Could you retire on half your current income?

clairehi

Part of the problem is that most of us are not financially literate enough to make active and informed choices about today's money let alone saving for 40 or 50 years hence.

I think there is a case for schools to teach basic financial skills as part of the curriculum, either by embedding in core subjects such as maths (not that the maths is complicated) or through PSHE, General Studies A-level or similar.

Plasticman

EdInvestor wrote:

Don't forget there are 2 state pensions - the basic pension you mention and the second state pension S2P (formerly SERPS) which is earnings related on top. People retiring now who have a full NI record (not contracted out into a company pension) and a salary towards the upper earnings limit c.34kwould get as much as 12k from the two state pensions.

This would cost you nearly 300,000 quid in savings to buy on the open market, the index linking is especially valuable.Even the basic state pension would cost around 120k.

Check out your personal entitlement here:

www.thepensionservice.gov.uk

True, but only the basic state pension for me as I'm contracted out.

The other thing that often comes into play when people reach retirement is the option of downsizing. I know a number of people who have been lucky enough to add a nice sum to their retirement funds by moving from their 'family sized' houses to something smaller. Also inheritance for those lucky enough to have rich relatives!

margaretclare

I've just read the Tiscali business report, and it seems to me it's saying something different. 'In the Queen's Speech the government outlines its plans to restore the earnings link and reduce the number of years to qualify for state pension, but don't be lulled into a false sense of security by the reforms. The expected reforms don't go far enough, there will still be too much complexity and too much means-testing.'

Therefore, everyone should take measures for themselves, each individual. My generation were meant to rely on a husband for financial support and pension provision - thank goodness I did it for myself!! ReportInvestor, the Levellers were sturdy individualists and we need more of their backbone and their spirit nowadays!

Clairehi, we were discussing the problem that you outline last evening at break-time in my GCSE Maths class. I feel sorry for today's youngsters because the Maths we're learning is at a pretty advanced level, then they've got another 7 or even more subjects on top of that! Nevertheless, it does get included, e.g. from my Maths textbook: 'Find the simple interest paid on £600 invested for 6 months at 8% per year' (I wish!) and then: 'Find the Compound Interest paid on £600 invested for 3 years at 6% per year'. Exchange rates, currency changing - it's all there. But suppose you were off sick or even 'bunking off' the day that was taught - you'd miss it. I also think that it's not enough to learn these things in isolation, in theory, they have to become 'real' to you. At 18 you might get your first credit card or three, and you then have to work out how the interest stacks up against you rather than in your favour. So many people say 'I'm not in debt, I have x, y and z credit cards plus a loan, I'm managing to make the minimum payments each month and the banks are quite happy with me....' They don't read the warning on the monthly statement which says that 'if you make only the minimum payment each month it will cost you more and take longer to pay off the balance'. How much starker warning do you want? Like someone who buys a packet of cigarettes with 'Smoking Kills' in big letters and immediately lights up? People are experts at self-deception.

Margaret

clairehi

margaretclare wrote:

I've just read the Tiscali business report, and it seems to me it's saying something different. 'In the Queen's Speech the government outlines its plans to restore the earnings link and reduce the number of years to qualify for state pension, but don't be lulled into a false sense of security by the reforms. The expected reforms don't go far enough, there will still be too much complexity and too much means-testing.'

Therefore, everyone should take measures for themselves, each individual. My generation were meant to rely on a husband for financial support and pension provision - thank goodness I did it for myself!! ReportInvestor, the Levellers were sturdy individualists and we need more of their backbone and their spirit nowadays!

Clairehi, we were discussing the problem that you outline last evening at break-time in my GCSE Maths class. I feel sorry for today's youngsters because the Maths we're learning is at a pretty advanced level, then they've got another 7 or even more subjects on top of that! Nevertheless, it does get included, e.g. from my Maths textbook: 'Find the simple interest paid on £600 invested for 6 months at 8% per year' (I wish!) and then: 'Find the Compound Interest paid on £600 invested for 3 years at 6% per year'. Exchange rates, currency changing - it's all there. But suppose you were off sick or even 'bunking off' the day that was taught - you'd miss it. I also think that it's not enough to learn these things in isolation, in theory, they have to become 'real' to you. At 18 you might get your first credit card or three, and you then have to work out how the interest stacks up against you rather than in your favour. So many people say 'I'm not in debt, I have x, y and z credit cards plus a loan, I'm managing to make the minimum payments each month and the banks are quite happy with me....' They don't read the warning on the monthly statement which says that 'if you make only the minimum payment each month it will cost you more and take longer to pay off the balance'. How much starker warning do you want? Like someone who buys a packet of cigarettes with 'Smoking Kills' in big letters and immediately lights up? People are experts at self-deception.

Margaret

You make some good points, but I think you are being a bit defeatist.

Of course there will always be those who are reckless but you can see from the posts on MSE how many people are uninformed but genuinely seeking help.

I agree in GCSE maths you wouldnt spend a lot of time on compound interest but I bet more could be done to teach useful real-life concepts through examples and case studies in a variety of subjects . Eg within Computer Studies, you could teach a course on spreadsheets by getting students to construct budgets. Of course its not enough on its own but its better than nothing surely!

lilac_lady

It's back to basic thinking. If you don't want to be poor in later life, save a little, stay out of debt and enjoy the rest of your money. Simple but effective. Forget about the State keeping you in old age. You only need a small works pension to be knocked off the benefits train so think ahead a little but not at the expense (!) of enjoying the present time.

