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Mikhail Liebenstein

1/3 have no Pension Savings

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https://www.theguardian.com/money/2017/oct/21/uk-retirees-state-pension-financial-future

Here we go, we’ll soon hear the wailing of large numbers of baby boomers complaining that no one told them they were supposed to save for a pension and that the triple lock isn’t generous enough.

But in all seriousness, who the hell is going to end up paying for this?

Hardly fair to dump the bill on the small numbers of GenX workers, anyway the oldest of those are starting to retire, and the Millennials have no money.

Also how can only 12% of Defined Contribution Scheme holders have more than £100k? If you just put away £4k net per year, say £5k  after tax rebate for 10 years, or even £3k for 15 years, you’d have a fund over £100k given market rises.

It’s all self inflicted, and this profligacy is what has made the UK more expensive than it should be!

 

 

 

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3 minutes ago, Save me from the madness! said:

There's a section of savers people whos greatest long term only saving achievement is saving for their next family holiday. 

 

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How much pension savings should you have at given ages?

age 20, age 30,40,50,60?

i read the government were considering giving targets out, so people actually know how they are doing. 

does not surprise me that a lot don’t have a pension. ‘My house is my pension’ (says that while heavily mewing) 

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Quite easy to solve really. Land rents. About 20-30% of the economy. Trousered by landowners and a lot of which ends up "offshored" in the Cayman Islands etc.

We are effectively double taxed in this country, firstly by the land rentiers who monopolise the land rents, then by the State.

The biggest taxes are imposed by so called capitalism and they are "land rent" and "usery." The State is a bargain in comparison to those theives!

Implement LVT and "share the rents."  I just don't buy into "there is no money for this and that" when tax havens are awash with stolen loot and a shit ex Council 3 bed in St Albans is "worth" £925K!

More than enough money exists for a basic income and health care. We are standing on it.

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Much of the depredation to pensions is the result of ZIRP which we've had for the last ten years and even before that. I retired over seven years ago; if I had retired in 1990 with the same pot of money my pension would be 2.5-3 times what it is; and if I were to retire now it would be 25-30% less.

If you are on a DC scheme I can't see most being able to cope with this type of situation and change. If interest rates and annuities change and you are twenty you have many years to make up deficiencies and probably just need to increase your contributions by a manageable amount; if you're 50-55 you not only have to increase contributions for the future but you may have to make up a huge deficit from the past. This is beyond many people and, to all intents and purposes and on current low rates of interest, pensions are simply too expensive for large swathes of the population.

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1 hour ago, Bruce Banner said:

Potential problems with saving in private pensions are "theft" by changes to pension rules, taxation and means testing.

Having said that, I'm very happy that I have a private pension

Pensions have also traditionally been hedged around with rules that make them inflexible savings medium particularly in DC schemes. The final payout is often a crapshoot based on the state of the stock market and annuity rates when you retire. That said someone saving into a DC scheme for 30 years even on average wages should have a much bigger pot than the £5000 quoted in that article.

Edited by stormymonday_2011

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21 minutes ago, jiltedjen said:

How much pension savings should you have at given ages?

age 20, age 30,40,50,60?

i read the government were considering giving targets out, so people actually know how they are doing. 

does not surprise me that a lot don’t have a pension. ‘My house is my pension’ (says that while heavily mewing) 

Good question. I guess the trick is to view it in terms of the life time allowance.

I have the happy challenge of being 43 and having almost £1/2m in my pot.  The issue is that over the last 8 years my biggest pot has more than doubled, and if the same were to happen again I’d almost certainly bust the lifetime allowance. The trouble is, I don’t know if that will happen or not, and so I need to keep paying in for the time being. It is a bit of a no-brainier as even with the penalty tax of 55%, i’m still better off as I get top rate tax relief and matched employer funding - basically for every £1000 I stopped putting in, I’d only get about £280 back - so it is a no brainer.

It is a kind of tax trap really, just one with a delayed release. That said, the lifetime limit is indexed, so I may get a bit of extra-headroom.

 

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The general rule of thumb is that in order to sustain your current standard of living into retirement, you should contribute (age when you began saving/2)% of your salary. So if you begin saving at 20, then you only need to put 10% of your income aside (including employer contributions) for the rest of your life. If you leave it until your fifties then you need to put aside a quarter of your salary at least. 

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I think that is fair.

i actually started properly paying in at about 26, at around 12%. I’ve pretty much stuck to that level, perhaps gone a bit higher, but certainly wouldn’t want to have to pay in 25% to make up ground - anyway that wouldn’t be allowed now as i’d exceed the annual limit.

I possibly need to look at switching more to ISAs at some point, but right now they make no sense given the matching and tax breaks.

 

 

Edited by Mikhail Liebenstein

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1 hour ago, Mikhail Liebenstein said:

https://www.theguardian.com/money/2017/oct/21/uk-retirees-state-pension-financial-future

Here we go, we’ll soon hear the wailing of large numbers of baby boomers complaining that no one told them they were supposed to save for a pension and that the triple lock isn’t generous enough.

But in all seriousness, who the hell is going to end up paying for this?

Hardly fair to dump the bill on the small numbers of GenX workers, anyway the oldest of those are starting to retire, and the Millennials have no money.

Also how can only 12% of Defined Contribution Scheme holders have more than £100k? If you just put away £4k net per year, say £5k  after tax rebate for 10 years, or even £3k for 15 years, you’d have a fund over £100k given market rises.

It’s all self inflicted, and this profligacy is what has made the UK more expensive than it should be!

 

 

 

FCA found that only 16% of workers have a final salary pension....

So, just the public sector then.

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1 hour ago, jiltedjen said:

How much pension savings should you have at given ages?

age 20, age 30,40,50,60?

i read the government were considering giving targets out, so people actually know how they are doing. 

does not surprise me that a lot don’t have a pension. ‘My house is my pension’ (says that while heavily mewing) 

10%, 15%, 25% too old unless you are going to put all of your salary in for 5 years. Possuble but rare.

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21 minutes ago, spyguy said:

FCA found that only 16% of workers have a final salary pension....

So, just the public sector then.

I think one of the reasons most of the public sector has stayed away from DC schemes is that the state as an employer would actually have to pay real money into them now rather than simply shuffling the liability onto future generations of taxpayers. For example as far as I am aware  in the Civil Service only the employees actually pays any  real cash contributions and those are not in a fund but simply swallowed by the state into the general budget.

Edited by stormymonday_2011

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2 hours ago, Mikhail Liebenstein said:

Also how can only 12% of Defined Contribution Scheme holders have more than £100k? 

There has been a bulge over the last few years as people were progressively kicked out of Final Salary schemes and displaced into DC. Can't expect there to be much in your DC if you've only been operating it for five years or so, but doesn't mean you're pensionless.

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The article also fails to ask the awkward question that if an average earning worker is paying 12% of their earnings in employees Class 1 NIC  and their employer 13.8% of their salary in Class 1 NIC for 35 years surely the pension at the end should be bigger than the £159 quid the state are currently offering. I would be interested to know how big a pot that would build up in a DC scheme.

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4 minutes ago, stormymonday_2011 said:

The article also fails to ask the awkward question that if an average earning worker is paying 12% of their earnings in employees Class 1 NIC  and their employer 13.8% of their salary in Class 1 NIC for 35 years surely the pension at the end should be bigger than the £159 quid the state are currently offering. I would be interested to know how big a pot that would build up in a DC scheme.

Isn't it supposed to cover NHS too....£2,000 per capita, not to mention disability top ups of several hundred pounds per week in some cases. Doubt there is anything left to pay one pound a week. Well there isn't, we have passed the bill onto the unborn.

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2 hours ago, @contradevian said:

Implement LVT and "share the rents."  I just don't buy into "there is no money for this and that" when tax havens are awash with stolen loot and a shit ex Council 3 bed in St Albans is "worth" £925K!

That's CRAZY talk.

But I like it.

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2 hours ago, doomed said:

Well just take it off the ones that have saved and redistribute it in the name of fairness.

I can see it coming. Future governments will bring something in like a 'means tested' state pension. It will be just another benefits claim.

If you were prudent enough to make some provision for a private pension, they will tell you that you are on your own, the money is needed for the vulnerable citizens who haven't been able to work and have no savings.

It's also a question of trust. Giving tax & NI to the government is mandatory, so we are trusting them to provide an old age pension. Putting a chunk into a company scheme also has the risk that the company dips into the pension fund when business is struggling. Private pension schemes are often run by some financial organisations who we have to trust are being regulated properly.

In the end, a lot of people say to themselves 'I may as well spend my hard earned money now, at least I know where it is going and I will look to the state to support me in old age'.

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11 minutes ago, stormymonday_2011 said:

The article also fails to ask the awkward question that if an average earning worker is paying 12% of their earnings in employees Class 1 NIC  and their employer 13.8% of their salary in Class 1 NIC for 35 years surely the pension at the end should be bigger than the £159 quid the state are currently offering. I would be interested to know how big a pot that would build up in a DC scheme.

 NICS are capped though at a level, though I think there was  1% added a few years back up to the top rate or something. I think my NIC is only about 5 or 6% of salary, though of course the employeers sits on top. 

I’ve probably paid something like £120k NICS, and I guess the employer has paid more. Let’s call it £250k, plus investment growth (though we know it is not invested), say £500k - that should get a £30k pension!

 

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