternative of just saving cash may not be so good if at some time a bout of serious inflation comes along and eats into the value of the savings fund, I think it is good to have part in cash and part in investments and to be aware of reducing risk as retirement nears.

That got me out of having to work at 50, but now the low interest rates are making me risk a bit more than I wanted, no easy way is there?

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50% of the population; the young, making £7 an hour can't support the other 50% of the population retiring on £25 an hour for life.. its mathematically impossible.

Whether its funded through corporate profits, income taxes, rentals of homes.. It just can't be done.

And speaking of corporate profits all of those are being eaten up by the hefty, generous pensions of the older generation. BT announced they are dropping their dividend by 95% all of the difference to fund their pension gap.. and it still left a £1 billion a year underfunding of their pension. It also creates a viscious circle, as companies profits disappear to pay pensions, the value of the equities will gradually fall towards practically nothing.

The slide in BT's stock, mainly from pension costs:

6zy9mp.jpg

Edited by aa3

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Lord Turner: "Raise state pension age to 70"

The author of an influential report into the future of pensions now believes that his proposals were not radical enough.

Lord Turner told the BBC he would now argue that the age at which people received a state pension should be raised more quickly.

He also suggested public sector workers should move to more flexible pensions, rather than a final salary scheme.

His commission's proposals four years ago moulded government pensions policy.

http://news.bbc.co.uk/1/hi/business/8131361.stm

Not very encouraging is it?

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50% of the population; the young, making £7 an hour can't support the other 50% of the population retiring on £25 an hour for life.. its mathematically impossible.

Whether its funded through corporate profits, income taxes, rentals of homes.. It just can't be done.

And speaking of corporate profits all of those are being eaten up by the hefty, generous pensions of the older generation. BT announced they are dropping their dividend by 95% all of the difference to fund their pension gap.. and it still left a �1 billion a year underfunding of their pension. It also creates a viscious circle, as companies profits disappear to pay pensions, the value of the equities will gradually fall towards practically nothing.

The slide in BT's stock, mainly from pension costs:

6zy9mp.jpg

Very interesting post aa3, it opens up a can of worms and loads of ifs and buts.

The fat cats at giants like BT, BP etc have salted enough cash & share options into their retirement pots, The staff on normal wages who joined these companies for the salary & benefits package are the ones who make the profits and should really come before the shareholders.

You are right saying that it creates a vicious circle with equity values dropping but one solution to consider is that workers in FS schemes are asked to contribute a bit more along with the employers. Some employers took contribution breaks for a few years whilst the stock market returns were boosting the pension funds and this partly caused the underfunding along with Gordon Browns actions in the '98 budget. These deficit figures always balloon when there equity prices drop and bond yields are lower, so maybe in a few years these pension funds may get to reduce or clear the deficits again.

Sounds like the good days of the pensions are over and it looks like the younger generation will have to either save more of their salary (if they can get a decent salary) or make some investment decisions themselves because it won't happen by magic. With wages of £7 an hour though how will anyone be able to make investments or even rent a flat, the wages for the lower paid in this country are a shambles, the state pension is a shambles - it is only a few who make it through to an affordable retirement unless things pick up or employers start paying real wages.

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Very interesting post aa3, it opens up a can of worms and loads of ifs and buts.

The fat cats at giants like BT, BP etc have salted enough cash & share options into their retirement pots, The staff on normal wages who joined these companies for the salary & benefits package are the ones who make the profits and should really come before the shareholders.

You are right saying that it creates a vicious circle with equity values dropping but one solution to consider is that workers in FS schemes are asked to contribute a bit more along with the employers. Some employers took contribution breaks for a few years whilst the stock market returns were boosting the pension funds and this partly caused the underfunding along with Gordon Browns actions in the '98 budget. These deficit figures always balloon when there equity prices drop and bond yields are lower, so maybe in a few years these pension funds may get to reduce or clear the deficits again.

Sounds like the good days of the pensions are over and it looks like the younger generation will have to either save more of their salary (if they can get a decent salary) or make some investment decisions themselves because it won't happen by magic. With wages of £7 an hour though how will anyone be able to make investments or even rent a flat, the wages for the lower paid in this country are a shambles, the state pension is a shambles - it is only a few who make it through to an affordable retirement unless things pick up or employers start paying real wages.

