Workers facing a bleak old age?

edinburgher

Indeed it seems to me from casual reading in the press generally that for employees below a certain wage level it will probably be better overall for them long term NOT to save for a pension as charges will overtake the gains and instead say sod you to HMG - you can pay when I'm 66.

While I respected your initial contribution, this is a !!!! poor attitude to take - the government has made a mess, so I'll let other people's grandchildren bear the burden? :mad:

Procrastinator333

MacMickster wrote: »

The problem is that many pension funds are very poorly run with the investor paying high charges and taking all the risk.

So move your money.

MacMickster wrote: »

If you are going to make contribution to a pension compulsory, then why not just increase National Insurance by a few percent for both employees and employers and pay a worthwhile state pension?

Leaving aside the fact that this comment shows one of the main problems - (lack of knowledge around the cost of a "worthwhile" pension), consider the idea of the government being responsible....

We would all be at the whim of the governemnt that is not in office yet. Say DC increased NI by 20% between empoyer and employee and said no body worry about pensions anymore, you will all get a 50% final salary pension. Great. Job done. But wait, what happens in a few years? Another government. And the next lot decide to !!!! the lot up the wall on some grand plan. 10 years later the country has no cash and pensions are cut back.

Each to their own, but I would far rather have a seperate pot of money specifically for myself. Rather than a giant pot that can and will be raided for other things.

MacMickster

Procrastinator333 wrote: »

So move your money.



Leaving aside the fact that this comment shows one of the main problems - (lack of knowledge around the cost of a "worthwhile" pension), consider the idea of the government being responsible....

We would all be at the whim of the governemnt that is not in office yet. Say DC increased NI by 20% between empoyer and employee and said no body worry about pensions anymore, you will all get a 50% final salary pension. Great. Job done. But wait, what happens in a few years? Another government. And the next lot decide to !!!! the lot up the wall on some grand plan. 10 years later the country has no cash and pensions are cut back.

Each to their own, but I would far rather have a seperate pot of money specifically for myself. Rather than a giant pot that can and will be raided for other things.

Those who are currently astute enough to have their own pension would, I'm sure, continue to make additional contributions to these.

Whilst a few per cent increase in National Insurance would not provide a great pension, it would provide better than those who make no provision are getting now. Hopefully sufficient to do away with expensive means-tested benefits that these people now receive.

As you say, each to their own, but personally I don't believe that many understand pensions sufficiently to make informed choices about where they should invest their proposed compulsory pension contributions. Another mis-selling scandal in waiting. Also governments of whatever colour still manage to interfere in private and company pensions to the detriment of the pensioners (eg Thatcher's pension holidays for employers and Brown's raid on dividends).

nearlynew

Procrastinator333 wrote: »

So move your money.



Leaving aside the fact that this comment shows one of the main problems - (lack of knowledge around the cost of a "worthwhile" pension), consider the idea of the government being responsible....

We would all be at the whim of the governemnt that is not in office yet. Say DC increased NI by 20% between empoyer and employee and said no body worry about pensions anymore, you will all get a 50% final salary pension. Great. Job done. But wait, what happens in a few years? Another government. And the next lot decide to !!!! the lot up the wall on some grand plan. 10 years later the country has no cash and pensions are cut back.

Each to their own, but I would far rather have a seperate pot of money specifically for myself. Rather than a giant pot that can and will be raided for other things.

Which is why so many people turned to BTL as an alternative.

PasturesNew

I don't have a pension; lower rate tax payer all my life, never had an employer who gave out a pension. In/out of jobs for the past 20+ years as companies closed/downsized etc etc.... on the pensions board here, it was said that if you're a lower rate tax payer and no employer contributions, it's not really worth trying to 'do the right thing'.

olly300

Procrastinator333 wrote: »

So move your money.

I don't understand why you took that comment literally?

Someone who bothers posting on this topic is likely to have had a look at pensions.

Procrastinator333 wrote: »

Leaving aside the fact that this comment shows one of the main problems - (lack of knowledge around the cost of a "worthwhile" pension), consider the idea of the government being responsible....

We would all be at the whim of the governemnt that is not in office yet. Say DC increased NI by 20% between empoyer and employee and said no body worry about pensions anymore, you will all get a 50% final salary pension. Great. Job done. But wait, what happens in a few years? Another government. And the next lot decide to !!!! the lot up the wall on some grand plan. 10 years later the country has no cash and pensions are cut back.

