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Will you get your state pension? Age 70 by 2060!


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27 minutes ago, buckers said:

I heard that the study about 1 glass a day being better than abstinence was skewed by many of the abstainers being abstinent due to health issues? Will try to find a link.

 

 

I tried this a few years ago; I've never consumed much alcohol but I was convinced about the potential health benefits.

After three weeks I gave up. I couldn't get used to drinking alcohol every day and also it tasted foul after that time, worse than medicine.

I am not now teetotal but I haven't drunk alcohol for eighteen months; even if the health benefits were proven conclusively I now wouldn't drink.

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2 hours ago, ExiledMatty said:

I use my ISA more as my pension more than my SIPP. The small amout in my SIPP is often gambled on very high risk stocks. It's worth 8x what I paid in, I got very lucky with a gold mining company. 

The problem with this is that in your pension you end up paying more tax if these investments are very successful, whereas there is no tax on your ISA. For this reason I think it would generally be more sensible to make your higher risk investments in the ISA and follow a less risky strategy in your pension. Of course it might still be worth having some low risk investments in your ISA if you are likely to retire on your ISAs before you are able to access your pension.

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1 hour ago, Errol said:

A glass a day is too much. More like 1 glass or less a week. Maximum.

Alcohol is just a poison to the body. No point pretending otherwise. 

Not exactly disagreeing with you but I will give you same reply I give to the nurse/doctor who gives me my occasional health check. Always goes same way; first she asks me how much I drink, then she does some mental arithmetic and tells me that I drink more than the chief medical officer's recommended safe level of "units" and this is a Bad Thing. 

Then I ask her what research are those guidelines based on? End of conversation. Because there is no research, Sally Davies and her religious temperance friends just made them up (details here on El Reg).

So I'm not saying drinking is good for you - it's obvious that being an utter p155head is going to damage your health. Equally though nobody can believe the official alcohol story.

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17 hours ago, One-percent said:

Avoid workplace pensions too.  Mine, which I have paid shed loads into has recently moved my retirement age to sync with the state retirement age.  Bitter? Me? Of course not. 

My daughter has started work recently and wants advice re the company pension scheme. I am at a total loss as to what to advise given the way in which the rules are arbitrarily changed  

Well the company matches (actually increases) my contribution so no thanks I would be paranoid to avoid workplace pension. 

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The ignorance around pensions is just shocking. I have one friend who is a full time employee and has the option of entering a scheme where contributions up to 8% will be matched. He refuses to sink a penny into it. He is one of these people who thinks the entire fiat money system is finished, and that the £10k worth of gold and silver that he owns will go up by 10x at least, therefore sorting his retirement. I said to him, if the system doesn't collapse and you don't get run over by a bus, you're probably going to live 20 years of destitution from when you retire unless you have a plan. He is just having none of it.

The other excuse I see people using here that they will be dead before they can draw down a pension is ridiculous as well. Life expectancy figures may level off, or even fall a little in future years, but I would be absolutely shocked if the average life expectancy in 2040 was less than 80. Assuming that someone retired early at 60, life expectancy dipped to 80, that is 20 years of living expenses that they would need to be able to provide for.

Seriously, if anyone is under the age of 30 and they have no pension, I would strongly urge you to set one up. For me, it's been one of the best financial decision I have made. Mine is just over 11 years old at the moment with 10% employer contributions and just under 10% personal contributions (which are of course tax deductible). I estimate that within 10 years, I should have a large enough pot that I can retire on. I am not expecting crazy investment returns, I am simply investing in various stock market index funds. Nor am I sacrificing my quality of life to meet my own contributions. I have a mortgage, drive a reasonably priced car, take an annual foreign holiday, while still being able to save a decent amount of money outside of my pension.

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9 minutes ago, NuBrit said:

The ignorance around pensions is just shocking. I have one friend who is a full time employee and has the option of entering a scheme where contributions up to 8% will be matched. He refuses to sink a penny into it. He is one of these people who thinks the entire fiat money system is finished, and that the £10k worth of gold and silver that he owns will go up by 10x at least, therefore sorting his retirement. I said to him, if the system doesn't collapse and you don't get run over by a bus, you're probably going to live 20 years of destitution from when you retire unless you have a plan. He is just having none of it.

The other excuse I see people using here that they will be dead before they can draw down a pension is ridiculous as well. Life expectancy figures may level off, or even fall a little in future years, but I would be absolutely shocked if the average life expectancy in 2040 was less than 80. Assuming that someone retired early at 60, life expectancy dipped to 80, that is 20 years of living expenses that they would need to be able to provide for.

Seriously, if anyone is under the age of 30 and they have no pension, I would strongly urge you to set one up. For me, it's been one of the best financial decision I have made. Mine is just over 11 years old at the moment with 10% employer contributions and just under 10% personal contributions (which are of course tax deductible). I estimate that within 10 years, I should have a large enough pot that I can retire on. I am not expecting crazy investment returns, I am simply investing in various stock market index funds. Nor am I sacrificing my quality of life to meet my own contributions. I have a mortgage, drive a reasonably priced car, take an annual foreign holiday, while still being able to save a decent amount of money outside of my pension.

I think this is excellent advice.  Ideally you need a spread of investments and that should include a pension.

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1 hour ago, Muddlehead said:

The problem with this is that in your pension you end up paying more tax if these investments are very successful, whereas there is no tax on your ISA. For this reason I think it would generally be more sensible to make your higher risk investments in the ISA and follow a less risky strategy in your pension. Of course it might still be worth having some low risk investments in your ISA if you are likely to retire on your ISAs before you are able to access your pension.

 

Absolutely right. 

Highest risk gambles in ISA every time. 

SIPP's are tax revenue raising machines. 

 

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5 hours ago, crashmonitor said:

With the qualification that i reckon alcohol in moderation is better than abstinence. Probably a small glass of red a day is optimum with a couple of days off, but I guess its hard to stop at that level.

Can't see what would be wrong with one small red wine a day, but not just alcohol also sweet fizzy drinks and drinks with artificial sweeteners.....also I don't think generally people are drinking enough plain water a day.;)

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9 hours ago, Dyson Fury said:

I think this is right.  A considerable part of the recent increase in life expectancy has been caused by the lucky generation being able to stop work at 60 and enjoy a relatively well-funded retirement.  As more and more people are forced to carry on working until 65, 67 or even 70 before they can afford to retire, average life expectancy will surely begin to fall again.  Imagine being in a physically exhausting job like bricklaying, or a mentally stressful one, or one where you hate the daily work, and not having any exit route.  Many of these people will simply drop before they reach their new pension age.

There are a lot of factors in play

The figures I quoted are raw data and have not been adjusted to take account of age distribution in the demographic profile

Obviously ,more old people probably means more deaths but even the ASMR adjusted figures were up about 5.0% in 2015.

I do think that some of recent increases in life expectancy are down to the fact that a certain part of the UKs demographic was put on a very healthy diet at a young age thanks to rationing. While they were a generation that smoked quite a lot when young theyprobably have not boozed as much as boomers and certainly took more exercise.

The Department of Health think the 2015 wre a blip due to a heavier than normal mortaility due to flu though to be honest 2015 was not an exceptional year in that respect. It was, however a year when life expectancy actually dipped in the UK slightly for the first time in a number of years. Even allowing for 2015 seeming to be a one off the general trend of deaths is definitely up on that 5 year moving average so I think something is changing as do some of the public health experts who watch those figures. At  the moment boomer generation barely dent the stats at the moment as many of them are still under 65. That is going to change in the next decade

Edited by stormymonday_2011
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22 hours ago, One-percent said:

She is 23 in her first corporate job, so the pay is low, thus contributions corresponding low.  Her employer is good actually at looking after their staff and puts a percentage in the pot.  It's dc, so no guarantee on final payout.  Whether it is index linked, I'm not sure.

my issue with advising is a complete lack of trust. A decision is made today on what is on the table, but in ten, twenty, fifty year's time, these contractual promises can and will be reneged on. At least that is my experience. 

