Generation Without Pension

[Hullabaloo82]

Opting out is probably the single worst financial decision you can make. You're effectively asking for a pay cut. 

Name me another investment where you instantly double your money, tax free, just by paying in up to the maximum they will match. 

We have a nation of Del Boys though who a) simply don't know how pensions work and b) believe that they'll pull off some incredible scheme that will leave all of us stick in the muds with our boring pensions way behind in the rear view mirror. Probably something to do with "property". 

[DownwardSlopingPlateau]

2 hours ago, Confusion of VIs said:

We are their already. If you have a half decent private pension you will be immediately returning 40 or 45% of your state pension. Add in VAT etc and it's probably over 50%

Huh?

Even a £1M private pension pot at a 4% SWR is only £30k as taxable income - as the first 25% is tax free. Your entire State Pension on top would only be taxed at 20%. And I'd call a £1M pot much more than "half decent".

And what is this "VAT, etc."? There is no VAT or any other charges involved, so where is this "over 50%" in taxation coming from?

 

[Hullabaloo82]

1 hour ago, TheResponsibleHouseBuyer said:

just had pension training the other day. Apparently need to be paying in like 16-18 and not minimum contributions. Literally most of what you earn needs to go in there to live confortably in retirement.

Many young people are due an awakening, assuming they dont have a ton of inheritance.

Millennials will just do what boomers did once they have the whip hand and vote themselves out of this mess, whilst the can gets kicked down the road yet again. 

[Confusion of VIs]

27 minutes ago, DownwardSlopingPlateau said:

Huh?

Even a £1M private pension pot at a 4% SWR is only £30k as taxable income - as the first 25% is tax free. Your entire State Pension on top would only be taxed at 20%. And I'd call a £1M pot much more than "half decent".

And what is this "VAT, etc."? There is no VAT or any other charges involved, so where is this "over 50%" in taxation coming from?

 

Both my CS/Private pensions and my wife's NHS pension will be well over £50k, so 40% straight back to the gov plus the VAT/etc on whatever we buy with the remaining 60%. 

NB 4% drawdown, isn't how people really spend their pensions. Usually they spend a lot more than that in the early years.

Edited April 24 by Confusion of VIs

[DownwardSlopingPlateau]

3 minutes ago, Confusion of VIs said:

Both my CS/Private pensions and my wife's NHS pension will be well over £50k, so 40% straight back to the gov plus the VAT/etc on whatever we buy with the remaining 60%. 

Everyone has to pay VAT on goods/services - that has nothing to do with pensions.

If both you and your wife will be in receipt of pensions paying £50k+ of taxable income (i.e. after the 25% tax free) then your income in retirement is the equivalent of private pension pots totalling over £3.2M. I don't think paying 40% tax on your piddling (in comparison) State Pensions is going to damage your wealth too greatly. 😉

[Confusion of VIs]

1 minute ago, DownwardSlopingPlateau said:

Everyone has to pay VAT on goods/services - that has nothing to do with pensions.

If both you and your wife will be in receipt of pensions paying £50k+ of taxable income (i.e. after the 25% tax free) then your income in retirement is the equivalent of private pension pots totalling over £3.2M. I don't think paying 40% tax on your piddling (in comparison) State Pensions is going to damage your wealth too greatly. 😉

No but the topic was "means testing" the state pension, I was just pointing out it already is.   

[kzb]

2 hours ago, DownwardSlopingPlateau said:

Huh?

Even a £1M private pension pot at a 4% SWR is only £30k as taxable income - as the first 25% is tax free. Your entire State Pension on top would only be taxed at 20%. And I'd call a £1M pot much more than "half decent".

And what is this "VAT, etc."? There is no VAT or any other charges involved, so where is this "over 50%" in taxation coming from?

 

What percentage of money does not get paid to the government eventually ?

It's only that which gets spent abroad or on imports which escapes.

[kzb]

3 hours ago, TheResponsibleHouseBuyer said:

just had pension training the other day. Apparently need to be paying in like 16-18 and not minimum contributions. Literally most of what you earn needs to go in there to live confortably in retirement.

Many young people are due an awakening, assuming they dont have a ton of inheritance.

That's a bit excessive !