Thanks. It is true the liabilities to employees legally comes before the common shareholders. I think the whole things stems from a scam. The actuarial profession says it can know the future, that investments will return 8% after inflation forever. This is for pension funds, insurance whatever.

So on a long time horizon companies can offer very generous benefits 'knowing' that return will be 8% a year. But what if its only 2% that can be returned after inflation. It dramatically changes the numbers. Some employees might need to be putting away 60% of their annual salary towards future pension and benefits. Which is not realistic, for one if everyone saved 60% of their income the consumer economy would collapse and they would likely lose their job anyway.

My 2% numbers comes from my own thinking, if British GDP is growing at about 2% a year, isn't it reasonable to expect the value of British equities to grow at about 2% a year in real terms?

Yet another can of worms is that pension is based on earnings at the end of the career. And most people are earning much more at the end of their career than at the start. So this changes how much needs to be put away early.

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It's all academic. Swine flu will have us all in the end. It's now reeached pandomanic red alert ultra phase - more than one person has died.

You are understating how serious it has become ..a second elderly chap who had other medical complications left the planet earlier in the week

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Can't retire until 70?

This is totally ludicrous.

How many jobless people are there in this country?

What are all these people going to do for work?

Nothing can be solved until this is answered, or we completely change the way we look at work and living.

Edited by dazednconfused

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Thanks. It is true the liabilities to employees legally comes before the common shareholders. I think the whole things stems from a scam. The actuarial profession says it can know the future, that investments will return 8% after inflation forever. This is for pension funds, insurance whatever.

So on a long time horizon companies can offer very generous benefits 'knowing' that return will be 8% a year. But what if its only 2% that can be returned after inflation. It dramatically changes the numbers. Some employees might need to be putting away 60% of their annual salary towards future pension and benefits. Which is not realistic, for one if everyone saved 60% of their income the consumer economy would collapse and they would likely lose their job anyway.

My 2% numbers comes from my own thinking, if British GDP is growing at about 2% a year, isn't it reasonable to expect the value of British equities to grow at about 2% a year in real terms?

Yet another can of worms is that pension is based on earnings at the end of the career. And most people are earning much more at the end of their career than at the start. So this changes how much needs to be put away early.

I was aware of the roughly 6% AND 8% return on investment figures being used in pension fund illustrations and endowments years ago when I was first looking at them, but I thought they were not taking inflation into account - maybe I am a liitle more forgetful now I have hit 50!

I had one of those FS schemes for a short while where the Employee had a minimum 5% contribution but could feed another 10% in via AVC's, while the Employer had to put in 10% as their share. the last I heard was that the Employer is now contributing around 33% in order to boost the fund value back to near normal. Going back to a previous point hasn't GB robbed well over £100 Billion out of the pension funds by stopping the tax credits, that move also had a 20% or more negative effect on share prices. That was the point in time where I started taking my own investments more seriously.

Regarding expectations of Equity growth, 10% was the norm before but that was before inflation and those sort of returns may not be available in the future if invested for the long term. Maybe it is time for portfolios to be spread a bit further around the world. I changed mine this year to 20% UK High Income, 10% UK Aggressive growth, 20% USA Large Cap, 30% Emerging Markets and 20% commodities and PM's. I am hopeful that it will work over the medium term but have to keep more of an eye on performance and if necessary switch funds/etf's.

Lastly, I can see more and more Final Salary schemes being frozen for current employees and changed to being based on Career Average Salary. Maybe only a few large FS schemes will survive, I was surprised to see that BP's was a non-contributory scheme. Everyone should contribute towards their pension scheme unless they care to opt out.

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Guest DissipatedYouthIsValuable

I suggest setting up some sort of fund, promising high returns. Simply run it as a Ponzi scheme, skimming all the way, and in the end, graciously accept retirement in an open prison.

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Isn't my house my pension? :)

We are going to have to work longer if we don't invest for ourselves. The media are now telling us we will have to work longer and that's that, but if you are smart and follow the basic principles of investing wisely, you can probably sort out a reasonable future for yourself. You may not be able to retire at 55, but many of us now don't start work till our mid to late 20s. We also live a lot longer, and with the advances in dimentia treatement that are on the horizon, it is conceivable that we will have a good quality of life well into our 80s. Also work is better than it used to be, in my opinion. If you ignore the negativity of the press, our lives are amazing...most of us live like kings compared to our predecesors.

