The Government Says That 11 Million People In The Uk Are Not Saving Enough For Their Retirement

[sossij]

What happens if you die after 5 years and one day? In many cases the pension finishes and that is that. With the BTL you would still have the 50k. But this is not really about BTL v Pensions it is the fact that pensions are a rip off and the rules can (and have changed) and you have no control over the money.

Er... I thought you're dead. Either way you got zip.

[Monkey]

Good because final salary is inter-generational theft. That's why you can't save for it.

why? and is this point at myself. i work in the private sector, and thus any pension like this will be paid for by myself. how will this steal from the next generation down?

[sossij]

Some pensions are a rip off, other pensions are as sweet as a nut, especially with the tax incentive's factored in.

Yes, I'd have had to give 40% to the tax man anyway... may as well go in my pension.

[Bruce Banner]

OK your wife and kids would have the 50k, not zip.

In my case the 25% tax free lump sum is sitting in the bank earning compound interest and I've already had nearly 40% back out of the rest. I could get hit by a bus tomorrow, or I could live for another forty years, who knows.

[Guest TheBlueCat]

Tata were apparently desperate to get the job to break into the UK market for big projects and were apparently honest and open about running this as a loss leader - i.e. they bid low and said they were prepared to make a loss while over-staffing to make sure it was done right.

Yes, that would be the terrible asset stripping Tata that bought the once proud Jaguar Landrover brand and......invested in it, hired lots of new people, made massive profits and paid loads of UK corporation tax. Ban them from all government contracts I say, it's unfair competition for Crapita!

[houses-do-my-head-in]

i thank you all for opening my eyes just slightly as to how fked up the whole system is. i question things like this when i have heard several ppl throughout the last 10 years talk about pensions. my analysis is as follows, and is really simple.

the ones that are saving into them think they are being responsible and doing and act of good. they say things like "tax free" investments, "employers contribution", "lump sum" blah blah blah.

the other group are the few that are in retirement are trying to get a payment upon retirement. they use language like. "not worth it", "all that money", "not as projected". sad thing is it does actually dawn on alot of them that they have been had, but they are too embarrassed to broadcast it to anyone else.

another point. if you save nothing and have nothing on retirement you get state pension, right? what if you do the right thing and save for a private pension, do u still get your state pension or do they take that off you aswell as you have a "private" pension? if so, what is the point?

[sossij]

another point. if you save nothing and have nothing on retirement you get state pension, right? what if you do the right thing and save for a private pension, do u still get your state pension or do they take that off you aswell as you have a "private" pension? if so, what is the point?

I can't answer your specific point, sorry, but I suppose it might be an idea to not have all ones nest eggs in one basket (or pot).

[Butthead]

i thank you all for opening my eyes just slightly as to how fked up the whole system is. i question things like this when i have heard several ppl throughout the last 10 years talk about pensions. my analysis is as follows, and is really simple.

the ones that are saving into them think they are being responsible and doing and act of good. they say things like "tax free" investments, "employers contribution", "lump sum" blah blah blah.

the other group are the few that are in retirement are trying to get a payment upon retirement. they use language like. "not worth it", "all that money", "not as projected". sad thing is it does actually dawn on alot of them that they have been had, but they are too embarrassed to broadcast it to anyone else.

another point. if you save nothing and have nothing on retirement you get state pension, right? what if you do the right thing and save for a private pension, do u still get your state pension or do they take that off you aswell as you have a "private" pension? if so, what is the point?

The basic state pension is paid to everyone regardless of any other savings they may have once they reach state retirement age.

Perhaps your "analysis" should be a little bit more thorough?

[porca misèria]

That doesn't matter, any amount that is earmarked for the purchase of a house benefits from house price deflation.

It's better than that. Suppose you had a deposit of just £20k five years ago, and never added anything to it. At 3% it's only grown to £23.185k, but it's grown from a 10% deposit to a 14% one on an average house. Or from 17% to 24% on an FTB home at 60% of average price.

Now imagine topping it up by the amount you weren't paying on mortgage+maintenance over those five years. As you would've done back in the old days to qualify for a mortgage.

[John The Pessimist]

Employers will be obliged to contribute to the pension of any employee that does not opt out of the NEST arrangement. Most large businesses are factoring the NEST costs into any planned wage/salary reviews this year. As a result, those that would have got 3% will now get 2.5% etc. with the balance being earmarked for the employers' pension contribution.

I'd expect to see a lot of 1.81% rises next month as people only move in line with the NMW rise.

[Bruce Banner]

It's better than that. Suppose you had a deposit of just £20k five years ago, and never added anything to it. At 3% it's only grown to £23.185k, but it's grown from a 10% deposit to a 14% one on an average house. Or from 17% to 24% on an FTB home at 60% of average price.

