Preparedness for when

Frugalsod

moneyistooshorttomention wrote: »

I would say there are some advantages to this "career average" thing that has got put in in recent years. I may be wrong on that, but my own personal view would be that "career average" wouldn't disadvantage those who hadn't climbed the career ladder (for whatever reason) and would benefit those who had actually been put down to a lower payscale over the course of their worklife (for whatever reason). Those whose income had been cut would find that there was at least part of their pension that was being paid according to their "proper" (ie previous) rate of pay I would have thought.

Maybe I'm getting things wrong on that and somehow things have been twisted so that everyone loses out????

There are winners and losers in many systems. Final Salary schemes are brilliant if you have been average throughout your career and then in the last few years or even days you get a massive pay increase and then your pension will be based on that. It does mean that you never manage to pay in enough to cover the pension so everyone else is subsidising those who get big increases at the end of their career, like hospital consultants. They might be registrars for decades and then in the last few years of their career they get that final boost. If they were to move to an average salary scheme then they would lose out but then they would be no worse off than if they funded the pension themselves. The average person would be no worse off, if they stayed on the same rate for their entire career. The only difference is that defined benefits schemes like final salary schemes are easy for people to work out what their pension will be on retirement. Not so easy with an average salary scheme or defined contribution scheme.

greenbee

Frugalsod wrote: »

There are winners and losers in many systems. Final Salary schemes are brilliant if you have been average throughout your career and then in the last few years or even days you get a massive pay increase and then your pension will be based on that. It does mean that you never manage to pay in enough to cover the pension so everyone else is subsidising those who get big increases at the end of their career, like hospital consultants. They might be registrars for decades and then in the last few years of their career they get that final boost. If they were to move to an average salary scheme then they would lose out but then they would be no worse off than if they funded the pension themselves. The average person would be no worse off, if they stayed on the same rate for their entire career. The only difference is that defined benefits schemes like final salary schemes are easy for people to work out what their pension will be on retirement. Not so easy with an average salary scheme or defined contribution scheme.

It used to be pretty much standard in a lot of public services to get massive promotions/rises in the last year or so to boost pensions.

Career average is probably more appropriate with rising retirement ages, as it allows you to reduce the pace towards the end of your working life without putting your entire pension at risk.

GreyQueen

:T Congratulations to the DS of Westlothianlass, you must be made up.

My local govt pension scheme has gone over to the career average path already. As a minnow in the career pond, with less than 10 years' service and only well enough to work 60% of fte, I'm not expecting a lot anyway, and my state pension age is 67 (turning 50 next month). Lots can be changed in the next 17 years and I fully-expect to see the mythical pension age retreating like a mirage across the sands..........one can see it but never reach it.

I'm not going to lose too much sleep about it. When you need half your present income to cover rent and council tax, there isn't a lot of room for fancy manoervers with the remaining £100 a week. I shall continue to be nifty and thrifty and get on with life as best I can.

Actually, the most efficient use of my contibutions would be to die before drawing my pension so that my nominee (kid bruv) could get my death-in-service grant. I'm currently worth £33k dead, which is more than my net worth alive. Kid Bruv has loyally said he'd rather have me alive than the money, and without a micro-second of hestitation, thus preventing immediate disinheritance in favour of the cats' home...........:rotfl:

moneyistooshorttomention

Frugalsod wrote: »

There are winners and losers in many systems. Final Salary schemes are brilliant if you have been average throughout your career and then in the last few years or even days you get a massive pay increase and then your pension will be based on that. It does mean that you never manage to pay in enough to cover the pension so everyone else is subsidising those who get big increases at the end of their career, like hospital consultants. They might be registrars for decades and then in the last few years of their career they get that final boost. If they were to move to an average salary scheme then they would lose out but then they would be no worse off than if they funded the pension themselves. The average person would be no worse off, if they stayed on the same rate for their entire career. The only difference is that defined benefits schemes like final salary schemes are easy for people to work out what their pension will be on retirement. Not so easy with an average salary scheme or defined contribution scheme.

As you say, not easy to work out what it should be if based on "career average", rather than "final salary".

I have obviously wondered if they sit down and say "Right - year 1...they earnt £x, so uprate that y% for inflation over that number of years" and then "year 2 - they earnt £x plus 5% inflation rise, so uprate that" and so on and so on for however many years the person worked for them and it could be that they would have to be sitting down working out what inflation means Year 1, Year 2, Year 3, etc money is 40 years or so later and just how they would go about doing that. Thus, my wondering whether they do actually work out each individual years worth over the course of a whole working lifetime and adjusting accordingly for inflation over that time.