It's an interesting point that companies won't be able to pay shareholders much return in the future due to FSS. Guess the solution is to invest in younger companies that don't have these schemes.

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I doubt the UK situation for most can be solved without a cosmic shift in human consciousness, & we are not going to get that from those that control the show.

60+ million, most packed in like sardines in tin & spiritually lost.

If one is looking for a physical plane comfort solution for 'retirement' or anything else assumed then I think deep down we all know there isn't one?

So maybe the problem is western thinking? - or rather non-thinking?

There is consolation in philosophy but the unfortunately the subject has been replaced by rather less satisfying toys.

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The pensions problem is going to be the mother of all problems , it is a FAR FAR bigger issue than HPI , the problems are twofold first the amounts individuals need to save are huge, you simply cannot assume the stockmarket will turn a small monthly payment into a pension , for a single male at 65 wanting to retire on half his salary he needs a pot of 13 years put by if he wants an index linked pension ,

The second problem is all these company final salary schemes are also living in La La land, first they are living in make believe about the investment returns they can make and then to compound the problem actuaries allow them to use some very dubious maths such as dicounting liabilities using corporate bond yields rather than goverment debt yields, when a credit crunch is in full swing using largely bank debt to get a "risk free rate" when there is huge risk the market prices that you wont get your money back means that the companies value their pension liabilities at less than half of what an annuity provider would , doing things in a prudent way would more than double the average company pension liability and therefore increase the deficit around 5-10 times , most ftse 100 companies are insolvent on any sort of a rational set of pension assumptions ... as they also invest thier pots in other ftse 100 shares rather than risk free ( ish ) gilts there is another layer of ponzi on top ,

In the long run there will have to be a huge bailout of all these schemes , on top of the massive public sector unfunded promises ...

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This is a question that has been chucked around my circle for some months and we have come to the conclusion, that we need to grow up.

The world is changing, it seems by the day. One day, we hear "green shoots" and the next "double dip".

How can you filter out the wheat from the chaff.

Ermmm.... You cant not unless you have crystal ball and mystic meg is nowhere to be seen.

The banks are not trustable.

The pension funds are not trustable.

Heres a shocker. Houses are not trustable.

So what do you do.

In essense, forget about getting a pension and retireing at 55. Its not going to happen for most of us. Simply keep working and dont bother. Have a bit put by for a rainy day and spoil yourself now. Ensure you pay all of your NI stamps especially if there are any gaps (Class III National Insurance) and keep money in an ISA.

Accept the fact that if you dont want to live out the remaining years in poverty, you will need to do some sort of work.

Now take a deep breath. Have you accepted it. Now live for today.

Maybe you can enlighten me on this. I've been paying voluntary NI contributions for the past few years (mum/housewife) but have recently stopped paying them. My thought process was, I'm in my early 30's, Is it really worth paying them voluntarily? In 30, 40 years time I just can't see the pensions system holding up.

Note: If you stop paying voluntary contributions make sure you clain back what you have paid in for the tax year or they will disappear. You can start paying again at any point.

I definately see the benefits for someone reaching retirment to keep paying NI.

Am I being rash/silly not paying mine?

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If the old continue working, the young will have to not work. The problem then becomes paying their benefits instead of paying the pensioners.

We have to pay someone to not work. It might as well be the old. I'd much rather the old tried to riot than the young.

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How many jobless people are there in this country?

What are all these people going to do for work?

Nothing can be solved until this is answered, or we completely change the way we look at work and living.

Seriously, do you think there are bods within Govt who are addressing some of these fundamental questions? It makes you think, what the heck are we paying all these great civil service brains to do? Surely they are giving ministers some genuine insights / advice on how to address this critical issue?

Or are they like 95% of this country, slave to a cozy liberal consensus which is suffocated and scared witless to challenge the established orthodoxy? We must address the challenge of work desperately. Where is the economic vision for this country, where are the robust plan to reduce the attractiveness of the welfare system, where is the focus on real "world class" industrial excellence and skills, where is the challenge to society to think more about our collective future rather than fecklessly spending their dosh on selfish pursuits and lifestyles?

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Maybe you can enlighten me on this. I've been paying voluntary NI contributions for the past few years (mum/housewife) but have recently stopped paying them. My thought process was, I'm in my early 30's, Is it really worth paying them voluntarily? In 30, 40 years time I just can't see the pensions system holding up.