Now imagine topping it up by the amount you weren't paying on mortgage+maintenance over those five years. As you would've done back in the old days to qualify for a mortgage.

Add to that the 6 or 7% interest rates that were available five years ago. Every little helps .

[porca misèria]

I'm 34. If I put £10,000 into a pension this year, after inflation and fees by the time I retire at 70+ it will be AT BEST the equivalent of £1000. So why the hell would I bother? And that's if I live until 70+, which is unlikely.

For it to even hold value my pension fund would need a risk-free investment that returned more than Inflation+Management fees.

True inflation is about 5% and fees are about 2%. Show me a totally risk-free investment that pays out over 7%.

And that's why pension will never work and I'm not paying into one.

So you put it in a pension fund without fees, and in an investment that returns not less than inflation.

My pension contributions to date would have bought half an average house. My pension fund's current value would buy one and a half such houses.

I did avoid them in my youth, because it was clear that pensions as they were then couldn't - for demographic reasons - survive through to my retirement. The SIPP has changed all that, with an individual pot, and those extortionate fees consigned to history.

[C2B]

For me, I only bothered taking out a pension 10 years ago as my employer was matching my contributions up to 5%.

e.g.

£100 gross pay, which is £60 (as I am in the 40% tax band) net .. cash in account

v

£200 in pension.

A profit of £140 there due to matching contributions and tax relief (although you may end up paying tax on your income upon retirement)

I currently have it in a global equity index (http://factsheets.financialexpress.net/scow/TCG.pdf) (was the default option my employer signed me up for, which I might change based on my risk appetite)

Numerous options are available at retirement (earliest being age 55).

- 25% cash lump sum withdrawal which is exempt from tax

- Swap your pension pot for an annuity (of which there are many types!)

- Income drawdown

- Phased retirement

See https://www.moneyadviceservice.org.uk/en/articles/annuities-and-other-types-of-pension-income-your-options

Now to find a fund that shows a good track record of returning a % higher than inflation + fees (approx 6%+) ...

[porca misèria]

An annuity rate of 6% is a complete rip off. You can buy perpetual preference shares yielding six to seven percent guaranteed, and sell them anytime you like to get your capital back or pass them on to your heirs.

Yep. Though until five years ago, bank preference shares were regular favourites. Some of those still pay the full coupon.

[porca misèria]

I agree (annuity rates used to be 11 or 15%) but with a pension you have to buy an annuity (hope I am wrong)

That used to be true. It's more complicated now, and an annuity isn't the only option.

[zebbedee]

It depends what the money is for. If it's earmarked for a future house purchase then 3% interest plus deflation of house prices makes savings accounts rather attractive.

****** me its there a thread you don't mention that on. Like a ******ing broken record.

[Bruce Banner]

****** me its there a thread you don't mention that on. Like a ******ing broken record.

Does the truth hurt?

[Traktion]

i thank you all for opening my eyes just slightly as to how fked up the whole system is. i question things like this when i have heard several ppl throughout the last 10 years talk about pensions. my analysis is as follows, and is really simple.

the ones that are saving into them think they are being responsible and doing and act of good. they say things like "tax free" investments, "employers contribution", "lump sum" blah blah blah.

the other group are the few that are in retirement are trying to get a payment upon retirement. they use language like. "not worth it", "all that money", "not as projected". sad thing is it does actually dawn on alot of them that they have been had, but they are too embarrassed to broadcast it to anyone else.

another point. if you save nothing and have nothing on retirement you get state pension, right? what if you do the right thing and save for a private pension, do u still get your state pension or do they take that off you aswell as you have a "private" pension? if so, what is the point?

They're not really 'tax free' though - while you get a tax break at the point of investment, you will still pay the tax on income when you get your annuity payouts. At best, it is deferred taxation. EDIT: Ofc, you may get taxed less this way, as income tax increases with earnings, which makes it even more complicated to plan... even income tax rates can change any time too.

The alternative is to pay the tax on the money up front, then buy a 'purchased life annuity' instead. You then don't pay tax on the annuity payouts, as you've already paid the tax years ago.

TBH, I agreed that the whole thing is a farce. I would rather just pay down a mortgage first and early - a guaranteed saving - then worry about how to fund my retirement annuity later. At least I am in control of that, rather some city spivs and the whims of the state.

Edited September 20, 2012 by Traktion

[Frank Hovis]

They're not really 'tax free' though - while you get a tax break at the point of investment, you will still pay the tax on income when you get your annuity payouts. At best, it is deferred taxation.

