Is it actually worth saving towards pension?

Velcro_Hotdog

I fail to see why means tested benefits need mentioning at all?

OP do the right thing and save for your own future and don't rely on hand outs.

Bigsmak

Stargazer57 wrote: »

So on this thread we have one IFA (dunstonh) saying that the Government are going to abolish means-tested benefits for pensioners, and another (Bigsmak) whose considered summary of whether it is worth saving towards a pension is not to mention means-tested benefits at all.

Anyone would think they get in the way of the sales process.

Hello - I never said that you should ignore the government 'hand out' (I did mention it in my first reply) - but that you should understand that it is far to small to live on. if you are earning even £20k and you retire and find yourself on 7000 or there about's (which is taxable as well) then this is not a good situation to be in. You need to take responsibility for your own future, be it Pensions, savings, ISAs, property, buying artwork etc etc etc...

Every week I speak to people who are coming up to retirement age and have decided to start saving.. but alas sometimes it is effectively far to late for them to do something meaningful in the short years they have left of their working life. They usually start of angry, then sad and afraid and often end up kicking themselves for not planning better when they were younger.

Its your life, its your actions which dictate how your lifestyle is, if you want a good one, you need to pay for it!

dunstonh

So on this thread we have one IFA (dunstonh) saying that the Government are going to abolish means-tested benefits for pensioners,

I have said no such thing. I said means tested pension benefits. Not means tested benefits for pensioners.

real1314

The Op asked if it is worth saving for a private pension, given that means tested benefit entitlement reduces as private provison increases.

Anyone who suggest that you shouldnt consider in any way, the potential loss of benefits against private provision is foolish. Financial decisions should be made on the basis of ALL the facts.

So, consider at the very least:-

Pension Credit (as it presently exists) balanced against moves to change it.

HB - with no proposals to remove it.

CTB - see HB

State Pension - and moves to increase it (how will that be paid for?)

Private Pensions - consider how much you pay for how much you get back. How the fees stack up (wasn't there a report suggesting europeans pay much lower management rates than UK?)

Housing - will it be private (maintenance costs?) or rented (benefits?)



Losing £1k a year towards a pension if you end up with an income £1 above means tested levels would be a complete waste for the individual.

On the other hand, being assured of having more than double the means tested level might be a good thing - but what would it cost to get that, what are the risks, what are the guarantees (none?).

An IFA suggesting that no consideration should be given to any possible benefit income is either:- 1. Naive; 2. Ignorant; 3. Incompetent; 4. Biased.

Mind you the IFA gets their fee based on the contributions, not what you get back, and not what extra income it gives you over what you would have had. :cool:

dunstonh

An IFA suggesting that no consideration should be given to any possible benefit income is either:- 1. Naive; 2. Ignorant; 3. Incompetent; 4. Biased.

No consideration should be given to the OP as its irrelevant. To tell a 31 year old to leave a cracking defined benefit scheme that will probably see them set up for life in retirement so that can live on £7000 a year plus council tax paid is stupid.

Mind you the IFA gets their fee based on the contributions

No they dont.

Private Pensions - consider how much you pay for how much you get back. How the fees stack up (wasn't there a report suggesting europeans pay much lower management rates than UK?)

There was a report and it was criticised for its errors and inconsistency and complete misrepresentation as it effectively compared the cost of one element of the cheapest unbundled option there against a UK bundled option and then added 50% to the UK charges for good luck. Indeed, the charges they used for UK were 6 times higher than what you can get.

real1314

aagie wrote: »

I'm 31 and I've been contributing towards my pension since 3 years (I pay 10% of my salary and my employer pays additional 14%).
I'm considering opting out to have a bit more money now (my net pay would increase by around £1000 a year).

OP's pay would increase by £1k per annum by dropping the 10% pension payment. Hence OP earns about £10k

dunstonh wrote: »

No consideration should be given to the OP as its irrelevant. To tell a 31 year old to leave a cracking defined benefit scheme that will probably see them set up for life in retirement so that can live on £7000 a year plus council tax paid is stupid.

Your own figures suggested (and let's be honest here, there are no guarantees with pensions; including government intervention to skim profits off) that the OP would get £8600 per year. How does that see them "set up for life"? Aim low? And can YOU guarantee this return?

You've also said it's a defined benefit scheme. I can't see that in the OPs posts anywhere.

That's £1600 per year more than YOU have estimated they would get from a state pension, but we don't yet know how any state pension at the £7k pa rate would be affected / off-set / funded via second pensions. One things for sure, it isn't going to be paid on the basis of the existing contribution rate. So more funds need to be allocated for it.
All you could really say for certain is that they'd get the current state pension rate.

So, your assumed £8.6k plus £5k for the state pension giving about £260 a week. Roughly Pension Credit £140 + CTB at £20 + HB at £100.

So, they spend £30k investing in a pension and end up on the same income as if they hadn't. Which was one of the OPs key questions.


Now, considering the OP is on about £10k, we'd have to consider whether they would be likely to increase their earning power over the next 30 years, and whether they currently rent or own and whether this might change.

IFAs might talk about how much "free money" the employer is putting in, and what a great deal it is taken in isolation, but when you actually look at the big picture, what difference does it make to the person's future?

A lot of pension selling is just smoke, mirrors and fear. :cool:

jem16

real1314 wrote: »

You've also said it's a defined benefit scheme. I can't see that in the OPs posts anywhere.

This post seems to suggest it's a defined benefit scheme.

aagie wrote: »

Thanks StephenM. You're right. I've contacted my pension provider and they said I could retire at 55 but would not be entitled to full pension. However, if I retire at 60, I'd get the full pension.

lvader

The OP is only 31, lots of things can change over the next 30 years such as getting a better paid job or getting married (if they aren't already). The pension scheme is increadibly generous and they would have to be stupid to pass it up.

StephenM_2

dunstonh wrote: »

No consideration should be given to the OP as its irrelevant. To tell a 31 year old to leave a cracking defined benefit scheme that will probably see them set up for life in retirement so that can live on £7000 a year plus council tax paid is stupid.

Whilst it certainly sounds a good scheme (though at twice the employee contribution rate I pay so I can't say I'm envious), I don't think you can say that it will probably see the OP set up for life in retirement. Even if they stay with the same employer until retirement, the chances are the scheme will be closed long before then.

moonrakerz

dunstonh wrote: »

For evidence see pretty much every media outlet over the last few weeks

Oh dear dunston ! I am disappointed in you............ "evidence" in the media :rotfl::rotfl::rotfl: