Something that doesn't seem to get mentioned

chewmylegoff

RenovationMan wrote: »

Interesting. What advice would you give to Graham?

since he works in local government (i think) i would advise him to pay into his pension, which more than likely comes with a reasonable employers pension contribution.


with everything else he has he should buy silver, and then try to ramp it on this website.

IveSeenTheLight

Joeskeppi wrote: »

My wife started her pension at 22, I started mine at 28.

All my mates at work are on the work pension scheme, but a lot of my self employed friends are still looking to property for their pensions.

Edit: Should probably add, the pension scheme I'm on is pretty generous

I thought these type of pensions were being phased out as it discriminates against age.

You could have one employee aged 24 with 4 years service that only gets 4% from the company , whilst a new start at 55 would get 16%

IveSeenTheLight

Snooze wrote: »

:huh:

Surely you are nearly 38 now, not 40.

Pedantically of course you are correct.
However in terms of the OP's question regarding those at 40, I believe I qualify as being nearly that age

wannabehermit

Voyager2002 wrote: »

No, disposable incomes have never been that much higher than they are now.

What your post reveals is a lack of knowledge about how to live cheaply: the kind of skills that are discussed on the Old Style board here. Back in the 60s and 70s, families were able to put money into pensions and mortgage repayments because many of them did not have a car, and those that did only used it when necessary. My dad had 3!!! motorbikes, my mum & I travelled on buses, school holidays we hired a car. When our last car died we looked into this ourselves. There is no public transport to DHs work, it is too far to walk or cycle, even train part way and cycling the rest would be more expensive than the cost of running our car. Hiring a car for the school holidays would be very expensive and the cost was more for one week than our finance payments for 4 months. Therefore more cost effective for us to have a car. Children got to school on foot or by bus, and so expenditure on petrol was much lower. My children have never been driven to school (helps having the school at the end of the road ) but they wouldn't even if it was half hour walk away. When they're in senior shcool they will walk or if it's a school that is further away then they will have a bus pass. Food was prepared in the house from unprocessed (affordable) ingredients: ready-meals were virtually unknown, take-aways were an unusual treat and restaurant meals a rare luxury. All of our food is cooked from scratch, with the exception of 'cheap pasta' - 18p for a bag od pasta, 25p for a jar of sauce. DDs meals are also all cooked from scratch and frozen to be used later. The only time she has a jar is if we are going out as many places will only heat up sealed food. Telephone calls were expensive and so made only when really necessary. Free calls on our mobiles - £12.25 per month) Of course, living like this demanded a great deal of time and trouble, which was generally provided by the unpaid labour of women (who typically were employed for fewer hours than were men, at far lower wages, and so began work again when they returned home).

In short, the corporate advertising machine has convinced many of us that "survival" means living at a far higher level than what was regarded as luxury until recently. And the fact that most households are no longer subsidised by 'free' female labour means that they need to buy in substitutes for this, such as more expensive prepared food rather than cheaper unprepared ingredients. The sad thing is that few people recognise that these are choices, and possess the skills to use time instead of money as required.

I do actually agree with your post, but for my family it's not the case.

ILW

Annuities are now paying around 4% and this is expected to keep falling.
With inflation expected to be pretty high over the foreseable future, is it worth it?

RenovationMan

chewmylegoff wrote: »

except your objective should be to get as much money after tax as possible, rather than to pay no tax at all.

Yes, and the best way to get more money after tax is not to pay tax at all, which is the most efficient way to organise your finances. Ask any millionaire whether he employes tax avoidance strategies in order increase his wealth.

chewmylegoff wrote: »

(i) the above ignores the 25% tax free lump sum you can draw from a pension, when considering pension vs isa.