Each to their own, but I would far rather have a seperate pot of money specifically for myself. Rather than a giant pot that can and will be raided for other things.

That's because our government(s) are untrustworthy. Other European countries have government schemes that work due to not having a spendthrift government.

olly300

edinburgher wrote: »

While I respected your initial contribution, this is a !!!! poor attitude to take - the government has made a mess, so I'll let other people's grandchildren bear the burden? :mad:

Why?

If you are in a situation like PasturesNew then contributing is stupid.

dtsazza

ChiefGrasscutter wrote: »

I think you are being harsh........

Here is an example from work
We had AVC's attached to our pension scheme
Many were paying in quite a lot into the AVC part - indeed at higher % rates than they were paying into the main scheme.
You had a number of options are to which firm would manage your AVC pot.
One of those options was Equitable Life...........and we know what happened to them!

In hindsight is easier to say this, but the Equitable Life scheme was in no way representative of a typical pension. It's true that it did fit the rules to be considered a pension wrapper, but if you look at how it worked it was basically an insurance premium as opposed to a more standard investment.

And that's important because it means you're exposed to massive counterparty risk (you only get your money back on the basis that EL can pay out) and depending on the regulations at the time, the accrued money may or may not have counted as an account in your name (it looks like it didn't).

On the other hand, if you're investing in shares via a typical pension company, the shares are assets in your name (i.e. you're the legal owner) which are held in trust for you in a nominee account operated by the company. If the provider goes bankrupt, your assets are segregated from theirs and cannot be claimed by creditors.

I was lucky by chance only - I chose one of the others, but you try telling those that did choose EL what a good idea pensions are and how essential it is to save in one and how it will "guarantee your future"

That's a massive generalisation, based on that one particular example (which, as noted above, was a particular kind of pension that was more vulnerable to failure to pay).

Besides, if people are saying it's essential to save in a pension then they're not being clear. What really matters is that you have a pot of several hundred thousand pounds that you can draw on in retirement to give yourself an income. Whether you've accumulated that inside a pension, inside an ISA, in "bare" savings accounts or via IOUs for hotdogs, it doesn't really matter. The only important part is to accumulate that fund; pensions are often (but not always) a good wrapper in which to do so because of the tax benefits.

As I noted above, start with the destination (the lump sum you'll need to buy the annuity you expect to need for retirement) and work back from there to work out a plan to accrue it most efficiently.

(And if you think that paying into a pension does "guarantee your future", that's verging on the naive from my perspective. They're not magic; you get out what you put in, modulo investment gains. And the gains themselves depend on what instrument you've chosen to invest.)

Indeed it seems to me from casual reading in the press generally that for employees below a certain wage level it will probably be better overall for them long term NOT to save for a pension as charges will overtake the gains and instead say sod you to HMG - you can pay when I'm 66.

Probably not, if the plans to introduce a flat-rate state pension (with no means-tested top-ups) go through, which looks quite likely.

Besides, if it makes you feel any better I'm broadly against any scheme that gives someone something for nothing, because it leads to these kind of perverse incentives.

dtsazza

PasturesNew wrote: »

I don't have a pension; lower rate tax payer all my life, never had an employer who gave out a pension. In/out of jobs for the past 20+ years as companies closed/downsized etc etc.... on the pensions board here, it was said that if you're a lower rate tax payer and no employer contributions, it's not really worth trying to 'do the right thing'.

Do you have a link to that thread, as I wouldn't have thought that was viable advice in general.

If people were talking about whether it's worth investing using the pension vehicle then that's a different matter - as a BR taxpayer you get relief on the way in but typically might pay BR tax again while drawing the pension, so there's not as much benefit as it might seem (still get 6.25% bonus from the tax free lump sum, and some of your pension income will be within the tax-free personal allowance in retirement, so I'd argue it's still likely to be the best vehicle for long-term savings).

If you were actually advised not to put aside any money yourself on the assumption that you'll be bailed out by a future government upping your state pension... it's possible, but I wouldn't want to count on it.

Oldernotwiser

olly300 wrote: »

I remember telling one of my mates, who is intelligent due to the job she holds, that the bank will charge interest on her overdraft once she wasn't a student. She didn't believe me until she was charged it.
.

You have no idea of the number of graduates who don't know that interest accrues on their student loan from the first day they receive it!