The union pension rep recommends 22% of your income, that is employer and employee contributions added together.  Presumably this is assuming you start at age 21 or so.

They used to say you need to pay your age in years when you start paying in, as the percentage of your income, again both contributions added together.

[Stewy]

Think I'll just be putting 80% of my last five-ten years' salary in to the pension based on what the rules are at that point. Too much water to pass under the bridge before then anyway.

My job feels like partial retirement anyway as it's enjoyable and done in my Riverside Study/Garden 🙂

[TenYearToGetMyMoneyBack]

10 hours ago, TheResponsibleHouseBuyer said:

just had pension training the other day. Apparently need to be paying in like 16-18 and not minimum contributions. Literally most of what you earn needs to go in there to live confortably in retirement.

Many young people are due an awakening, assuming they dont have a ton of inheritance.

I have had similar training and seen similar papers. The "retire comfortably" option seemed to be completely OTT with several holidays a year, a new kitchen and bathroom every ten years, and large payments to grandchildren. The complete opposite to being a @Frugal Git

[jiltedjen]

3 minutes ago, TenYearToGetMyMoneyBack said:

I have had similar training and seen similar papers. The "retire comfortably" option seemed to be completely OTT with several holidays a year, a new kitchen and bathroom every ten years, and large payments to grandchildren. The complete opposite to being a @Frugal Git

Best things in life are free.

most people just cannot break spending habits. No amount of money will ever be enough for them.

cheap coach trips to UK locations as deals, allotments, gardening, reading, walking, playing music, fish and chips on the seaside. we live in a mostly beautiful country.

holidays abroad are a pretty obscene luxury, both in cost and resources. 

you can have a cheap runabout car, and a stunning classic in the garage. 

a huge ‘cost of life’ is work, with commuting costs and everything associated with it, even to being too tired to cook and get a take away.

you can do a lot with limited resources (and paid off house and modest income) especially these days, you just need to adjust mentally what an ‘event’ is. So instead of a weekend blowout. Instead look forward to that special home cooked meal, the treat of a steak.

its not depressing, its the opposite, its having the time and energy to appreciate and ‘take in’ each tasty meal, each sunny day, changing of seasons. 

yeah you will be grey, and deeply uncool. but your status and ‘usefulness’ in life has ended, why fight trying to be relevant in a world which no longer needs you? Why buy a flash landrover, why not take it easy and lean into it. don’t rage against the dying of the light, enjoy it.

time is all that we have, some don’t even have that.

[debtlessmanc]

51 minutes ago, TenYearToGetMyMoneyBack said:

I have had similar training and seen similar papers. The "retire comfortably" option seemed to be completely OTT with several holidays a year, a new kitchen and bathroom every ten years, and large payments to grandchildren. The complete opposite to being a @Frugal Git

My son in laws father retired (20 years ago) from ICI at 51 on 75% of his (substantial) final salary. He lives this life. 

[hurlerontheditch]

18 hours ago, LivingWithTheInlaws said:

Well, I'm 51 and I don't know any of my peers who have a DB pension. Nearly all the companies I worked for when I left Uni had phased them out by then and anyone who was lucky enough to get one moved jobs after a few years anyway because they were young and looking for better pay. I don't have any sympathy for anyone. It's just an observation. I have no doubt that the younger ones are just as screwed but we are coming up to retirement time for some of the people in that boat.

I am 45 and have one. i was removed from it a few years in. I didn't really understand then but the older colleagues were raging. I get my annual statement now which tells me at 65 i will get 1300 a year

[DownwardSlopingPlateau]

8 hours ago, kzb said:

What percentage of money does not get paid to the government eventually ?

It's only that which gets spent abroad or on imports which escapes.

Get a small house and pay off the mortgage. Then live off pension/savings at max gross of £18,760.00. That's zero tax payable. Food from the supermarket is zero vat, energy 5%. So you could live, say, 97-98% tax free, if you wanted. 😉

[hurlerontheditch]

3 hours ago, Stewy said:

Think I'll just be putting 80% of my last five-ten years' salary in to the pension based on what the rules are at that point. Too much water to pass under the bridge before then anyway.

My job feels like partial retirement anyway as it's enjoyable and done in my Riverside Study/Garden 🙂

you bought in a flood plain? Makes sense now

[Stewy]

18 minutes ago, hurlerontheditch said:

you bought in a flood plain? Makes sense now

I'm many metres above it. 

