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Couples Retiring Now Have ‘More Wealth Than Necessary’

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http://www.theguardian.com/money/2014/sep/09/couples-retiring-wealth-ifs

Britain’s retiring workers have never had it so good, according to an analysis by the Institute of Fiscal Studies which shows that the vast majority of couples born in the 1940s are maintaining their former living standards into retirement – and nearly a half enjoy a greater income in retirement than average real earnings.

The IFS research looked at the income and wealth of couples at retirement compared with their average earnings when they were 20- to 50-years-old. It found that 80% of couples born in the 1940s had an income at age 65 from both state and private pensions that was equal to two-thirds of their average working-life earnings, and that 40% enjoyed incomes higher than their average real working-life earnings.

Economists used two-thirds of former earnings as the benchmark for living standards in retirement as pensioners typically no longer have to support children, have generally paid off mortgages, and do not have to put aside any of their income to pay into a pension.

Once housing wealth is added to the equation – which reflects the huge gains made by people who bought their first home in the 1970s and 1980s – the IFS found that pensioners are awash with cash, suggesting that the “median surplus” wealth held by pensioners in excess of their needs is £220,000.

The IFS said: “92% of couples born in the 1940s have accumulated more wealth than the model suggests they need to maintain their standards of living into and through retirement. The surpluses are substantial on average – the median surplus being over £220,000, which would be enough to produce around £7,000 a year of income if used to buy an index-linked annuity. Even excluding housing wealth, 75% of couples have more wealth than the model suggests they need to maintain their standards of living. The median surplus is over £120,000.”

And if the housing "wealth" goes down what then? There is no wealth in the house unless you sell it, how far would £7000 a year in rent as you'd have no house?

Got to love studies like this, well thought out research at it's finest.

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Their wealth might well be reliant on their house price inflation, but they're still significantly better off than the generations below that have suffered as a result of HPI and not gained from it.

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Their wealth might well be reliant on their house price inflation, but they're still significantly better off than the generations below that have suffered as a result of HPI and not gained from it.

This can't really factor in the value of their house since it doesn't produce an income only a liability. It's easy to see why a retired couple are very well off......no mortgage (in most cases), no kids ( I get it Eight Year Itch) state pension rights of quarter of a million pounds each, possibly supplemented by works pension and possible investment portfolio.

Dream scenario...bus pass essential.

Now what to do...Oh yes sign up for Escape to the Country have an eight hundred thousand pound budget and tell everybody that you can't possibly manage on less than five bedrooms and the kitchen is impossible without the aga and proverbial work top island....just to piss off all the young families watching.

Edited by crashmonitor

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This can't really factor in the value of their house since it doesn't produce an income only a liability.

It can be used to raise additional income through sale so must really factor in. Look at it fro the other side - that extended asset and far extended debt and interest payments for the generation of purchasers on the other side, very much not an asset being onthe other side of the equation.

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Now what to do...Oh yes sign up for Escape to the Country have an eight hundred thousand pound budget and tell everybody that you can't possibly manage on less than five bedrooms and the kitchen is impossible without the aga and proverbial work top island....just to piss off all the young families watching.

Sounds like my parents, but what they ended up with was a maintenance and heating money pit in the middle of nowhere!

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Sounds like my parents, but what they ended up with was a maintenance and heating money pit in the middle of nowhere!

Yup houses in the country deteriorate faster, pest infestation becomes common we needed two cats just to keep the rats out. Heating oil is crazy expensive, broadband is shit, you always need a good car possibly two including 4x4 or you end up trapped, What happens when you get too old to drive? bus service is always terrible. Its expensive as everything involves a drive.You always have to plan ahead running extra freezers stocked up on essentials. It is much much colder in winter. Keeping the garden under control is harder too you often need industrial scale gardening equipment. Ride on mowers n stuff. You often need muscle too, one time we were getting flooded and I had to get out in the rain with a spade and help divert a stream which was filling the conservatory. Oh yeah and in emergency ambulances cant find you and take way longer, this is important if your infirm.

These property shows always make me laugh that living in the country is the easy option you just sit around the arga baking cakes, tending the garden and patronizing simple country folk. Dont get me wrong I loved living in the country but it is nothing like these tv shows portray. It is a lot of hard work especially compared to a terrace in a city. Just living in the country is a near full time job.

oh and you dont escape crime either, its just different crime.