 

13 hours ago, One-percent said:

Many thanks both, very helpful.  I fell a little more informed and able to help her.  My only experience of dc pensions are colleagues who took out top ups to DB pensions with the prudential and have been completely done over on it with the policies paying out very little. 

I did quite a bit of research 18 months ago into opening a Junior Sipp.   Investing early.  Time and possible performance.  Performance being key.  With history an insight but blah blah no guide future.

Although I decided far more pressing needs at the moment, and have to look at getting serious in putting my own pension provision into any sort of shape*, and couldn't commit to such an early start.   (*And that's without house prices having zoomed and zoomed out of sight, against my position.) 

I do not know ins-and-outs of all the different pensions, but starting early on anything like a company contribution match or more to pension, seems like a wise move to me.   23.... you get big boost to contributions early, everything counts from small amounts, and could make so much of a difference over the long run (aside from corrections along the way).  

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However when workers pass up an offer of essentially free money with no strings attached, it's hard to identify a scapegoat other than those workers.


Partial Junior Sipp research some time ago.

uFVVceuh.jpg

http://www.telegraph.co.uk/finance/personalfinance/special-reports/11437077/Turn-2000-into-500000-the-pros-and-cons-of-starting-a-Sipp-for-your-child.html

 

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With a SIPP the lifetime allowance on the amount withdrawn is 1million, then it's 55pc tax or something daft....

Also this allowance was dropped from 1.5m so it will probably drop again. I'd guess 500k in 10 years, what with the idiots that make the rules.

Lots of people could go over that limit, especially if equities chase inflation. As indicated in the post above. Very much a cash cow.

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20 minutes ago, Venger said:

 

I did quite a bit of research 18 months ago into opening a Junior Sipp.   Investing early.  Time and possible performance.  Performance being key.  With history an insight but blah blah no guide future.

Although I decided far more pressing needs at the moment, and have to look at getting serious in putting my own pension provision into any sort of shape*, and couldn't commit to such an early start.   (*And that's without house prices having zoomed and zoomed out of sight, against my position.) 

I do not know ins-and-outs of all the different pensions, but starting early on anything like a company contribution match or more to pension, seems like a wise move to me.   23.... you get big boost to contributions early, everything counts from small amounts, and could make so much of a difference over the long run (aside from corrections along the way).  


Partial Junior Sipp research some time ago.

uFVVceuh.jpg

http://www.telegraph.co.uk/finance/personalfinance/special-reports/11437077/Turn-2000-into-500000-the-pros-and-cons-of-starting-a-Sipp-for-your-child.html

 

Ta very much, the more analysis from the giants on here the better.

on my commute home tonight, I was thinking about the argument that it's a no brainier as the employer matches the contribution up to a certain point.  Yes, all very good.

but, and there is a massive but, it is all dependent on the stockmarket and other such investments that those in the city deem to be good.  However there is no guarantee and as they say, investments can go down as well as up.  There are arguments on here that we are waiting on a massive reset. So, is it akin to wandering into a casino and placing it all on black?  I honestly don't know but it feels like that.

at least with a DB pension, itbwas clear what you would get at age X. Until the goalposts were moved that is. 

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I *love* reading that people don't trust pensions. Makes me happy as it makes the incredible benefits less of a target than say, BTL.

For every 68p I give up now, I get 113p in the pension. If I was a higher rate tax payer, which I'm not by choice (part time work is healthier) that'd be 58p today for 113p. For clarity that because of the full tax relief and NI savings via salary sacrifice and the full employers NI saving I make them. Plus the company gives me another 6% off my gross salary on top just for participating. I would be a muppet not to take that deal.

With the amount i put in, that brings down my current overall rate of tax on income (after NI and income tax) to a single digit percentage. Lovely.

When I retire, out that comes tax free for the first 11k. Which, happily is not a lot short of my current and expected (inflation adjusted) cost of living. So, no to very little tax on way out.

The fund, managed by me, is beating inflation so that covers the inflation adjusted withdrawal.

Once I die, the remaining whole lot is passed on tax free to a successor if I cark it pre 75, or as a drawable wealth fund after. Excellent, plus it doesn't even count as part of my estate for IHT purposes. I plan on there being a *lot* left.

The point here is that an ISA, whilst excellent in addition certainly doesn't boost new payments into it by 66%, or by a near incredible 95% if you're a higher rate payer in a company like mine. 

I'm happy with the risk of them bumping the age, which I see as a minor risk, and have sufficentered outside the wrapper to tide me over.

If they change the rules, so be it. But they haven't. And pretty much everyone else I know is obsessively going the bricks and mortar route. How many people born after 1977 are stuffing their pensions full? Probably a trace percentage. It's hardly going to be a cash cow compared to property imho.

My feeling is this : Rich people know all this, and make full use. Poor people don't. That is no accident. These sort of opportunities are not publicised, and instead people just listen to the general mistrust. Like I say, fine by me.

 

 

Edited by Frugal Git
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55 minutes ago, adamLancs said:

With a SIPP the lifetime allowance on the amount withdrawn is 1million, then it's 55pc tax or something daft....

Also this allowance was dropped from 1.5m so it will probably drop again. I'd guess 500k in 10 years, what with the idiots that make the rules.

The lifetime allowance is now linked to inflation.

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12 minutes ago, Muddlehead said:

The lifetime allowance is now linked to inflation.

Yes. And if annuity rates stay the way they are, there's going to be pressure to increase the limit by more imho. 

As I alluded to before, of my generation there's not going to be more than a tiny percentage of people who have even 1/4 million in their pot at retirement. Big DC pension pots will be the exception, not the norm. So there is no mythical cash cow for the gov, unless they go after the literal handful of people who haven't mortgaged themselves to the hilt or ploughed balls deep into buy to let and actively chose to build a fund. Not to mention the army of zero hours/min wage/ tax credit / dole slaves for whom this sort of talk is a pipedream.

Edited by Frugal Git
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5 hours ago, Frugal Git said:

I *love* reading that people don't trust pensions. Makes me happy as it makes the incredible benefits less of a target than say, BTL.

For every 68p I give up now, I get 113p in the pension. If I was a higher rate tax payer, which I'm not by choice (part time work is healthier) that'd be 58p today for 113p. For clarity that because of the full tax relief and NI savings via salary sacrifice and the full employers NI saving I make them. Plus the company gives me another 6% off my gross salary on top just for participating. I would be a muppet not to take that deal.

With the amount i put in, that brings down my current overall rate of tax on income (after NI and income tax) to a single digit percentage. Lovely.

When I retire, out that comes tax free for the first 11k. Which, happily is not a lot short of my current and expected (inflation adjusted) cost of living. So, no to very little tax on way out.

The fund, managed by me, is beating inflation so that covers the inflation adjusted withdrawal.

Once I die, the remaining whole lot is passed on tax free to a successor if I cark it pre 75, or as a drawable wealth fund after. Excellent, plus it doesn't even count as part of my estate for IHT purposes. I plan on there being a *lot* left.

The point here is that an ISA, whilst excellent in addition certainly doesn't boost new payments into it by 66%, or by a near incredible 95% if you're a higher rate payer in a company like mine. 

I'm happy with the risk of them bumping the age, which I see as a minor risk, and have sufficentered outside the wrapper to tide me over.

If they change the rules, so be it. But they haven't. And pretty much everyone else I know is obsessively going the bricks and mortar route. How many people born after 1977 are stuffing their pensions full? Probably a trace percentage. It's hardly going to be a cash cow compared to property imho.

My feeling is this : Rich people know all this, and make full use. Poor people don't. That is no accident. These sort of opportunities are not publicised, and instead people just listen to the general mistrust. Like I say, fine by me.

 

 

12

I'm kinda in the same camp, loading up your pension is the contrarian's choice and while there's a few risks, there's plenty of upside.  The tax situation is even better than you describe as 25% can be taken as a lump sum tax-free, can't it? 