I said to Graham "make sure that your pension projection does not take you above the age related personal allowance". The pension projection would have the various options available, including withdrawing 25% tax free, setting up spouse pension, having the pension index linked, having a 5 year guarantee. Each option will have a different pension projection and it is upto Graham to decide which option to chose. When he has chosen his pension option he needs to ensure it doesn't go above his age related pension.

chewmylegoff wrote: »

(ii) if you are a higher rate tax payer, then you get 40% tax relief when paying into a pension now, but would likely only be paying 20% tax as a pensioner. if instead you pay into an ISA now, you pay 40% tax now before you pay it into the ISA, in order to avoid 20% tax later.

Graham isn't a higher rate tax payer and as I was answering his post, I didn't need to mention this.

chewmylegoff wrote: »

(iii) if you are receiving employer contributions into your pension which depend upon the amount that you pay in, then you would be foolish to pass these up in order to try to manage the amount of tax you would pay in 30 odd years time when the tax system and state pension may both be completely different.

Graham stated that he has started his own pension plan up a year ago. I assume that he therefore does not have access to a company pension.

I was answering Graham's post based on Graham's circumstances. We are not on the pensions board having a discussion about Pensions Vs ISA. Graham has made the decision to rely on the state pension with a private pension supplementing it. I would not go down this route myself, but then I have a significant pension pot built up from years in company pensions schemes, which not everyone is lucky enough to have.

For people who have no access to employer contributions and who are basic rate tax payers, the strategy I have outlined to Graham is what I consider to be the best available. If you think not then please challenge but challenge based on this scenario.

Snooze

I'm pretty radical when it comes to pensions, ie. I don't have one and I don't hany any plans to have one and I am in my mid 30s. I've no doubt that most of the I-have-my-entire-life-already-planned-out-ahead-of-me brigade would be very "OMGWTF" at that but I choose to live my life as it happens and not worry too much about what may - or may not - happen decades into the future.

That said, I do agree with AD9898 that by the time I reach retiring age the state pension either won't exist or be worth so little that it's neither use nor ornament so I do have an ever-growing stash of cash accumulating in Snooze's Under-The-Mattress Savings Account LTD (not Government backed..).

I've seen it happen with other family relatives where they have scrimped, saved and lived frugally all their lives for "a rainy day" and then when they've actually reached retirement to enjoy all that money they've saved they have fallen ill and not been able to enjoy any of it. Sure, they've not had to worry about care costs but to my mind it's just one complete and utter waste of a life. I would much rather use my money when I'm still relatively young, fit and healthy to enjoy it rather than hoping I still am when I reach retirement age.

And anyway, speak to most retirees and they'll tell you how they were over the moon when their retirement day arrived; they went on their cruise, bought the new car, had the extension done, but now they are bored as hell and wish they were back at work! :rotfl: I am actually looking forward to still "working" well into my retirement simply because in my line of work it's something that I enjoy and will keep me occupied when I'm not doing other stuff. I think if you are PC literate and internet savvy you will not have a problem sourcing an income stream to support yourself in your retirement.

Linton

ILW wrote: »

Annuities are now paying around 4% and this is expected to keep falling.
With inflation expected to be pretty high over the foreseable future, is it worth it?

RPI linked annuities are around 3%, fixed ones twice that.

Is what worth it? Saving for the future is always better than not saving for the future. Broadly and over the long term share prices tend to keep pace with inflation, although of course with wild fluctuations.

Whether annuities are worth it is another discussion.

StevieJ

Linton wrote: »

As to not being able to afford it - almost certainly rubbish. How much do you spend on your mobile phone, Sky, going out etc etc? Its just a question of priorities.

Suggest you and anyone thinking the same find out the facts quickly. Perhaps a wander and a few questions over on the pensions board would help.

It may be a question of priorites but I think for a young person 'going out' should come well before providing for a pension, otherwise that 25 years of living on a state pension will be extended to the whole of their adult life

Graham_Devon

Going out?! The horror of it all.

Would never have happened in the 60s,70s,80 or 90's. The youth of today simply want it all.