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Even though they're referring to "couples" the report doesn't square with the reports regularly broadcast in the media that people (including older people) aren't saving enough for their retirement and the average amount of pension savings is a relative pittance compared to the amount required to fund the time after retirement. Typically they refer to amounts in pension savings around £15,000 or so.

It all doesn't add up.

So which is true - and if couples do have "More wealth than necessary" does that mean they've got to give it to the government now or to the banks in bailouts/ins or something else? That in addition to the amounts they're currently taking and whittling away through inflation etc.

Edited by billybong

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averages, averages.

I guess we dont need to worry about anything, annuities are paying out fortunes...etc etc.

Course, 40% of retirees are public sector...on average

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Yup houses in the country deteriorate faster, pest infestation becomes common we needed two cats just to keep the rats out. Heating oil is crazy expensive, broadband is shit, you always need a good car possibly two including 4x4 or you end up trapped, What happens when you get too old to drive? bus service is always terrible. Its expensive as everything involves a drive.You always have to plan ahead running extra freezers stocked up on essentials. It is much much colder in winter. Keeping the garden under control is harder too you often need industrial scale gardening equipment. Ride on mowers n stuff. You often need muscle too, one time we were getting flooded and I had to get out in the rain with a spade and help divert a stream which was filling the conservatory. Oh yeah and in emergency ambulances cant find you and take way longer, this is important if your infirm.

These property shows always make me laugh that living in the country is the easy option you just sit around the arga baking cakes, tending the garden and patronizing simple country folk. Dont get me wrong I loved living in the country but it is nothing like these tv shows portray. It is a lot of hard work especially compared to a terrace in a city. Just living in the country is a near full time job.

oh and you dont escape crime either, its just different crime.

Well we all hanker after that Georgian rectory in a couple of acres. It's just that the house ends up owning you rather than you the house.

Suddenly from March-October you are on the treadmill of seeking fine weather to keep on top of that massive expanse of lawn, worries about the damp, the leaking roof and the rats. Not to mention paranoia lest the camper van parked nearby is the start of an all week rave or gypsy encampment. The maintenance free urban slave box starts to look attractive.

Edited by crashmonitor

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Even though they're referring to "couples" the report doesn't square with the reports regularly broadcast in the media that people (including older people) aren't saving enough for their retirement and the average amount of pension savings is a relative pittance compared to the amount required to fund the time after retirement. Typically they refer to amounts in pension savings around £15,000 or so.

It all doesn't add up.

So which is true - and if couples do have "More wealth than necessary" does that mean they've got to give it to the government now or to the banks in bailouts/ins or something else? That in addition to the amounts they're currently taking and whittling away through inflation etc.

No it means triple locks, bus pass and winter fuel allowance are here to stay.

Edited by crashmonitor

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No it means triple locks, bus pass and winter fuel allowance are here to stay.

Maybe that's what they're getting at but those things still don't add up to the difference between figures of £220,000 for a couple (or the spare £120,000 on top) and say £30,000 for a couple typically mentioned when they're trying to sell pensions.

Edited by billybong

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Some more accurate figures on pension savings and annuities in 2013.


https://

www.abi.org.uk/~/media/Files/Documents/Publications/Public/2014/Pensions/The%20UK%20Annuity%20market%20Facts%20and%20Figures.ashx

THE MARKET

In 2013 there were 353,000 annuities sold by ABI members in the UK, worth £11.9bn in total.
14 providers offer annuities on the open market.
12 providers offer enhanced annuities based on health or lifestyle factors, of which 11 offer these on the open market.
The average (mean) annuity in 2013 was bought with a pension fund of around £35,600; but
the median was around £20,000, so half of people buy an annuity with less than this.
Among ABI members, 7% of annuities are investment-linked and there are around 21,000 new drawdown customers every year
Later in the ABI report they mention how small pension pots are.
It doesn't tally with the "More wealth than necessary" IFS report. They should clarify why it doesn't tally.
Edited by billybong

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Some more accurate figures on pension savings and annuities in 2013.