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10 hours ago, One-percent said:

on my commute home tonight, I was thinking about the argument that it's a no brainier as the employer matches the contribution up to a certain point.  Yes, all very good.

but, and there is a massive but, it is all dependent on the stockmarket and other such investments that those in the city deem to be good.  However there is no guarantee and as they say, investments can go down as well as up.  There are arguments on here that we are waiting on a massive reset. So, is it akin to wandering into a casino and placing it all on black?  I honestly don't know but it feels like that.

at least with a DB pension, itbwas clear what you would get at age X. Until the goalposts were moved that is. 

And if that reset doesn't happen?   A small percentage of salary toward future, in pension, with a 100% employer contribution, still seems a good move to me.  One thing is certain... we all age, and many a person has regretted not saving more toward retirement.   A time will come where many have found they need funds/pot/income toward making life comfortable in older age.

40 years and we could also be living in a world of plenty, where barbaric money in a scarcity economy like today has no meaning any more.. and all of needs served by robots and nanobots and Minds and intelligent drones, but I would not bet on it.  I still hold to optimism on progress though (and from returns in the market from optimism that way) and positioning as best as we can.

Quote

We live in an age in which there is a widespread fear of the future. The idea of progress is being questioned or attacked openly by pre-modernists and postmodernists. Defending the future, crusading for Progress, ought to be a primary concern and goal for Objectivists. 

 

10 hours ago, Venger said:

I do not know ins-and-outs of all the different pensions, but starting early on anything like a company contribution match or more to pension, seems like a wise move to me.   23.... you get big boost to contributions early, everything counts from small amounts

Also, from January, I picked this up below - seemingly not good for creditors looking to recover BTLers debt from pensions.   However yet another protection that so far seems guarded, to back pensions overall (vs ISA etc... and good posts about ISA for higher risk investment positions on this thread, with future tax a consideration).

@spyguy who I think once raised this point in the past (BTLers at risk with pensions - may have been another hpcer).

 

8 hours ago, Frugal Git said:

Poor people don't. That is no accident. These sort of opportunities are not publicised, and instead people just listen to the general mistrust. Like I say, fine by me.

 One paper I read about returns from 'giving up cost of a margarita a day.. couple of £s' when young, and putting £ to pension instead, convinced me about trying to position to future.  Compound growth/returns.  Although every else since then made me so uneasy; zirp QE, FLS, ForeverHPI and rent-forever-loser, but overall many pensions with big employer contribution seem worth taking (against history and in positive life planning vs risk).

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1 hour ago, RDW said:

According to the telegraph, 'hundreds of thousands' are due to breach the lifetime allowance

http://www.telegraph.co.uk/pensions-retirement/tax-retirement/hundreds-thousands-drift-towards-costly-pensions-tax-trap/

If only I had their 'problems'. :)   Still worth going for when young, imo - although looking at different schemes/costs.  

(Getting a pension going with big employer side contribution).

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Pension protections are not that clear any more.

It did used to be that creditors could not touch undrawn pensions. Thats not the case anymore - I need to do digging.

If the person was seen to be 'reckless' or putting money from being reckless into the pension.

In fatty fergus' case, where he drawing a pension, a creditor can make a move to take quite  a lot of the pension income as a contriubtion.

 

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3 hours ago, RDW said:

According to the telegraph, 'hundreds of thousands' are due to breach the lifetime allowance

http://www.telegraph.co.uk/pensions-retirement/tax-retirement/hundreds-thousands-drift-towards-costly-pensions-tax-trap/

That's still a small number in the big scheme of things (less than 1%) and it's primarily something that affects defined benefits schemes, which as we know are often insanely generous. The fact that some of the better off future recipients of these schemes are in danger of breaching these limits is hardly surprising.

For me, in the defined contribution world, being at risk of breaching lifetime allowances would be one problem I'd be happy to face. Stop making further contributions immediately would probably be my first line of attack.

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