Half of UK have no pension

Aegis

marvin wrote: »

Why don't I have a pension? Well for 20 years I was a carer then 5 years ago entered the workforce again.

Looked at the stakeholder pension offered by my employer (before the crash) and if I tucked away the max I could and the employer did as well then the most I could invest every month was £150 a month. This would, according to their illustrations, giove a pension c£150 a month on retirement!

That's the maximum you can put away through your employer, perhaps. But you can make independent contributions to another stakeholder pension up to your annual earnings (or the annual limit if you're earning somewhere around a quarter of a million a year...). You can always choose to save more for your retirement outside what your employer wants to offer, and the more you save the higher your income will be in the future.

jem16

butterfly72 wrote: »

My pension is an NHS pension and I'm buying extra years at over £200 a month. I haven't a clue if i'm doing the right thing. How do you know? Also, they are going to give us the option of moving to the new April 2008 scheme - a lack of understanding will probably make most people do nothing!

If you don't know then seek advice from someone who does know.

He's a higher rate tax payer.. should he stay in the company scheme or use some other method such as a SIPP? We just don't know!

Is the company also making a contribution? If so will they still make that contribution (unlikely) if he moves outwith the company scheme? If the answer is yes to the company making a contribution and no to making it elsewhere then he should stay in the company scheme - nothing else will make up for the "free" money from the company.

If no company contribution then seek the help of an IFA to see if there are better pension options available. However a SIPP is really for an experienced investor who is going to make use of the extra features of a SIPP. If you are not making use of the extras then a Personal pension is often cheaper.

EdInvestor

The main problem with pensions is that they only provide income.You lose control of 75% of the capital effectively forever.But in retirement you need capital, as well as income.

New car, new roof, new boiler, children's and grandchildren's education/weddings/house deposits.Holidays and travel.Medical treatment,long term care. Income alone just doesn't cut it.


It is a good idea to make sure your state pensions are fully paid up and to take advantage of any free money from an employer.But for the rest, better to use the s&S ISA which gives you tax free income and immediate access to capital throughout. MSE nerds may like to fine-tune their long term savings so pension income matches the tax allowances.;)

Toto

butterfly72 wrote: »

Do you think one of the main reasons people don't bother with pensions is because they don't understand them? I do have a pension and have tried to make sense of it but to be honest I just don't really understand the language and consquence of doing this or that or not. I really would like to understand it more.

I agree 100% with this. I consider myself to be reasonably intelligent and pretty good with money but the language used in the finance sector just makes my eyes glaze over. To be honest I haven't really got a clue what on earth they are on about, I've no idea what's good and what's not. That's probably another reason why I've just used ISAs; at least I understand those (I think).

I do wonder if people would invest more in a pension if they were made a lot plainer and clearer, think idiot’s guide and speaking to me as if I am a 5 year old.

dunstonh

I've no idea what's good and what's not. That's probably another reason why I've just used ISAs; at least I understand those (I think).

The investment options for pensions and ISAs are virtually identical. The only main differences are the maturity process and the tax relief. Pensions pay 25% lump sum when you retire and 75% goes towards providing an income.

So, if you can invest in an ISA then you can invest in a pension as the investment options are the same. e..g if you want Invesco Perp High Income fund in your ISA then you can have it in your pension as well. Rates of return will be the same as its the same fund. The only difference, as already said, is the maturity process.

I do wonder if people would invest more in a pension if they were made a lot plainer and clearer, think idiot’s guide and speaking to me as if I am a 5 year old.

The problem is that people want to complicate them more than they really are. Or more likely assume that they are more complicated than they really are. Personal pensions are just a tax wrapper. Just as ISAs and investment bonds. If you know about ISAs then you can know about pensions just as easily.

Part of the problem is media driven. They bundle all retirement provision under the "pension" banner and then slag it off as if pensions are all one thing. Pensions can get more complicated at the higher value end of the scale and can allow more specialist things to be done with them. However, for the average person, those things wont matter.

Also, to get the optimal income in retirement usually means fine tuning things and whenever you start going down into the depths of fine tuning and getting what is absolutely the best, then it will become more complicated. That goes for any area. For example, life assurance, if done correctly, will usually end up needing 3 or 4 policies or segments to cover different needs. Yet most people go for just 2. Some even fudge it with just 1.

Dick_here

EdInvestor wrote: »

The main problem with pensions is that they only provide income.

Damn those State Pensions, why don't they give you a lump sum (much more than 25%) and an income. Damn them !

MikeJones_2

Hi ray123,

ray123 wrote: »

What I would like to know is - how many of the 50% saving for a pension are working for the Public sector, who seem to have very good schemes? I sure it is a fair proportion.

To answer your question posted earlier on this thread (27/05/2009), I managed to dig out these figures:

Source: Office for National Statistics (pdf-5 pages). © Crown copyright 2008

Employee membership of private sector defined benefit occupational pension schemes – often referred to as ‘final salary’ schemes – continues to decline, according to figures published today by the Office for National Statistics. It fell from 3.0 million in 2006 to 2.7 million in 2007. Of this 2.7 million, 47 per cent were in schemes which were open to new members.

Employee membership of public sector defined benefit schemes rose slightly to 5.2 million in 2007.

Employee membership of private sector defined contribution schemes – also known as money purchase schemes – has changed little in recent years. It stood at 0.9 million in 2007, of which 89 per cent were in schemes which were open to new members.

These results are from the Occupational Pension Schemes Annual Report, published today, which contains detailed analysis of the 2007 Occupational Pension Schemes Survey and revised figures for 2006.

In 2007, total membership of occupational pension schemes was estimated at 26.7 million (the same as in 2006), comprising:
- 8.8 million employee members, down from 9.2 million in 2006;
- 8.5 million pensions in payment, up from 8.2 million in 2006; and
- 9.4 million preserved pension rights, the same as in 2006.

The figures appear to refer to active members only, so there will be a significant increase when you include preserved members and pension members.

Hope that helps.

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

zarazara

I have about £30-£50 a month left over if I budget carefully. I am 48 yrs old. I will get the state pension at 66. Is there anyway I can invest this to get a pension of £15,000 pa after tax when I retire?

bendix

zarazara wrote: »

I have about £30-£50 a month left over if I budget carefully. I am 48 yrs old. I will get the state pension at 66. Is there anyway I can invest this to get a pension of £15,000 pa after tax when I retire?

If those figures are all you have, then no.

Look at the figures. Let's assume you need around £18,000 gross to generate £15,000 after tax (sorry, i don't know your tax situation, so it's just an example).

Let's assume you also get around £7000 a year from your state pension, including tax benefits.

That means you will need to generate around £11,000 per annum from your other savings, be they pension plan or other investments you might have. To do that on today's annuity rates (assuming a return of around 5%) you would need a pot worth at least £200,000.

I'm assuming you have no pension provision already. Even if you saved £50 per month, that is only £9600 contributions. It would need absolutely stellar investment returns never seen before over a sustained period to get you close to £50,000, let alone the required £200,000.

dunstonh

I have about £30-£50 a month left over if I budget carefully. I am 48 yrs old. I will get the state pension at 66. Is there anyway I can invest this to get a pension of £15,000 pa after tax when I retire?

You forgot the smilie in your post. It appears bendix took your sarcasm seriously