Note: If you stop paying voluntary contributions make sure you clain back what you have paid in for the tax year or they will disappear. You can start paying again at any point.

I definately see the benefits for someone reaching retirment to keep paying NI.

Am I being rash/silly not paying mine?

You're quite a long way from retirement and a lot can change between now and then. The current position is that State Retirement Pension will be paid for your age group from 68.

The number of full years contributions you need to qualify for a full State Retirement Pension has also been reduced, can't remember the exact details, but it's around 30, was about 39 before.

If you receive Child Benefit you do not need to make voluntary contributions whilst in receipt of Child Benefit as you have Home Responsibilities Protection, which basically gives a years NI conts, each year you receive CHB. The system changes next year but will work in much the same way.

At the moment Pensioners can apply for Pension Credit to top up their incomes. The full State Retirement Pension is £95.25 per week. Pension Credit has two elements, the Guaranteed credit and the Savings Credit. Guaranteed credit is means tested but guarantees to top up a single Pensioner's income to £130.00 per week. You can receive Savings credit if you have additional pensions. Too complicated to go into here.

At the moment Pension Credit can be claimed from the age of 60, but this may be increased to 65 with the change in retirement age for women.

It's diffficult to weigh up the best approach as who knows what might happen in the next 35 years. I think you can assume that the SRP will still be here, and some form of Pension Credit, but it may be less generous.

Edited by GGGGGGGGarry

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Maybe like laura says, we DO need a cosmic shift in human consciousness regarding looking after ourselves in old age.

Relying on a 'possible' or not pension is massively dangerous. Unless you have super children who will happily take you on when you're old we have to think of alternative ways of supporting ourselves.

Maybe we have to do this collectively.

By pooling resources to create a small community of small, uber-insulated, off-grid homes. (no fuel bills)

Allotment co-operative for food share/trade. Not everyone would be physically able to dig, but skills for baking, making etc could be traded. (reduce food bills).

Ensure you have enough currency to pay for care (if needed), house-upkeep and any other essentials.

I will not be relying on a future government for my old age that's for sure.

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You're quite a long way from retirement and a lot can change between now and then. The current position is that State Retirement Pension will be paid for your age group from 68.

The number of full years contributions you need to qualify for a full State Retirement Pension has also been reduced, can't remember the exact details, but it's around 25, was about 39 before.

If you receive Child Benefit you do not need to make voluntary contributions whilst in receipt of Child Benefit as you have Home Responsibilities Protection, which basically gives a years NI conts, each year you receive CHB. The system changes next year but will work in much the same way.

At the moment Pensioners can apply for Pension Credit to top up their incomes. The full State Retirement Pension is £95.25 per week. Pension Credit has two elements, the Guaranteed credit and the Savings Credit. Guaranteed credit is means tested but guarantees to top up a single Pensioner's income to £130.00 per week. You can receive Savings credit if you have additional pensions. Too complicated to go into here.

At the moment Pension Credit can be claimed from the age of 60, but this may be increased to 65 with the change in retirement age for women.

It's diffficult to weigh up the best approach as who knows what might happen in the next 35 years. I think you can assume that the SRP will still be here, and some form of Pension Credit, but it may be less generous.

Thanks GGGGGary

Nice of the contributions office to tell me that I didn;t need to pay voluntary contributions.

That's really helpful info cheers.

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Guest Steve Cook
This is a question that has been chucked around my circle for some months and we have come to the conclusion, that we need to grow up.

The world is changing, it seems by the day. One day, we hear "green shoots" and the next "double dip".

How can you filter out the wheat from the chaff.

Ermmm.... You cant not unless you have crystal ball and mystic meg is nowhere to be seen.

The banks are not trustable.

The pension funds are not trustable.

Heres a shocker. Houses are not trustable.

So what do you do.

In essense, forget about getting a pension and retireing at 55. Its not going to happen for most of us. Simply keep working and dont bother. Have a bit put by for a rainy day and spoil yourself now. Ensure you pay all of your NI stamps especially if there are any gaps (Class III National Insurance) and keep money in an ISA.

Accept the fact that if you dont want to live out the remaining years in poverty, you will need to do some sort of work.

Now take a deep breath. Have you accepted it. Now live for today.

Can I afford to retire yet?....

:lol:

I'll be working till I drop

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Guest KingCharles1st

Bankers who retire at 55 may soon well need to spend most of their retirement money on walls, machine gun posts and minefields

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