Wednesday, August 8, 2012

Its not

Almost half of Brits are not planning to use a pension when retire

Its not really that trust in pensions has hit an all time low as suggested, its more that nearly everybody recognises that their pension money is immediately blown by government mandate basically. Looking at todays crop of pensioners, who have got about 25% of what they could have got if they had just "borrowed to save" its not so much of a surprise. But pension savings is by proxy some kind of misguided belief in sterling so if it goes south, and I think at this point it has, then you have a nation of people who will not put aside consumption.

Posted by stillthinking @ 06:08 PM (4865 views)
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24 thoughts on “Its not

  • Well the articles comments are your usual mindless guff.

    No one seems to be saying — sh1t! I must do something about it. And the likely result? Pensioner poverty for millions. Don’t plan to fail, fail to plan why don’t you?

    Yes there is much the government could do — force pensions to be more transparent for one. But the gravy train that is the financial services sector has yet to properly come off the rails, and it’s been a big bank roller of much of the last 30 years in our economy. So it will take some time for the train crash to take effect.

    But you can plan your own pension yourself — and there is the Internet of course. So you’ve no excuse to know how to do it.

    Put it this way, I’ve planned mine, so I don’t really give a sh1t at those that haven’t.

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  • happy mondays says:

    Fair play dude, however many out there who are on a minimum wage or average wage & together with living expenses & keeping a roof over your head, virtually impossible for some, myself included.. And with pensions just being another ponzi scheme who in there right mind would put into this, Btl maybe the way to go, but hang on am i not against this for the obvious reasons..

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  • Responsible public sector staff have made provisions so that the state does not have to support them in later life.

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  • @2: Yes that is a REALLY fair point. And one that is difficult to square. I for years had very low income (I was unemployed for two years in the 80s). But I still managed to put £20 or £30 pm away in a pension. And I think the answer to that point is for a reasonable state pension for all — if you’ve worked all your life on the minimum wage you are owed a pension. To my mind that can’t be disputed.

    What really needs to change is the fees structure. The reason the pensions industry is so large is because they take too much from you. What they should do is allow you individually to put into a common pot, so you get the economy of scale; they do this in Europe (the Netherlands, for example). That way you get more of your money growing, and ultimately have a larger pension.

    But it will be blocked all the way coz that’s there the big fat profits in the City come from.

    Ultimately we will all grow old, and we will live longer than ever before. Those are undisputed facts. That makes the economic response very difficult. But as everyone has been ignoring this for the last 30 years I at least have grabbed the bull by the horns. OK, I do it via stocks and shares ISAs using trackers rather than pensions, but the point I’m making is try to find some income you can set aside.

    [Note to self: please don’t send this post back to myself through a time machine to the early 1980s — I’ll just tell myself to p1ss off. Even though I know it’s the right thing to do. 😉 ]

    Rant over!

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  • The much maligned public sector staff have made pension provisions so they are not a burden on the state in later life.

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  • The basic state pension is only £107 pw (£5.6k pa). I worked out just last night that in only 11 years of paying in to two pensions I have already saved the equivalent of this so even if I stopped now I’d be getting double what the rest of the country seems to be expecting to live on. Of all my former Uni friends I’d guess at least 50%have no pension provision and 25% have only just started saving!

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  • mark wadsworth says:

    I’m all in favour of people “saving” i.e. spending less than they earn, means tested pensioner benefits aside, it must be clear that on the whole you end up happier overall if you spread your consumption spending more evenly over your lifetime or over the whole year or over the salary month.

    The point is that this does not automatically mean you hand your hard earned over to the black hole of fees and commissions that is known as the City of London. You can do like Dude does and buy shares, great, or just pay off your mortgage as quickly as possible for a start and then save up cash, even if the cash is losing value slightly, you’re still better off with a bit of extra cash in bad times/old age than splurging it now, marginal utility of consumption and all that.

    It’s all part of the brainwashing that goes on “Thrifty is good and being thrifty means giving us your money to play with”. Wrong, being thrifty means spending less than you earn in the good times, you can worry about where best to save that money as a secondary issue. The simple fact that somebody hands over £100s a month to the fat cats does not mean he’ll have a comfortable retirement if the corollary of that is that the man is not paying off his mortgage.

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  • @7 – “The point is that this does not automatically mean you hand your hard-earned over to the black hole of fees and commissions that is known as the City of London.”

    Quite…. http://www.telegraph.co.uk/finance/personalfinance/pensions/8182959/Hidden-fees-cut-pension-payouts-by-75pc.html

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  • MW, what do you think about SIPP for company pensions? I was quite surprised to find out how easily accessible it is, yet how few people actually take advantage of them – there are less than 1 million in the UK (although it’s on the rise). Having seen my company pension consistently out-performed by the FTSE due mainly to rollover fees etc, it seems like a no-brainer.

    I reckon the majority see a company pension as “free money” and pay little attention to what is going on, hence the likely disappointment when they hit 65 and don’t have quite as much free money as they thought.

    Of course I still can’t quite understand why we don’t just focus more on financial education for people and pay them a higher salary instead of a pension so they can sort themselves out, but anyway. That’s another story.

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  • mark wadsworth says:

    Ic, exactly.

    Bubba, two things really matter: a) spending less than you earn and b) what you invest in. You can invest indirectly in lots of stuff via lots of fancy schemes (ISA, SIPP, pension plan, whatever). The fact that it’s a SIPP is not important, what is important is what the SIPP invests in. The only question is, do the “tax breaks” justify the fees and charges and loss of flexibility as to what you can do with your own money? Opinions differ on this.

