Do you think you'll be able to work till you're 68?

homersimpson_3

I dont knock state pensions. However, I dont think you should plan on the second state pension being there. If the Govt do abolish it in the future, which is likely at some point, then you havent relied on it. If they dont abolish it and you get something out of it, then it helps make up for the fact that you probably didnt save enough for your retirement.

If they did abolish it what would happen to all the money people have paid into it- would we get this money back?

nearlyrich

homersimpson wrote:

If they did abolish it what would happen to all the money people have paid into it- would we get this money back?

I doubt it, the money we pay in today is already being paid out to the people who are claiming their state pension now.

When I started working fulltime I was entitled to retire at 60, it was moved to 65 and now I think it will be 66 for me. If a major insurance company moved the goalposts like that there would be an outcry.

I have been making provision for my early retirement since I was 28 when I restarted my career but I will probably need to carry on working to some extent until I am 60ish.

Debt_Free_Chick

EdInvestor wrote:

It's a nice idea, but it's asking a lot of many people. Do you realise how much you would need to save to buy a pension income equivalent to the (index linked) basic state pension as an annuity these days?

It's about 100,000 pounds.:eek:

It will take most people a long time to save that much.

And that's the point too many of us fail to grasp. Saving for retirement needs to start at an early age.

Relying on the State pension isn't an option. It's a paltry amount and we cannot be sure what (if anything!) will be paid out in 20, 30 or 40 years time.

Given that the average house now costs close to £200k, then any "average" houseowner is surely in a position to save over their lifetime. Afterall, mortgages are usually paid over only 25 years and we are mostly able to save from age 18 to ....???

It's simply not good enough to claim that "we can't afford to retire" when we spend most of our lives frittering money away. Or .. perhaps, we have a choice? Save now, live later/longer or spend now and face the consequences.

I don't want to live on £4k a year - I can't! Our budget is about £1k a month, even after taking out our mortgage :eek: OK, so there are two of us .. .but even then, we couldn't live on £8k a year. (Yes, I've ignored the Additional State Pension, but we've mostly been contracted out via occupational pensions).

In summary .... if you cannot afford to save for retirement, then you simply cannot afford not to save for retirement

nearlyrich

Debt_Free_Chick wrote:

In summary .... if you cannot afford to save for retirement, then you simply cannot afford not to save for retirement

I am amazed how few of my colleagues, friends etc have any retirement provision, I am almost 45 so it is quite shocking and I wonder when they are going to wake up to the fact that they have to think about it and fast.

I have a reasonable pension pot, I am contributing the maximum allowed to my company pension and I have just moved some old private pensions into a better performing plan, I still worry I haven't done enough.

EdInvestor

Of course there are many ways to put together a pile of assets for your old age. In the old days, buying a house and contributing to a final salary pension, plus the state pension, used to be the standard routine.

These days, many people either don't have the option of a risk free final salary company pension, or can't afford it if they do until they're somewhat older, or distrust pensions.The rise in house prices has also had an effect on available money for saving.

Other people prefer to accumulate savings and investments in the more flexible ISA wrapper.Yet another idea is to buy an investment property or even a second home overseas, with a view to generating retirment cash by selling the UK one and moving when the time comes..Because of low interest rates and investment returns, some people prefer to accumulate assets by paying off their mortagage early.

As long as you save/invest somehow, it probably doesn't really matter how you do it long term.

dunstonh

If they did abolish it what would happen to all the money people have paid into it- would we get this money back?

Three times in the past the Govt has reduced Serps benefits for those contracted in which didnt impact on past payments made for those contracted out.

Whilst a lot of it is guesswork, the main reason for the eventual removal of SERPS/S2P would be the move to a single state pension. The Govt did have this as a stated aim (depending on whom in Govt you were talking to!). If this was the case, all contracted in benefits would be lost as they would be less than the new single state pension. However, contracted out benefits would be kept as it would require primary legislation to claw them back and you are talking billions of pounds here. It would bankrupt some insurers and create a massive stockmarket crash. So its unlikely to happen.

homersimpson_3

Whilst a lot of it is guesswork, the main reason for the eventual removal of SERPS/S2P would be the move to a single state pension. If this was the case, all contracted in benefits would be lost as they would be less than the new single state pension.

should people get out of it by contracting out? if so how do you contract out? what can we do with money? what should we do with money?

EdInvestor

Contracted in benefits wouldn't be lost - they'd be subsumed within the single larger state pension.So instead of having two state pensions as now, one flat rate basic state pension plus one earnings linked second pension you would have one single but higher flat rate state pension which would be linked to earnings not inflation.

Contracting out is anyway going to be abolished from 2012 so it's rapidly about to become a non-issue IMHO. Most better off people will already be contracted out into final salary pensions which won't be affected, and most less well off ( average wage or below) people will (and should) be contracted in because it's too much of a risk they would make a loss.

There's only a few people in the middle affected by any real choice. If you are already contracted out, you might as well leave it as is until 2012. But is it worth going to the trouble of contracting out now for five years if you are contracted in? Not IMHO.I might take a different view if contracted out money was allowed in SIPPs and you could invest it properly at low cost.But it isn't (yet).

dunstonh

Not IMHO.I might take a different view if contracted out money was allowed in SIPPs and you could invest it properly at low cost.But it isn't (yet).

It is in hybrids

I think 5 years is still enough to get £5k or so out. If you have the years left for that to grow, then it could still be worthwhile.

Dead_Eye_Jones

It really depends what you are doing I think, from my (limited) experience people tend to slip away quite quickly when they lose structure and routine from their lives, so working late into life is no bad thing - the trick here is to ensure you do a job you actually enjoy! Id be happy to drop some of the responsibility and keep on going for as long as they'd have me lol!

Obvioulsy physically demanding jobs may not be possible after a certain age, but tbh many people are fit and healthy late into their lives so dont write yaself off!

I think the world will be a very different place by the time I get to 68 so its really hard to comment, hopefully I will be self sufficient in my retirement but then one has a sneeky suspicion the world economy will fall apart as pressures on global resurces hit breaking point. And WWIII cant be too far away now... !