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Ash4781

Many Pension Schemes 'inadequate'

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http://news.bbc.co.uk/1/hi/business/7016482.stm

The survey highlights the reduced levels of company pension provision.

It was previously thought that an average contribution rate of 15% of salary, throughout a 40-year career, was the minimum necessary to provide a decent individual pension fund at retirement.

That figure is now much higher as people are living longer, and the cost of buying a year's worth of pension has risen sharply,compared with the cost of doing so in the 1980s and the early 1990s.

According to Mercer, current contribution levels will enable staff to buy a pension equivalent to just 20-30% of their pay, after 30 years' service, compared with the 50% or more of pay that many employees expect.

What are these things indexed to, CPI, RPI or something else ?

Edited by Ash4781

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Pensions are basically finished.

I do worry that this may be true (for those under 30, or even 40). I've mentioned this to people and they say that 'The Government wouldn't let it happen' or 'I'll just trade down my house and retire at 60'.

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Pensions are basically finished.

No - people just need to be more realistic about what they need to pay in to get a decent pension out.

My twit of a brother thinks £75 a month into a stakeholder is adequate

Edited by Kurt Barlow

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I tried the scottish widows pension calculator and was shocked to see how much i would need to contribute to give a pension that i deemed would be enough to allow me to live comfortably in retirement.

Check it out yourselves:

Pension Calculator

It's to be hoped this calculator doesn't become common knowledge or the game is most definately up. Thought I'd put a modest £12k in and the amount I'd need to put in is a joke.

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It's to be hoped this calculator doesn't become common knowledge or the game is most definately up. Thought I'd put a modest £12k in and the amount I'd need to put in is a joke.

Bear in mind that pension contributions are before tax therefore you can deduct 22 / 40% off the amount to see what actually comes out of your pocket.

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Bear in mind that pension contributions are before tax therefore you can deduct 22 / 40% off the amount to see what actually comes out of your pocket.

Yes but when you retire your pension income is subject to tax.

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http://news.bbc.co.uk/1/hi/business/7016482.stm

What are these things indexed to, CPI, RPI or something else ?

The amount they can get away with to line their own pockets!

Edited by erranta

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I'm not particularly knowledgable when it comes to pensions. I am in the Police so I have what has always been quoted as an excellant pension. Is the impending doom likely to effect my pension aswell? I guess it probably will??

Simon

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Pension provision as a whole has absolutely nothing to do with the amount of money put aside. It has to do with the number of workers who will support the pension base when they retire.

As it means current workers doing more for less, it's always is going to end badly when pensioners outnumber their base of income, unless there are insane efficiency gains in production from somewhere. It's exactly the same as taxing workers, beyond a certain point they just down tools because it's not worth it.

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Pension provision as a whole has absolutely nothing to do with the amount of money put aside. It has to do with the number of workers who will support the pension base when they retire.

As it means current workers doing more for less, it's always is going to end badly when pensioners outnumber their base of income, unless there are insane efficiency gains in production from somewhere. It's exactly the same as taxing workers, beyond a certain point they just down tools because it's not worth it.

That's not true is it. If it is a private final salary scheme is depends on a number of factors including individual/co. contributions, scheme member demographics etc. If it is a money purchase scheme it depends on how much you stick in it for how long and the growth rate. If it a state scheme depends on contractual guarantees. If it is the basic state pension, depends upon taxation and political regime at the time you retire.

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When you see so much evidence in how poor pension options are, you can understand why people have piled into BTL.

A point that people have not even touched on is the possibility that the pension they are paying into may not even be there at the time when you come to claim it. So many company pension funds have collapsed. People have seen the pension they have paid into for 40 years, just disappear in front of their eyes. I work in the engineering/manufacturing sector and have seen it first hand.

BTL is inherent with risks. Investing in a private pension is inherent with risks. Where else does the average person put their money with the intention of being prudent and providing for their future?

I am not a BTL LL, but I am sure anyone can understand the logic behind it. The average or amateur BTL LL is not looking for a quick buck. They are looking for a return on asset growth on a very long term basis. They are looking for an investment to provide for them in their old age. They are looking for a pension that they feel they can rely on.

Gordon Brown has ganged raped pension funds through taxation and has reduced pension funds to 50% of expected value over the last ten years, company pension funds are flaky and at great risk of not existing at time of maturity, general pension benefits are being slashed left right and centre. The pension crisis is something we are all aware of.

To a lot of people on this site, BTL LLs are classed as scum. When you consider their options for future pension provisions, can you really blame them for investing in property?

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That's not true is it. If it is a private final salary scheme is depends on a number of factors including individual/co. contributions, scheme member demographics etc. If it is a money purchase scheme it depends on how much you stick in it for how long and the growth rate. If it a state scheme depends on contractual guarantees. If it is the basic state pension, depends upon taxation and political regime at the time you retire.

That assumes that production lasts a lot lonnger than it really does. You can have a £1m income but if no one is actually going to do the work you want for the sum you factored in as your pension, it's going to vanish pretty quickly. The real economy, while built on lots of previous production has varying half lives. The half life of food production, for instance, certainly isn't 35 years. Only houses and some infrastructure lasts that long, barring accidents.

You are thinking that money = resources. It really doesn't. Money is a way of dividing resources up today, regardless of where they came from yesterday.

An example - you put money aside every day for 20 years in a company pension scheme. At the end of this you want other people to go to work for this money to provide you with the goods and services that you need for your retirement. So does everyone else of your generation to varying degrees.

The next generation is half the size of yours. You want them to work for less than half of what you did, and not work according to their own proclivities and interests, but to service yours. Why would they do that? They have no reason to, you are dependant upon them. Matters can be arranged so that they are fooled into providing for you - see house prices for an example of this, where the older generation has been living off the younger one via the youth getting into debt for essentials. Or they can be forced - via regulation and taxation.

Both of those methods suffer from the fatal flaw that as you force or fraud people into a behaviour, you automatically deter them from doing it. Many intelligent youngsters have jumped into the black and grey markets, and who can blame them. Why work for a company to honour some old guy's pension contract that you weren't even born for when you can chance it and have the same standard of living but not work as hard? (Because you aren't paying the grey tax on your labour.)

People are self interested, what can I say?

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I don't find your explanation very clear, I'm sorry.

I think there is an obsession with younger people that older people are ripping them off intentionally which I don't subscribe to.

As an example, my parents paid around £5k for a house in 1960. No mortage. They saved up for 10 years first. They've never had a loan for a car or a credit card. They rely on a modest pension which gives them a very modest retirement, with basic food, clothing and housing. Their house has risen in price without their intervention and its value means nothing to them. It is simply where their home.

I don't think the issue is as black and white as you are suggesting, and there are millions of pensioners living incredibly modest lives which many would consider poverty/subsistence.

For what it is worth, I think some of today's problems are being caused not by boomers, but by 20s and 30s who have taken incredible risks in the BTL market, borrowed crazy income multiples, which they partly CHOOSE to do, buy consumables on their credit cards, live out more than in, have multiple holidays/weekends away, buy cars they cannot afford on debt they cannot service etc etc etc. Blaming that on boomers or pensioners is not valid. In any event, as we have seen from rising IHT take, many of these pensioners estates are being passed down the chain to their children in due course.

Profligate over-spending by the starbucks/xbox generation is not the fault of older people who may have paid into a pension scheme for 40 years and been more modest in their "lifestyle".

Edited by Red Kharma

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I don't find your explanation very clear, I'm sorry.

I think there is an obsession with younger people that older people are ripping them off intentionally which I don't subscribe to.

As an example, my parents paid around £5k for a house in 1960. No mortage. They saved up for 10 years first. They've never had a loan for a car or a credit card. They rely on a modest pension which gives them a very modest retirement, with basic food, clothing and housing. Their house has risen in price without their intervention and its value means nothing to them. It is simply where their home.

I don't think the issue is as black and white as you are suggesting, and there are millions of pensioners living incredibly modest lives which many would consider poverty/subsistence.

For what it is worth, I think some of today's problems are being caused not by boomers, but by 20s and 30s who have taken incredible risks in the BTL market, borrowed crazy income multiples, which they partly CHOOSE to do, buy consumables on their credit cards, live out more than in, have multiple holidays/weekends away, buy cars they cannot afford on debt they cannot service etc etc etc. Blaming that on boomers or pensioners is not valid. In any event, as we have seen from rising IHT take, many of these pensioners estates are being passed down the chain to their children in due course.

Profligate over-spending by the starbucks/xbox generation is not the fault of older people who may have paid into a pension scheme for 40 years and been more modest in their "lifestyle".

Fair points I can agree. The only question I would raise is what sort of standard of living would old people have without the young taking on big debts and therefore paying their pensions via interest and tax? It's not an accident that the emphasis moved from grants to loans in student funding a decade ago. The ploy is simple - get the young to run aroudn servicing the economy under the presumption that they have run up debts and they need to pay for them.* A young population saving up, being thrifty and not paying interest but recieving it would see pensioners on even lower incomes. There are only so many resources to go around, and the amount of producers to consumers is shrinking all the while.

The current trend of young debt and old profit is exactly the opposite of what we should be seeing. The young should be charging the earth for their services (and getting it) because they have a captive audience in the old. The income transfer should be going down the ladder and no tup.

Immigration, regulation, fiat currency and other factors are fighting this process, but it won't last long. The market always wins.

*Because of the fractional reserve system, even this is nonense. It's a scam, and its worked so far.

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I don't have figures to support this, but my sense is that many pensioners are not being supported by young people's taxes and debt interest. Indeed, you are contradicting your own argument since you are saying young people's earnings and taxes are lower than they should be. It is also not the case that pensioners are all living it up on generous state pensions. They're not.

Many older people are economically inacitve, or managing on low incomes before retirement age as well.

I just don't subscirbe to your rather black and white view of "young people" versus "old people", with no transmission mechanism other than taxes and pensions inbetween, and where older people are somehow seeking to exploit younger people.