ReportInvestor

No more coin guzzling coffee machines at work.

My last workplace had a canteen that offered bacon sandwiches for the early starters .

Fatal on both the health and MSE front.

No more going out for coffees, drinks, meals with your colleagues in order to stay "in the loop".

margaretclare

lilac_lady wrote:

It's back to basic thinking. If you don't want to be poor in later life, save a little, stay out of debt and enjoy the rest of your money. Simple but effective. Forget about the State keeping you in old age. You only need a small works pension to be knocked off the benefits train so think ahead a little but not at the expense (!) of enjoying the present time.

I completely agree, lilac_lady. So how do we alter the thinking of those older people who're spreading the idea 'it's not worth saving, I saved and got nothing, next door didn't save and got everything'? Because this idea is very widespread and every time someone makes a statement like this - with emphasis and with feeling - someone else listens. A generation or two ago people would say what you've just written: 'If you don't want to be poor in later life, save a little, stay out of debt, enjoy the rest of your money - simple but effective'. Then came the 'we'll look after you from cradle to grave' soundbite, and a lot of people bought into that kind of philosophy. You hear older people say that even now, 60 years later, and they feel that they've somehow been cheated of what they were promised. Even people who have what should be enough for a comfortable retirement worry about 'how they can lose assets' to bring them into the means-testing bands.

I just don't know how we can get it through to the people who need to hear it.

Must go and do some maths homework - it's always better the day after an evening of 2 1/2 hours at college, and it's too wet to do anything else anyway!

Margaret

seven-day-weekend

margaretclare wrote:

I completely agree, lilac_lady. So how do we alter the thinking of those older people who're spreading the idea 'it's not worth saving, I saved and got nothing, next door didn't save and got everything'? Because this idea is very widespread and every time someone makes a statement like this - with emphasis and with feeling - someone else listens. A generation or two ago people would say what you've just written: 'If you don't want to be poor in later life, save a little, stay out of debt, enjoy the rest of your money - simple but effective'. Then came the 'we'll look after you from cradle to grave' soundbite, and a lot of people bought into that kind of philosophy. You hear older people say that even now, 60 years later, and they feel that they've somehow been cheated of what they were promised. Even people who have what should be enough for a comfortable retirement worry about 'how they can lose assets' to bring them into the means-testing bands.

I just don't know how we can get it through to the people who need to hear it.

Must go and do some maths homework - it's always better the day after an evening of 2 1/2 hours at college, and it's too wet to do anything else anyway!

Margaret

Margaret Clare I agree with you inasmuch as it's better to save and have an element of choice, but I also understand why people say it's not worth it.

Take my m-i-l for example . She had her State pension (full stamp thank goodness) and a TINY Occupational pension from her late husband. They'd never earned enough to have loads of savings, but had saved a bit.

However....her husband's miniscule pension put her over the threshold for claiming any benefits, which meant she had to pay most of her rent and council tax.

This meant that she was about £20-30 a week worse off than her sister who'd never worked, let alone saved.

I know this example is for income, but the same works for people who have savings that put them slightly over the threshold, but do not have much income. They can end up being poorer than people who have never saved and receive State benefits.....then they have to use their savings to subsidise their income until they are below the threshold to get the benefits, which makes them as badly off as those who've never worked or saved.

You can understand them feeling upset. At least I can

Paul_Herring

EdInvestor wrote:

Don't forget there are 2 state pensions - the basic pension you mention and the second state pension S2P (formerly SERPS) which is earnings related on top. People retiring now who have a full NI record (not contracted out into a company pension) and a salary towards the upper earnings limit c.34kwould get as much as 12k from the two state pensions.

Wasn't there talk of merging the two pensions?

margaretclare

seven-day-weekend wrote:

Margaret Clare I agree with you inasmuch as it's better to save and have an element of choice, but I also understand why people say it's not worth it.

Take my m-i-l for example . She had her State pension (full stamp thank goodness) and a TINY Occupational pension from her late husband. They'd never earned enough to have loads of savings, but had saved a bit.

However....her husband's miniscule pension put her over the threshold for claiming any benefits, which meant she had to pay most of her rent and council tax.

This meant that she was about £20-30 a week worse off than her sister who'd never worked, let alone saved.

I know this example is for income, but the same works for people who have savings that put them slightly over the threshold, but do not have much income. They can end up being poorer than people who have never saved and receive State benefits.....then they have to use their savings to subsidise their income until they are below the threshold to get the benefits, which makes them as badly off as those who've never worked or saved.

You can understand them feeling upset. At least I can

Yes, I can understand their feelings, and there are large numbers of these type of examples. They are real people too. AgeConcern did a study earlier this year which was titled 'Just above the breadline' and it was all about people just like that, who were, as the title said, 'just above the bread-line'. Not starving but nothing to spare either. By Monday morning they were ready for the next week's income, having used every last penny by the end of Sunday. They're probably the ones who queue outside the post office in the little town centre here, about 30 people are there by 8.45 am every Monday (not all pensioners).

I don't know what the answer is. I have no answer, I just have a strong feeling that it's better to save than not, and I've always been glad when I had savings. I'm lucky - I can save now, and I'll go on saving as long as I can.

Margaret