Generation Y and pensions

Wappers

As a Generation Y, I don't really find the current pension setup very suitable. Which I suspect is one reason (among several) for lack of pension saving in this age group.

I am 26, and I already have three pension schemes, with 42 years to go to state retirement age. Each pension has 1-3 years contributions.

What I don't like is that I would lose some value from the funds if I transfer them to another. It all seems to be designed around the expectation that the employee will stay with the same employer forever.

What I would like is a scheme that I can move between employers, but employers will only ever contribute to their own special scheme.

How would you reform pensions to cope with this 'flexible' workforce?

I imagine the up and coming 'National Pension Savings Scheme' may be of some benefit here, but the employers that already have schemes will probably keep on running them.

EdInvestor

Wappers wrote: »

I am 26, and I already have three pension schemes, with 42 years to go to state retirement age. Each pension has 1-3 years contributions.

What type of pensions are these?

What I don't like is that I would lose some value from the funds if I transfer them to another.

Why do you think this? Have you actually checked if it is true?

Andy_L

Wappers wrote: »

I am 26, and I already have three pension schemes, with 42 years to go to state retirement age. Each pension has 1-3 years contributions.

Not necessarily a bad thing. Whilst amalgamating them might reduce charges you employer may have negotiated a reduction in charges which cancels that advantage out.

dunstonh

What I don't like is that I would lose some value from the funds if I transfer them to another.

That is unusual on modern plans. Legacy plans used to be very common but modern personal pensions, stakeholders and SIPPs dont have them. Also, occupational money purchase schemes dont either. Final Salary schemes have indirect penalties but thats more down to the calculation of value rather than the basis they are set up on which is a defined benefit.

So, what type of pensions are yours?

How would you reform pensions to cope with this 'flexible' workforce?

I wouldnt. It would just encourage what is left of final salary schemes to close even faster. As its not an issue with money purchase schemes which you can move as you like and they are the majority now, there is no need for any reform.

I imagine the up and coming 'National Pension Savings Scheme' may be of some benefit here, but the employers that already have schemes will probably keep on running them.

Or downgrade them to match the NPSS. Also the NPSS doesnt benefit from higher rate tax relief. At the time of posting this, individual, group and occupational money purchase schemes do and will continue to do so (although there is fear that the removal of higher rate relief will go in a future budget if Labour stay in power).

The reason younger people dont tend to pay into pensions any more is that pensions used to be sold. Now they are required to be bought. The home service salesforces have largely gone now. The plans may have been expensive by todays measure but at least they got out there and proactively sold them. Many cant be bothered to plan for later and prefer to spend now. So, they put pensions off and off and off and then when they are mature enough to realise they need to plan for retirement, it usually costs more than they realise.