retirement age increase

dunstonh · 24 February 2011 at 10:37PM

BSE - previously thought to be mad cow disease but turns out its actually Blame Someone Else

hugheskevi · 24 February 2011 at 11:04PM

Whilst on acronyms...

SMT: Save More Tomorrow (an idea in vogue over last few years whereby people commit to saving more in the future)

Which is unfortunately also the acronym, as well as meaning the same as...

SMT: Spend More Today

jamesd · 25 February 2011 at 3:45PM

prus wrote: »

i work in the construction industry by the time you get to 65 you need to retire due to wear and tare on the body

What sudden change happens between age 65 and 66 that makes waiting until 66 harder than waiting until 65?

You do have solutions available. You could seek agreement within the construction industry that it's necessary for people to retire earlier than state pension age and work with those in the industry to set up work or private pensions to make that possible.

Given the nature of the industry may people will be self-employed and won't have a problem because it is their responsibility to arrange most of their own retirement income, so they can just adjust how much money they put away for retirement to cover the £5,000 or so they won't get for one year from the basic state pension.

That £5,000 number is interesting. you really don't think it's possible to accumulate enough to cover one year of the basic state pension? There's more for employees, some additional state pension as well, the earnings-related part. That might add another few thousand.

diable wrote: »

I entered in to a contract when I started work back in 1980 that I would work X amount of years and pay X amount into the system so to be able to retire at 65

Are you sure you want that contract? It also included you dying earlier than you're likely to die with current life expectancies. So I'l make you a deal: you give me those extra years of your life and I'll pay you the pension for the extra year at the start.

diable wrote: »

private pension funds (which seem to have bombed and are worthless)

You're kidding, right? We're two years into one of the fastest stock market growth periods in history following the last drop back in 2008. Anyone who put lots of money into the market in early 2009 through mid to late 2010 is smiling and really happy these days, having made a lot of money. There's a lot of comment by people who did unfortunate things or looked at bad times and haven't looked again but that's not the picture for most people who make sensible decisions about using private pensions or stocks and shares ISAs.

Even during the worst part of 2008 the UK market was down less than 50%, hardly worthless. People who bought emerging markets funds at the peak then sold at the bottom could have lost 70% but if they had held on could now be ahead.

If you're getting comments about private pensions being worthless that's a good clue that it's someone who you shouldn't be paying much attention to if you want to know how to use them properly. And at the moment it's someone who last looked back in late 2008 and hasn't looked since.

patmil · 25 February 2011 at 4:24PM

A mandatory retirement age is a ridiculous concept. I assume legislated by government employees for their own advantage?

If you have saved/accumulated enough funds you can choose to retire at any age. If you haven't ... keep working and if you cannot perform your job then rely on being terminated as "not fit for duty" or fired for incompetence.

bendix · 25 February 2011 at 4:32PM

dunstonh wrote: »

BSE - previously thought to be mad cow disease but turns out its actually Blame Someone Else

Ladies and gentlemen . I give you . . . The Winner

:rotfl:

Old_Slaphead · 25 February 2011 at 4:40PM

jamesd wrote: »

You're kidding, right? We're two years into one of the fastest stock market growth periods in history following the last drop back in 2008. Anyone who put lots of money into the market in early 2009 through mid to late 2010 is smiling and really happy these days, having made a lot of money.

Bit unfortunate though for those retiring around 2008 with a decade of investments going no-where.

Anyone investing from 2007 to now will still be pretty glum - sitting on a 10% loss.

jamesd · 25 February 2011 at 5:50PM

You think they went nowhere for ten years? You need to find better sources. Those making regular pension contributions were probably up over that period because they were buying during the cheap times, not all at the beginning and selling all at the end. Those who say they went nowhere usually just look at the index value and ignore the half of the return that's paid out in dividends in the major UK index. Those who invested outside the UK, particularly in emerging markets, could have done extremely well, better than those making regular payments during the cheap part of the period.

Those retiring in 2008 after March hopefully didn't buy an annuity and lock in any loss they saw. Even more important not to after the autumn of 2008.

What I did in April 2008 was set up a big increase in pension payment, putting in most of my salary over the next year. Then I borrowed money on credit cards in 2009 and invested that as well as my income and the money I'd kept in cash. Did quite well out of those decisions. It'll take quite a drop before I can get into negative territory for the money I was investing at the cheap times.

For pensions it's important not to use just the beginning and end values over a period to guess how things went because few people just put in a single lump sum at the start and take it out at the end. Averaging the results for all the monthly payments gives a much better idea of the result.

Old_Slaphead · 25 February 2011 at 7:52PM

Jamessd - how old are you?

