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Private Pensions Take-up Drops To One In Four

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http://www.telegraph.co.uk/news/main.jhtml...02/npens102.xml

The scale of the pensions crisis is worse than originally feared, with retirement provision facing a "perfect storm", a leading think-tank warns today.

Over-regulation, rising life expectancy and higher costs have combined to worsen the pensions debacle.

The report, from Policy Exchange, also claims that the Government has lacked ambition in its reforms, with serial changes to the state pension system having no real impact.

It shows that only one in four of Britain's 26.2 million employees has a private pension in addition to the basic state pension. This represents a sharp fall from 1991-92, when 39 per cent of workers were putting money aside for later life.

The report shows that taxpayers are struggling to save for their own pensions, while the annual burden of contributing to public sector pensions is predicted to rise by 33 per cent by the 2030s.

Only 15 per cent of private sector employees are now in final salary schemes and a mere four per cent are in schemes still open to new members.

Final salary schemes - where the pension is based on length of service and salary - are being replaced by money purchase schemes where the value of the pension is dependent on how much the employee and the employer put into the fund.

Yet the total of employers' and employees' contributions to the average money purchase scheme is only nine per cent, according to Chris Lewin, who led a pensions review for the Government last year. And this would not be enough to build a decent sized pension pot.

According to Standard Life, someone aged 30 earning £25,000 a year needs to have total contributions of 19.9 per cent of their earnings each month - £414 - if they wish to retire on two-thirds of their salary at 65. A 30-year-old earning £50,000 needs contributions of 21.6 per cent - £899 a month.

Nick Hillman, the author of the report, said: "There is next to nothing to encourage employers to provide generous pensions and personal accounts are a disaster waiting to happen because the implementation risks are so enormous."

He said that if the Government were to "quell the storm" it needed braver deregulation for occupational schemes.

"Too many working-age people face poverty in their retirement," Mr Hillman said. "If we do not make changes now, this situation will continue for decades to come. The window for opportunity is small."

Mr Lewin claimed that Labour was failing to do enough to help people save for the future.

"There is currently far too much means testing: it is degrading, expensive to administer, and a disincentive to save," he says in Quelling the Pensions Storm: Lessons from the Past.

"Occupational pensions are being strangled by too much regulation, and this is deterring employers."

The Government has claimed that the Personal Account system - due to be introduced in 2012 - will tackle the pensions crisis by encouraging people to save in the knowledge that their contributions will be matched by their employers and tax relief.

The scheme will see four per cent of employees' earnings diverted into their own pension fund, topped up by a further three per cent from their employer and one per cent in tax relief from the Government.

However, critics have warned that thousands of people who save towards a Personal Account will do so to no avail because of means testing. It could cut their credit entitlement and they would be no better off than if they had no private pension and received the full credit.

It is estimated that about 40 per cent of pensioners will still rely on means-tested benefit by 2050.

RIP pensions

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You can't blame people, the FT is still 1,000 below what it was in 1999 and the money supply has doubled since then.

The managers of the pension funds keep taking their fees each year, the government the dividend tax, the shares

havn't grown and inflation is slowly but surely wiping them out.

Yes there is the dividends that get re-invested and the tax breaks. What is the average FT dividend these days, 3.5% or something? Hardly makes up for anything when inflation is 13% a year.

I think I'd rather forget all the tax breaks etc and have 100% control of my cash, to invest when and how I see fit. If you lock it up for 30years you don't know what taxes etc they will introduce by then when you take it out.

Not allowing dividends to be tax free in pensions buggered it up I think, took 20% off my father's final pension at least.

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Over-regulation, rising life expectancy and higher costs have combined to worsen the pensions debacle.

Nothing to do with that thieving little shit that calls himself PM now? The one who via retrospective taxation who has been stealing from pension funds for years.

Edited by OnlyMe

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There is always the risk that private pension schemes will be raided by new owners e.g after a take over.

Take Alliance Boots and KKR - KKR wanted to sell off the freehold buildings but realised they were locked into the final salary pension scheme. The buildings cannot be sold to release equity because they are secured by the rents/lease renewal which pays a regular income into the pension pot.

Possibly one of the reasons why KKR had to restructure debt repayments twice recently.

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Well just because someones not in these rip off schemes doesn't mean they're not squirreling away cash for that rainy day.

If its all the same i'll f88k up my own pension fund thank you very much playing on the stock market, instead of letting some pinstriped ****** f88k it up for me and expect me to buy an annuity at the end of it.

RIP Pensions indeed.

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Brown's deliberate strategy was to stop people saving and get them borrowing and spending. The next 30 years will be oh so very much more difficult than the last 30. Brown - how does he sleep at night?

As it happens, there is no better way of saving for retirement than a pension. 20% or 40% relief going in, practically tax free growth, 25% tax free at end.

fp

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Why invest in a private pension ? They are sooooo last week.