[winkie]

17 minutes ago, Stewy said:

I'm many metres above it. 

Yes, head in the clouds.

[hurlerontheditch]

3 minutes ago, winkie said:

Yes, head in the clouds.

😁

[kzb]

2 hours ago, DownwardSlopingPlateau said:

Get a small house and pay off the mortgage. Then live off pension/savings at max gross of £18,760.00. That's zero tax payable. Food from the supermarket is zero vat, energy 5%. So you could live, say, 97-98% tax free, if you wanted. 😉

People are living off your mortgage payment, they pay tax.  Tesco workers pay tax and they pay business rates on the premises.

Nearly all money goes back to the government eventually,  It takes several stages to get there, that is all.

The government/banking system supplies money.  It's like a stream of water coming out of a pump, it makes lots of water wheels spin on its route and we all run on them like hamsters.  Then the water is returned to the pump and it all starts again.

There is a bit of leakage, which is the money that goes to other countries. 

[scottbeard]

1 hour ago, kzb said:

The government/banking system supplies money.  It's like a stream of water coming out of a pump, it makes lots of water wheels spin on its route and we all run on them like hamsters.  Then the water is returned to the pump and it all starts again.

No, it's not like that at all.

Even if we still used gold coins for money they would still circulate between banks, companies, government and people because - at any one time - the coin has to be SOMEWHERE, but will eventually move to one of the others.

The fact that money circulates is not connected to where it comes from.

The point about the state pension being means-tested by the back door is true because of the existence of the income tax personal allowance.  Because tax doesn't start at £1 of income but at £12,000 an individual is indifferent between the state giving them state pension, them taking it back as tax on their private pension, or doing neither.  Whether you get a state pension of £11k and pay £5k in tax, or get a state pension of £6k and pay Nil in tax, you are in exactly the same position.

[kzb]

3 hours ago, scottbeard said:

No, it's not like that at all.

In actual fact I wrote it wrong.  It would've been better to say the water comes down the hill, and we hamsters run like fury on the wheels to pump the water back up the hill.  When it is released by the state again, and the cycle keeps going. 

3 hours ago, scottbeard said:

Even if we still used gold coins for money they would still circulate between banks, companies, government and people because - at any one time - the coin has to be SOMEWHERE, but will eventually move to one of the others.

At every stage it is taxed.  A percentage is creamed off as tax with every transaction.  It all eventually ends up back at the government, from where it is "spent" again.

[scottbeard]

16 minutes ago, kzb said:

At every stage it is taxed.  A percentage is creamed off as tax with every transaction.  It all eventually ends up back at the government, from where it is "spent" again.

But there is nothing special about the government in this scenario - you could apply the same comment about individual people, because every £1 that is taxed is also spent either paying people directly via benefits and salaries, or by paying companies (who then pay it to employees or shareholders).

The point is that money keeps going round and round and round so if you keep going long enough every single £1 will end up with every single entity in the economy if you run it long enough...the same logic as every breath you take today has a few atoms in it that were once breathed out by Julius Caesar. 

[Staffsknot]

I know quite a few people who were not in pensions until auto-enroll as never offered. They are sub-£30k pots atm and shocked at what being asked to put in as 40 yr olds.

I also know a guy who's had company contribs but never putin himself - just had the free advice day and he's white as sheet too.

A lot of people started looking at pensions recently and realising they look underfunded for future.

I am bunging in as much as can as no intention of working into 60s if can avoid it. 

[kzb]

14 minutes ago, scottbeard said:

But there is nothing special about the government in this scenario - you could apply the same comment about individual people, because every £1 that is taxed is also spent either paying people directly via benefits and salaries, or by paying companies (who then pay it to employees or shareholders).

The point is that money keeps going round and round and round so if you keep going long enough every single £1 will end up with every single entity in the economy if you run it long enough...the same logic as every breath you take today has a few atoms in it that were once breathed out by Julius Caesar. 

But what would happen if the government stopped all spending (and continued taxing) ?

Eventually there'd be no money left in the economy.  It would all be in the BoE or whatever, and no-one would do any work.

[shlomo]