This excludes most works pensions presumably and then ,of course, we have the proverbial six figure stash in the building society. <_<

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This excludes most works pensions presumably and then ,of course, we have the proverbial six figure stash in the building society. <_<

Maybe the rules have changed but it used to be the case that you could have either a works pension or an annuity pension - not both

I dare say there were ways around that for some people but most would stick to that.

It must be so many six figure + stashes in the building society bumping up the averages.

According to the ABI about 29% of annuities are bought with pension pots of less than £10,000 - but the IFS are claiming such high percentages of people retiring are so wealthy typically using percentages like 92% and 75%.

Maybe it's the public sector but overall it doesn't tally.

Edited by billybong

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Maybe the rules have changed but it used to be the case that you could have either a works pension or an annuity pension - not both.

I dare say there were ways around that for some people but most would stick to that.

It must be so many six figure + stashes in the building society bumping up the averages.

According to the ABI about 29% of annuities are bought with pension pots of less than £10,000 - but the IFS are claiming such high percentages of people retiring are so wealthy typically using percentages like 92% and 75%.

Maybe it's the public sector but overall it doesn't tally.

Maybe the rules have changed but it used to be the case that you could have either a works pension or an annuity pension - not both.

I dare say there were ways around that for some people but most would stick to that.

It must be so many six figure + stashes in the building society bumping up the averages.

According to the ABI about 29% of annuities are bought with pension pots of less than £10,000 - but the IFS are claiming such high percentages of people retiring are so wealthy typically using percentages like 92% and 75%.

Maybe it's the public sector but overall it doesn't tally.

...in the public sector they do still have the final salary pensions schemes with people retiring now....no wealth here ..it's just tax payers money being spent and that's in short supply anyway ....Guardian needs to get real.... :rolleyes:

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They need the wealth so they can pass it on to their children, for them to buy houses and keep the prices high! As China becomes more capitalist, We're falling back into the old realm dynasties especially is Scotland cuts its ties.

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They need the wealth so they can pass it on to their children, for them to buy houses and keep the prices high! As China becomes more capitalist, We're falling back into the old realm dynasties especially is Scotland cuts its ties.

..everyone will need to work for the public services then to get a final salary pension .... :rolleyes:

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They need the wealth so they can pass it on to their children, for them to buy houses and keep the prices high! As China becomes more capitalist, We're falling back into the old realm dynasties especially is Scotland cuts its ties.

I guess that is why house price to earnings charts may not be as reliable as they once were....legacies, investment income and profit on houses and a shrinking sector on the pie chart called income from employment.

Edited by crashmonitor

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There have been figures posted before on the number of people of retirement age who have not paid off their mortgage - they're not small. I know someone who works for one of the main mortgage providing banks and he told me it is a massive dilemma what to do as they don't want the bad publicity of "making pensioners homeless" before you even look at how it would devalue the bank's supposed assets. I guess we are at "peak pension" now and things will become worse for each generation. Thing is, if they cut the aid to pensioners based on this better off generation, the perks like bus passes will never be restored and the worse of future generations will be even worse off.

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Maybe the rules have changed but it used to be the case that you could have either a works pension or an annuity pension - not both

I'll assume that a "works pension" means a defined benefits pension, one where the final pension is a fixed percentage of your final salary, and an "annuity pension" is a defined contribution pension, where you and/or your employer contribute each month but the final pension is determined by how well your pension investments have performed over the years. If that's the case then it's okay to have both as long as your total contributions were below 15% of your pay. This was one of the "hidden perks" of a non-contributory company pension, because you didn't pay anything into your defined benefit company scheme you could squirrel away up to 15% of your pay into a second, private pension and enjoy the attendant tax relief. Sadly the days of private sector non contributory defined benefit pension schemes (which used to be the norm) are now pretty much over.

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Their wealth might well be reliant on their house price inflation, but they're still significantly better off than the generations below that have suffered as a result of HPI and not gained from it.

Rubbish

High house prices are because they worked hard

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No it means triple locks, bus pass and winter fuel allowance are here to stay.

I think you'll find they worked hard and paid on for all that, only what they're entitled to after working hard paying off a£40000 mortgage and wearing jumpers etc

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