The alternative is to pay the tax on the money up front, then buy a 'purchased life annuity' instead. You then don't pay tax on the annuity payouts, as you've already paid the tax years ago.

TBH, I agreed that the whole thing is a farce. I would rather just pay down a mortgage first and early - a guaranteed saving - then worry about how to fund my retirement annuity later. At least I am in control of that, rather some city spivs and the whims of the state.

Higher rate relief in, basic rate tax out. So it can be better than deferred taxation.

[Bruce Banner]

They're not really 'tax free' though - while you get a tax break at the point of investment, you will still pay the tax on income when you get your annuity payouts. At best, it is deferred taxation.

The alternative is to pay the tax on the money up front, then buy a 'purchased life annuity' instead. You then don't pay tax on the annuity payouts, as you've already paid the tax years ago.

TBH, I agreed that the whole thing is a farce. I would rather just pay down a mortgage first and early - a guaranteed saving - then worry about how to fund my retirement annuity later. At least I am in control of that, rather some city spivs and the whims of the state.

But the tax rates tend to be lower on drawing the annuity than they were when building the pot. In my case 40%+ tax saved against 10%ish paid on the annuity.

[Bruce Banner]

Higher rate relief in, basic rate tax out. So it can be better than deferred taxation.

Snap .

[porca misèria]

Higher rate relief in, basic rate tax out. So it can be better than deferred taxation.

Yep. There's a small advantage even if you don't get that, but I wouldn't consider the 25% tax-free sufficient compensation in itself for locking the funds up.

The bigger advantage of a pension pot for some is that it's out-of-reach of means-testing if you fall on hard times.

[Democorruptcy]

i thank you all for opening my eyes just slightly as to how fked up the whole system is. i question things like this when i have heard several ppl throughout the last 10 years talk about pensions. my analysis is as follows, and is really simple.

the ones that are saving into them think they are being responsible and doing and act of good. they say things like "tax free" investments, "employers contribution", "lump sum" blah blah blah.

the other group are the few that are in retirement are trying to get a payment upon retirement. they use language like. "not worth it", "all that money", "not as projected". sad thing is it does actually dawn on alot of them that they have been had, but they are too embarrassed to broadcast it to anyone else.

another point. if you save nothing and have nothing on retirement you get state pension, right? what if you do the right thing and save for a private pension, do u still get your state pension or do they take that off you aswell as you have a "private" pension? if so, what is the point?

Pensions are a gamble because you don't know what changes they may bring in before you retire. In the 90's people drawing £15k annuities on a £100k might be surprised it's only £6k now and the average pot is only £30k! It seems to me that everything is now leaning towards means testing i.e. the more you save and try look after yourself the more you are being a mug and just using your money to pay yourself on behalf of the government.

The state pension is currently £107.45 for a single person.

http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/DG_188551

However you may also receive Pension Credit which takes it up to £142.70 for a single person

http://www.direct.gov.uk/en/Pensionsandretirementplanning/PensionCredit/DG_10018692

The surprising thing for me is that they fairly recently (New Tory Labour) reduced the number of qualifying years for a male for a full state pension from 44 to 30 years. As it stands now if you have say 28 years (like me) you get a proportion of the pension e.g. 14/15ths. So if someone with my years retired now and only got £100.28 state pension does that mean they just get a larger pension credit top-up to £142.70? If so, why put the extra 2 years in? Or the extra 16 if qualifying years goes back up to 44?

[porca misèria]

The state pension is currently £107.45 for a single person.

http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/DG_188551

However you may also receive Pension Credit which takes it u to £142.70 for a single person

http://www.direct.gov.uk/en/Pensionsandretirementplanning/PensionCredit/DG_10018692

That's the old rules. AIUI they're eliminating that anomaly from (sometime soon) by aligning basic pension with means-tested top-up, so you won't just lose that first £35.

And they have to do it for real: they're battling a lot of hostility arising from a legacy of unrealistic promises and expectations. That means now is a good time to be paying into a pension!

[RufflesTheGuineaPig]

As a 34 year old, and I'm only slightly younger, you and I can be pretty sure that any government pension that exists when we reach state pension age (whenever that happens to be) will be completely inadequate to live on. It'll be survival at best.

You've decided a pension isn't right for you. What plans are you making for your retirement, if any?

At 34 I have 40 years until retirement. The chances are in those 40 years we will have had at least 1 complete economic collapse wiping out all saving, and probably 1 or more major wars.

When there were final salary schemes, pensions seemed worth going for.

I you take out final salary and include the fact that I have to pay for my parents pension, any pension money I "save" is just going in the bin.

I'll start looking at pensions 20 years before retirement. If I can afford it I'll save, if I've fallen on hard times then the chances are the government would already have made me spend my pension pot anyway.