Age has a huge influence on risk perspective.

You cherrypicked a couple of dates ie 2008-10 to illustrate how well markets have done - unfortunately, people saving for retirement can't always pick the period of their investment...... ie they start when they see the need and cash in when retirement calls.

You say that people investing over the period were probably up - not if they were retiring in 2005-9 they weren't. Your scenario only works,as it always will, if the stockmarket is at a high at the END of the period in question. Indeed, EVERYONE will gain if they get out at this point.

Maybe you could afford to go large in 2008 - well done. But what about those, aged maybe 55, with 20 years of pension savings heading south - they were hardly likely to want to max out their credit cards were they - and if perchance they did and lost out for a few years, they wouldn't have had the time to get it back would they?

lvader · 25 February 2011 at 8:48PM

Old_Slaphead wrote: »

Maybe you could afford to go large in 2008 - well done. But what about those, aged maybe 55, with 20 years of pension savings heading south - they were hardly likely to want to max out their credit cards were they ?

Unless they are already retired they would have still benefited from a period of being able to buy funds (as part of their regular pension contributions) at a greatly discounted price. Big corrections in stock prices are generally beneficial to people saving for a pension.

jamesd · 25 February 2011 at 10:08PM

Data on Yahoo Finance can be downloaded to a spreadsheet so I was tempted to work out the value of £100 a month starting back in 1984 using the FTSE 100. Here are some sample values using the first day in February:

2011: value: 62246 paid in: 32300 as %: 193%
2010: value: 55132 paid in: 31100 as %: 177%
2009: value: 38470 paid in: 29900 as %: 129%
2008: value: 57669 paid in: 28700 as %: 201%
2007: value: 59320 paid in: 27500 as %: 216%
2006: value: 54510 paid in: 26300 as %: 207%
2005: value: 45637 paid in: 25100 as %: 182%
2004: value: 40088 paid in: 23900 as %: 168%
2003: value: 31566 paid in: 22700 as %: 139%
2002: value: 42603 paid in: 21500 as %: 198%
2001: value: 48101 paid in: 20300 as %: 237%
2000: value: 49476 paid in: 19100 as %: 259%

That's the results for anything from 16 to 28 years of pension investing. No inflation adjustment for contributions, I just kept the flat £100 each month to make calculation easier for me. No fee deductions either.

Old_Slaphead wrote: »

Jamessd - how old are you? Age has a huge influence on risk perspective.

Sorry, that's something I'm deliberately imprecise about here. I'm neither old enough to take pension income nor uncommonly young. Old enough to think about retirement or unexpected inability to work and put away more than 60% of my income for the last five or so years.

Old_Slaphead wrote: »

You cherrypicked a couple of dates ie 2008-10 to illustrate how well markets have done[

I used what you gave and now. Still, I've added a lot more data above.

Old_Slaphead wrote: »

unfortunately, people saving for retirement can't always pick the period of their investment...... ie they start when they see the need and cash in when retirement calls.

Agreed. It's one reason why I'm not happy when I see people writing that income drawdown is only for big pension pots. It's a vital bit of protection that needs to be available for all so they don't buy an annuity at a bad time.

Old_Slaphead wrote: »

You say that people investing over the period were probably up - not if they were retiring in 2005-9 they weren't. Your scenario only works,as it always will, if the stockmarket is at a high at the END of the period in question. Indeed, EVERYONE will gain if they get out at this point.

Using every month from the start of the FTSE 100 index the worst recent result at this time of year was making 29% gain on the money put in. The best, a 159% gain. Big drop from early 2008 to early 2009 though. The average was a 92% gain on the money put in.

You are right that the value at the end is critical to the result if an annuity is purchased. Even spreading annuity purchase out over a few years when times are bad can make a big difference.

Old_Slaphead wrote: »

Maybe you could afford to go large in 2008 - well done.

Not so much afford it as using salary sacrifice pension contributions all the way down to minimum wage, anticipating a good buying opportunity. Then in 2009 recognising that it might well be a once in a lifetime opportunity, and acting on it. Not easy to do. And not something I expect someone with a more settled and sufficient pension pot to do, mine was and remains insufficient, though it is now enough to maintain my current frugal lifestyle even if I couldn't work any more, without adequate safety margin.

Old_Slaphead wrote: »

But what about those, aged maybe 55, with 20 years of pension savings heading south - they were hardly likely to want to max out their credit cards were they - and if perchance they did and lost out for a few years, they wouldn't have had the time to get it back would they?

Right, options and choices can differ depending on circumstances. It would have been harder for someone with a big pension pot to act boldly than it was for me.

retirement age increase

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