BTL is the guaranteed path to a comfortable retirment. :lol:

Edited by Prof

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Brown's deliberate strategy was to stop people saving and get them borrowing and spending. The next 30 years will be oh so very much more difficult than the last 30. Brown - how does he sleep at night?

As it happens, there is no better way of saving for retirement than a pension. 20% or 40% relief going in, practically tax free growth, 25% tax free at end.

fp

Good point, that 300 pounds a month or so which should have been invested in a pension is being spent, along with all that money from MEW, credit cards, loans etc. This situation can be sustained for 5 years or so, then CRASH.

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Brown's deliberate strategy was to stop people saving and get them borrowing and spending. The next 30 years will be oh so very much more difficult than the last 30. Brown - how does he sleep at night?

As it happens, there is no better way of saving for retirement than a pension. 20% or 40% relief going in, practically tax free growth, 25% tax free at end.

fp

For me the 20% tax relief wasn't enough considering

i) I'd have to buy an annuity at the end, when what i want is income generated from my portfolio.

ii) I'm unlikely to make it past 67 (my choice i stand by it)

iii) I'd like to be able to access my pot at anytime over the next 15 years in case of any dire emergencies.

If i was paying 40% tax and had little self control when it came to saving i'd maybe feel differently.

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As it happens, there is no better way of saving for retirement than a pension. 20% or 40% relief going in, practically tax free growth, 25% tax free at end.

fp

B0ll0x.

Gold Sovs and Britannias.

0% capital gains tax

0% on dividends (there aren't any)

not locked into contract for some arbitrary length of time and you don't have to buy an annuity.

Inflation proof, stock market crash proof - and if they change the tax laws...........well the Gov't can't tax you for what it doesn't even know you have.

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B0ll0x.

Gold Sovs and Britannias.

0% capital gains tax

0% on dividends (there aren't any)

not locked into contract for some arbitrary length of time and you don't have to buy an annuity.

Inflation proof, stock market crash proof - and if they change the tax laws...........well the Gov't can't tax you for what it doesn't even know you have.

except if you had bought gold in 1980 and come to retire now you would have been stuffed

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Started contributing to my pension at age 21, last year. So with any luck I won't be suffering when I retire.

Dont want to sound pesermistic as saving for retirement is a positve move but as a poster on here has pointed out the ftse is still 1000 off its 1999 level and personaly see no real inprovement in the forseeable future ,if you are in a DB (final salary scheem ) no worry if not I would strongly advise any person of your age to look at building up savings for retirement in a mini cash ISA, ok you don't get tax relief as with a pension on your savings but as things stand you wont get taxed when you take an income as you do with all pensions above your allowance

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From the article:

However, critics have warned that thousands of people who save towards a Personal Account will do so to no avail because of means testing. It could cut their credit entitlement and they would be no better off than if they had no private pension and received the full credit.

This is the crux of the problem. We need a system which does not let anyone genuinely starve on the streets, but at the same time sends the message that if you save now, you'll have a better standard of living in retirement than someone who blows everything on consumer tat now and thinks about their future later. I'm not exactly sure how to square that circle, but there has to be a way.

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Dont want to sound pesermistic as saving for retirement is a positve move but as a poster on here has pointed out the ftse is still 1000 off its 1999 level and personaly see no real inprovement in the forseeable future ,if you are in a DB (final salary scheem ) no worry if not I would strongly advise any person of your age to look at building up savings for retirement in a mini cash ISA, ok you don't get tax relief as with a pension on your savings but as things stand you wont get taxed when you take an income as you do with all pensions above your allowance

Its in part cash ISA and part stocks. Last year half was in a property fund, moved those into cash.

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except if you had bought gold in 1980 and come to retire now you would have been stuffed

Actually if you'd retire now you'd be doing alright. Assuming you've still got 10 years to live you'll see the next gold boom.

As for being stuffed, what about all the people who had private pensions in companies that went bust. Those people lost EVERYTHING.

And what about all those people who bought endownment mortgages - or the people who got f*cked over people by Equitable life.

Sooner or later there comes a point where people realise that these fancy long term promises from financial institutions aren't what they're cracked up to be, and choose to exit the system completely.

(also note that for much of 1980 Gold was under $600. You would only have bought it at $850 had you bought it on one specific day)

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Nothing to do with that thieving little shit that calls himself PM now? The one who via retrospective taxation who has been stealing from pension funds for years.

It's genius really. After all, in our increasingly illiterate, innumerate, apathetic society, the vast majority of people told that they will have no pension provision simply cannot either believe or comprehend that this will happen. The "young" simply trust that there will be pension provision for them because there are pensions now. They actually believe for the most part that they are paying into a system that is providing for their future, rather than the reality that they are simply paying todays pensions.

