NOW OPEN: the MSE Forum 'Ask An Expert' event. This time we'd like your questions on TRAVEL & HOLIDAY DEALS. Post by Wed and deals expert MSE Oli will answer as many as he can.
MSE News: Thousands forgoing pay rises due to pension apathy
Former_MSE_Guy
Former MSE 1.7K Posts
This is the discussion thread for the following MSE News Story:
"Many do not take up free cash by starting a company pension where their employer makes an automatic contribution ..."
"Many do not take up free cash by starting a company pension where their employer makes an automatic contribution ..."
0
This discussion has been closed.
Latest MSE News and Guides
Replies
More likely due to stupidity or short sighted "want it now". You only have to read a selection of threads from opt outs/non-joiners to realise that its usually down to a lack of common sense, a lack of understanding or a want it now mentality.
There is a small window of income earned that can do damage. However, when the MIG was abolished and replaced with pension credit, the reduction due to having savings/investments and other income didnt hit 1:1
However, lets be honest about this. A personal contribution of say 5% matched by the employer for 20 or more years is likely to take the average person well through the pension credits mark. Not just close but miles through it. Not too many people are going to be keen to be planning to live on £6k-9k a year that the pension credits would apply to.
Also with triviality at £18,000 now, thats quite a lump you can build up with free money from the employer without being concerned about pension credits.
The company I work for recently closed its final salary scheme. If you had started there before a certain date (I think 1988) the pension was non-contributory - believe it or not, there were several people who hadn't joined this pension scheme! Even when it's completely free money people have chosen not to take it.
I do believe it.
I know my first post on this thread was blunt but I have been doing this for a long time now and I have heard all the excuses non-joiners give and its rare anyone has a valid thought through reason that makes sense. Half the time they are just trying to kid themselves.
It goes something like this:
1. Why bother paying into a pension scheme when you might as well save up the money in a savings account?
2. Any company can go bankrupt and this is true with company pension schemes and pension insurance companies.
3. We're talking about an investment that can take most of your working life and you could see the company going bankrupt or investing your money badly and ending up getting less than what you put in or started with.
4. Also very often people that have spent all the money others have saved all their lives on pension deposits get their pensions and other benefits like income support to bring up their income to more than what it would be subscribing to a pension scheme
5. With the above points in mind the people simply saving up the money just before retirement could draw all the savings as in point 1. and put them in a good safe and benefit from point 4.
People do (quite rightly) what is best for them not the government.
Cash deposits are a useless long-term investment.
Pension Protection Fund and FSCS protection are provided in those circumstances.
Even if company goes bankrupt and ends up in the PPF and an individual receives reduced benefits, they are still almost certainly better off than if they had not been part of the pension fund.
Investments can disappoint, but over a long-period you would be very surprised to get less out than you put in, particularly once you take account of tax relief. Risks work both ways - you might get more than you expect. And if you invest with regard to your own risk tolerance you should know how much you are putting at risk.
A sound strategy, if you want to live on £132.60 per week from age 68+ and take your chances on the same system still being in place when you retire.
Commit benefit fraud you mean?
The Government is in the process of restricting pension tax relief to increase revenue.
Pension is more tax efficient, gets tax relief and free money from the employer. A savings account cannot come close to providing the same level of income.
As can banks with savings accounts. However, the whole lot has protections in virtually the same way as deposits.
Bankruptcy of a company is irrelevant. You can invest your money badly outside of a pension. You can also invest it sensibly which is what you would hope most would do.
Media misinformation. The earnings level to get benefits is not far off £7000 a year for s single person. Do you fancy only living on that amount? Its bread line benefits.
As hugheskevi says, its fraud. However, its also stupid. Its planning to fail and waste money.
With respect, your analysis was deeply flawed. Your misconceptions are obsolete and assumptions are poor. They are not actually uncommon misconceptions. You are not alone. However, its the sort of response that someone that only ever relies on the media for information or assumes that what happened 20-30 years ago can still happen today. Its man down the pub told me... stuff. And that is usually wrong.
Rather than a simple "means test" at the time of claiming state pensions and benefits, I would like to see the Government build up some sort of income score throughout someone's working life. They have all the information. What I am advocating is an end-of-tax-year statement which would accumulate ones "Lifetime taxable earnings", possibly inflated by a miminal interest rate. Benefits should be based more on this figure than on what someone claims to have in the bank.
In other words, if anyone has earned, say, £40K/£60K (today's equivalent) all his working life, but has blown it all, never saved a penny, and wonders how to pay rent, fuel, food, run a car on £6K pension, then my only answer is "Tough!. That's your problem and not the tax payer's."
I am still mulling over each point. I did actually ask these points because I've heard other people make the same comments.
One thing I left out with the pensions question .. Some people don't make it to retirement. So dependents may not get any money where as if it was saved in an account there would be.
The pension scheme point was made because I do remember Robert Maxwell and I believe there are rumours of other companies like Equitable life that didn't pay what they promised lurking in the background.
All this is in the back of peoples mind and the FSCS have limits of £50,000 per savings institution. - of course this remains to be tested.
Also I don't know what the PPF compensation or guarantee is, I can't seem to find any reference to it on google search.
As for living on £7000 per year ... well believe it or not I think you might find that by the time they've taken out council tax, rent, this that and the other, a hell of a lot of people out there right now are living on less.
Factor in inflation and what ever the relative value may be at anyones given retirement age I would guess it could be roughly the same in real terms.
My last quote where you both pointed that it was fraud. Agreed it is fraud but although it may well be, nonetheless people will do just that and I'm sure they are plenty with money in the mattress or under the stairs whatever unaware that this could land them a prison sentence. Where however if they'd drank their savings away, that's OK.
And what did they call the antics of bankers like Fred Goodwin and all the MPs expenses including Mr Cameron and Mr Brown?
All legitimate & within the rules (their rules that is).
Strangely we haven't heard any more of the 3 labour MPs and a conservative peer that were the whipping boys of the commons scandal - have they been let off?
I said it before the public that are working their bottoms off just to keep their heads above water also have their own rules too and they always do what is best for them if they know how to.