As an example, I have a son just starting University. It troubles me greatly that he is starting his adult life in debt. I lose sleep over it. If I am able to help reduce that debt in the future I will do so, to do my own economic disadvantage, and I know many parents who feel the same way and help in whatever ways they can.

But I would also urge him to stick two fingers up to credit card companies and VIs who try and tell him he has to borrow 5 times his income to "get on the housing ladder". I think following the coming HPC many people's eyes will be opened and some of these inequalities will start to sort themselves out. I am also of the view that as a society over time we will see a swing back towards a more family oriented and community oriented society, with generations helping each other more not less, sharing homes/assets and so on (as far ar practical), and less reliance on the "state". In fact, I see that already happening around me, so I'm afraid I don't share your assessment of an inter-generational economic "war". Sorry.

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I don't have figures to support this, but my sense is that many pensioners are not being supported by young people's taxes and debt interest. Indeed, you are contradicting your own argument since you are saying young people's earnings and taxes are lower than they should be. It is also not the case that pensioners are all living it up on generous state pensions. They're not.

Many older people are economically inacitve, or managing on low incomes before retirement age as well.

I just don't subscirbe to your rather black and white view of "young people" versus "old people", with no transmission mechanism other than taxes and pensions inbetween, and where older people are somehow seeking to exploit younger people.

As an example, I have a son just starting University. It troubles me greatly that he is starting his adult life in debt. I lose sleep over it. If I am able to help reduce that debt in the future I will do so, to do my own economic disadvantage, and I know many parents who feel the same way and help in whatever ways they can.

But I would also urge him to stick two fingers up to credit card companies and VIs who try and tell him he has to borrow 5 times his income to "get on the housing ladder". I think following the coming HPC many people's eyes will be opened and some of these inequalities will start to sort themselves out. I am also of the view that as a society over time we will see a swing back towards a more family oriented and community oriented society, with generations helping each other more not less, sharing homes/assets and so on (as far ar practical), and less reliance on the "state". In fact, I see that already happening around me, so I'm afraid I don't share your assessment of an inter-generational economic "war". Sorry.

I agree that there is no conspiracy of old people and that they aren't living it up on state pensions. The money for what they do get is very definitely taken from the current tax base - for their pension, for their healthcare and so on. The government isn't great at saving. They very rarely do it if there are brown people in the world that they can deliver free bullets to, or voters they can bribe with someone elses money. That means that everyone who is given wedge by the state has acquired that cash from someone very recently. Which in this case, does mean forced payment of old people by young ones. The current options for the average under 30 - huge debt and live hand to mouth in a world where they are replacable or no debt, no house, no fancy goods and live under a landlord's whim.

Without the state "helping" your view would be the correct one..but the state is. It's seen the trouble coming and brought in regulation and financial frameworks to "help." The ease of borrowing, student loans, credit card culture and so on are all backed by the government's policies and are quite deliberate in design and the way they work. It's not only the state ofc, the banks and other financial institutions are loving the generation of debtors. So easy to control, so easy to keep them occupied. The young think they have been giving funds from the banks and that they must pay them back. As the banks never lend anyone anything, it's a terrible trick to play.

I also agree that people will help each other if left alone to do so, especially families. Anyone who has read Gatto's work will be aware that the state is on a deliberate footing to reduce family and community power because it threatens their own interests and social restructuring agenda, in exacly the same way as they are deliberately making sure that as few people as possible can read, write and add up or critically think about anything.

I also agree that these are very broad strokes to be using in an analysis. As back of the envelope goes I don't think it's that far off.

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Bizarrely worrying

To get a pension of 12000 a year (not a lot at all)

If you were to start today, think about saving around £1047 per month if I want to retire at 55 (Because let's be honest who wouldn't)

If you were to start today, think about saving around £660 per month at 60

f you were to start today, think about saving around £428 per month at 65

If you were to start today, think about saving around £280 per month at 70

And if I never retire but just drop dead at work I'd not have to save anything AND don't have to worry about the government stealing all the pension or pensions being a waste of money.

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Guest vicmac64
I'm not particularly knowledgable when it comes to pensions. I am in the Police so I have what has always been quoted as an excellant pension. Is the impending doom likely to effect my pension aswell? I guess it probably will??

Simon

Cant see why it shouldn't, whats sauce for the goose is sauce for the gander. We taxpayers pay your pension, if we get it tight you get it tight.

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including the state pension we are all paying 11% towards from our income.

I am presuming you are alluding to National Insurance. It isn't just for pensions, you know.

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Gordon Brown has ganged raped pension funds through taxation

It was the Major government that first reduced the dividend tax relief. Gordon just finished it off.

and has reduced pension funds to 50% of expected value over the last ten years, company pension funds are flaky and at great risk of not existing at time of maturity,

I somehow doubt the value has been reduced to 50% of the expected value. Perhaps growth was only 50% of expected, but then growth predictions in the 1990s, prior to the dot.com bust were overoptimistic and many funds took payment holidays.

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