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  • The trouble with SIPPs is they present the holder with the problem of managing their money, and that is a task difficult enough for those who take the considerable trouble to do so. The best pensions (which should be a model for all) are the public sector schemes, but this Govt is intent on slicing these down, while engaging the tabloid media to generate hostility to aid this.

    I don’t think there is any serious attempt to deal with the pensions problem. Many people are not paid enough to save in the first place (inequality again), and if they are in a position to save, the options are poor. In all cases, the investment industry has its grubby fingers in the pot somewhere, even in the case of SIPPs which are generally invested in funds.

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  • mark wadsworth says:

    Mark, awesome.

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  • Thanks for the reply MW, agree with a) and b) – my point is that most company pensions give you very limited control/visibilty over what to invest in, whereas SIPP by definition means you control it.

    Letthemfall – public sector pensions are great for the employee, but incredibly unsustainable and high risk for those who provide them, i.e us taxpayers indirectly.

    At the risk of sounding like i’m on a crusade for SIPP’s (which i’m not) – i would have thought most would feel happier managing their own money. It’s not that hard to pick a few well performing funds and diversify a bit; most people either can’t be bothered or fear the unknown without realising they should actually be pretty scared of what pension managers are doing with their hard-earned retirement fund.

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  • I hate how everyone’s plan is to have BTL for their retirement. What if we all did this? Presumably every young family would have to pay rent to support these retirees grand plans.

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  • bubba sparks says:

    @12, it’s a very important point, if he owned a £100,000 one bed flat in Aldershot, or was, heaven forbid, a renter, then he was simply getting his just desserts.

    Great find 🙂

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  • bubba:” incredibly unsustainable and high risk for those who provide them, i.e us taxpayers indirectly”

    Er, no; but that’s the myth that is peddled. Those which are not “funded” (i.e. parasitised by the private sector) are no more risky to the taxpayer (and public employees pay tax too) than the salaries themselves; pensions are nothing more than deferred income. The only risk, such as it is, concerns longevity, which has been taken into account – twice now.

    Personally I like SIPPs, given there is no better alternative. But managing money is not for everyone; if one is highly numerate, reads the financial papers and spends considerable time researching investment, one can make them work. I agree the money managers are mostly hopeless. But for the average pension holder, something more straightforward and robust is needed, and I suggest the public sector model is a good start. But since few people understand them and are happy to join in the general attempt to destroy them, I don’t see much improvement in pension provision in the offing.

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  • bubba sparks says:

    Agree with you that they are straightforward, but the cost is just too high. Back of the fag packets maths…but….
    Someone who has worked for 40 years and finishes up getting paid £30k a year will recieve a salary of £20k based on a 60ths scheme. Assuming they live another 15 years, that’s a cost of £300k on a DB scheme. Assuming their average salary during that time was £5k, the cost is 30% on top of their salary.

    Sorry, but you don’t need to be “highly numberate, etc. etc.” to make sound investments. In my ideal world, you would have a choice between a DB pension based on 1/120th at best, or more pay up front, plus a GCSE in finance would be mandatory for all so people can make their own choices.

    There are inherent risks in any pension, but the larger the committment, the greater the risk. Please don’t assume though that I’m jumping on the bash public sector pension bandwagon, i appreciate it is complex (have sourced pension schemes for blue chips in my time), but i also don’t buy into the whole “it makes up for worse salaries argument.

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  • But most employees don’t have 40 years of service. Average public pension is 3 to 4000 pa (forget the exact figures), so costs are lower. In any case, the question whether costs are too high depends on many considerations, the majority of which seem to be political these days. Incidentally, public sector salaries on the whole are pretty low, given the education level needed for many of them (a considerably higher proportion of graduates in the public).

    Perhaps a good level of numeracy isn’t necessary (though I wouldn’t want to invest without it) but few people appreciate the risks, never mind invest accordingly (do the professionals even do that?), so leaving pensions entirely to the individual is a recipe involving much cream to the investment industry, as indeed it is now.

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  • bubba sparks says:

    Average is 7-8k, but anyway. Agree considerations tend to be at best idealogical, at worst, political.

    Whether the public model or private one is best, I’m fairly convinced that the apparent murkiness of the pension world is what drove people to rely on their house as a pension and probably contributed significantly to the house price bubble. Greater understanding and education regarding pensions and general finance literacy won’t help deflate the current bubble but might help prevent future ones.

    At the risk of sounding like I’m splitting hairs, i agree that a good level of numeracy is pretty necessary, but not that you need to be highly numerate to invest your own dosh. Perhaps if private investments became in vogue, genuine, independent financial advisors who knew their stuff and were incentivsed to make you more money would thrive and bloated institutions that are more concerned about swapping providers to get their signing on fees would not.

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  • Yes I think the “my house is my pension” thing does have some relation to suspicions around pensions in general, though how most people expect to live off the proceeds without ending up in a tent suggests even a modest level of numeracy is absent.

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  • stillthinking says:

    I think the problem is that those who have perhaps foolishly followed the deflation argument always thought that there would be deflation first then inflation second. But those who followed the inflation argument thought that immediately inflation.
    ……
    So…. pensions are kind of long term. You can’t read about people getting shafted all the time and still commit to them. How can the government tax at 50% of GDP but offload pension responsibility. Anyway this is one of those non-argument things because apparently people don’t want to use pension schemes anymore. I am sure some are being irresponsible and some are being responsible outside of pension schemes but there it is.

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  • my dad’s pension kept changing over many years .. until he finally ended up with nothing like what he was promised.

    For this reason … i have not interest in giving my money to someone else to manage …

    money might not even exist in 30 years … and anyway they’ll probably just keep jacking the age at which you can claim it.

    we should all just live of the day … screw tomorrow … it never comes … not how you expect anyway.

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  • general congreve says:

    Add me to the list, they can keep their f4cking ponzi.

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