Very few can really bring themselves to care about their futures as the state constantly leads us to believe they will provide, and Gordon has certainly done his best to take advantage of this. Why should he care if you gamble on the property market instead of a pension, this just generates more money for him anyway and shifts the blame elsewhere. When the pigeons do come home to roost on his pension grab in 15-20 years time, the incumbent government will blame previous governments and Gordon will be long gone (with his very generous pension secured by the taxpayer).

The S2P provision has now overtaken most private pensions in terms of forecasted returns, so it would seem the money you could pay into a private pension would be better placed with the governments provision. However, you'd better be sure that future governments continue to generate taxes to sustain this "promise" (remember unlike other countries where pension payments are held in an account - a guarantee - the UK government does not "invest" your money for you, it simply allocates greater provision from any future pool) and that the rules are not changed so significantly from their current provision so that your eventual payment from S2P is means tested (if you have saved you will be royally screwed).

Just like PFI Gordon has created an illusion of wealth and "prudence" at the cost of future wealth of the UK and when the consequence of his profligacy manifest themselves in future years he will insist that the problems were not of his making but the results of either "18 years of Tory mismanagement" or the then current governments policies (assuming it's not a Labour Government).

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Started contributing to my pension at age 21, last year. So with any luck I won't be suffering when I retire.

stuff putting it in a pension put it i gold and land! at your age inflation will make any private pension worhtless

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I have a lot to say on this matter, but I will be brief.

Firstly, everyone needs a pension plan, but administer it yourself. You dont need to throw money at Standard Life or Equitable life :lol: , in order to have a comfortable retirement.

Firstly there are 5 things you need.

1) A Maxi Isa from Nationwide., there fees are 1% per year, but you can invest up to £7k a year tax free. This equates to £135 per week. This can be a monthly amount by direct debit.

2) A guaranteed Equity bond from National Savings. It is a five year ftse linked bond. Put it a lump sum as and when you have it.

3) Put £3,000 in the stock market, focusing on commodities such as wheat and oil.

4) Put £1000 in to gold it will have a long way to go yet.

5) The final option is to put 10,000 lump sum into a UK 10 Year Gilt, with tradindex.co.uk

This is not advice and should not be treated as such, this is just an example of how I am funding my pension plan, I will be spending my retirement, NOT watching the pre=payment gas and electric meter in poverty, I will sun myself in the far east.

You dont have to invest as much as the figures above just put in what you can afford, just dont give it to a pension company, they are a bunch of greedy half wits who dont give atuff about you.

Shop around, get some good investment vehicles for you.

Edited by debt-free

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Gold Sovs and Britannias.

0% capital gains tax

0% on dividends (there aren't any)

not locked into contract for some arbitrary length of time and you don't have to buy an annuity.

Inflation proof, stock market crash proof - and if they change the tax laws...........well the Gov't can't tax you for what it doesn't even know you have.

And why can't you buy gold stocks, silver stocks, gold etf etc in a pension? Of course you can.

You forgot tax relief... (deliberately of course).

The only (minor) issue for most people is access. However, as one will expect to live to retirement and, anyway, one is saving for retirement - even if one doesn't get there - one will need the money at that time whether it's in a pension or not.

It's almost tax free to 75 and after that an annuity or similar. Nothing wrong in that in my book.

fp

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except if you had bought gold in 1980 and come to retire now you would have been stuffed

No right thinking perosn would have done so after a rise from $35 to $800 over 15-20 years.

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As it happens, there is no better way of saving for retirement than a pension. 20% or 40% relief going in, practically tax free growth, 25% tax free at end.

Only if you have an above-average life expectancy, don't expect to need means-tested benefits, or the rules to change, or to pay at least the same marginal rate tax in retirement as currently.

The pension regulations change faster than governments, and then it seems always for the worse. Seeing as changes affect money that has already been committed and cannot be withdrawn until retirement, the tax relief on current contributions is merely a provisional figure that can be "adjusted" at any time a government chooses. Now that only a minority contribute to pensions, that course of action will surely become more appealing as time goes by. Anyone who expects the 25% lump sum to still be there in (say) 20 years time is an incurable optimist.

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Brown's deliberate strategy was to stop people saving and get them borrowing and spending. The next 30 years will be oh so very much more difficult than the last 30. Brown - how does he sleep at night?

As it happens, there is no better way of saving for retirement than a pension. 20% or 40% relief going in, practically tax free growth, 25% tax free at end.

fp

I would agree with you, but I don't trust this or any future government.

For example, as far as I can see, there are huge unfunded liabilities in the form of pension promises to public sector workers. These can only be paid by either punitive taxation on a diminishing pool of young workers (which will not be acceptable, the best and most able will walk out in even greater numbers than they are now), or by raiding other assets like private pension funds, for example through high rates of taxation on pensioners. The mechanism used will simply be the most politically expedient at the time.

I don't blame public sector workers for negotiating the deals they have, I do blame government for being prepared to make commitments which cannot be honoured.

So, I will continue to prefer ANY form of investment which will permit me to move my money outside the reach of the Treasury over one which doesn't.

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  • 293 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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