Much easier to sit down and say "Right...Freda Bloggs retired in 2012 (for the sake of argument) and we are going to base our calculations on what she earned in 2012 and never mind whether it was lower or higher money in the years beforehand".

Hence my wondering whether the career average is really based on average income allowing for inflation in each of these years and calculating accordingly. Hence my mind boggling at doing those sort of calculations, whereas one based on Freda Bloggs working a standard 40 year work lifetime and then retiring based on, say, £20,000 pa salary is easy enough for even me to get out my calculator and say "Based on that, then her annual pension will be and her lump sum will be...".

greenbee

moneyistooshorttomention wrote: »

As you say, not easy to work out what it should be if based on "career average", rather than "final salary".

I have obviously wondered if they sit down and say "Right - year 1...they earnt £x, so uprate that y% for inflation over that number of years" and then "year 2 - they earnt £x plus 5% inflation rise, so uprate that" and so on and so on for however many years the person worked for them and it could be that they would have to be sitting down working out what inflation means Year 1, Year 2, Year 3, etc money is 40 years or so later and just how they would go about doing that. Thus, my wondering whether they do actually work out each individual years worth over the course of a whole working lifetime and adjusting accordingly for inflation over that time.

Much easier to sit down and say "Right...Freda Bloggs retired in 2012 (for the sake of argument) and we are going to base our calculations on what she earned in 2012 and never mind whether it was lower or higher money in the years beforehand".

Hence my wondering whether the career average is really based on average income allowing for inflation in each of these years and calculating accordingly. Hence my mind boggling at doing those sort of calculations, whereas one based on Freda Bloggs working a standard 40 year work lifetime and then retiring based on, say, £20,000 pa salary is easy enough for even me to get out my calculator and say "Based on that, then her annual pension will be and her lump sum will be...".

It's pretty straightforward really. They had to work it out before they brought them in.

http://www.thisismoney.co.uk/money/pensions/article-1612167/Career-average-pensions-QA.html

Karmacat

DawnW wrote: »

... Because I had for many years prepped to some extent, saved, and been as self sufficient as possible, I was able earlier this year to take early retirement age 60, on a reduced pension (reduced by 25 % as I took retirement 5 years before I was 'supposed' to). OK, so pension is small, but I have preps and savings, and working till I dropped wasn't in my plan ...

Great post! I'm scheming all the time at the moment to get things sorted. Little bit of planning tonight on zoopla, downsizing to a flat, maybe, so I can buy two flats and rent one out (and my new aim is in my sig

moneyistooshorttomention wrote: »

My mind struggles to get my head round age 60 being regarded as "early retirement age" for a woman. I've duly retired myself at "retirement age" (ie 60 = because I am a woman) and done what prepping I can for the fact that I'm being made to wait for the State part of my pension as a consequence and will never receive the State money I should have had in between my retirement age and my revised State Pension Age:(:mad::(.

My retirement age has shifted twice, and I haven't quite thought about it like that _pale_ I'm going to be retiring in a little under two years, aged 61.5 I sound very much like an older version of Adrian Mole when I say that

Thank goodness I'm not the only one that insisted I was still going to retire at Retirement Age, regardless of when my SPA was....I don't know how many there are of us???

I'd like to say I'm another one, but I've really been bashed about these last few years financially, so I've not been able to. Still going to do it 4.5 years before the new SPA. Ha!

westlothianlass wrote: »

Got some wonderful news the other week, my DS got a job (where's the leaping about like a madwoman smilie when you need it):D
He is happy and enjoying himself which is wonderful to see.

Congratulations! Lovely news :beer:

DawnW

moneyistooshorttomention wrote: »

I
My mind struggles to get my head round age 60 being regarded as "early retirement age" for a woman. I've duly retired myself at "retirement age" (ie 60 = because I am a woman) and done what prepping I can for the fact that I'm being made to wait for the State part of my pension as a consequence and will never receive the State money I should have had in between my retirement age and my revised State Pension Age:(:mad::(.

DawnW = I'm wondering if you have any other tips besides the general "prepping" you did in order to cope with this gap in between retirement age and revised SPA? It's not my idea of "a load of fun" to have a temporarily reduced income and to find that in some places you are regarded as retired (and duly get pensioner discounts) and others want proof of being in receipt of State Pension before they will accept you have retired (and so you cant get your pensioner discount from them until you're through that "gap"). I've just had to hand over £12 extra above the pensioner rate for something the other day, because their definition of pensioner = proof of receipt of State pension.

Thank goodness I'm not the only one that insisted I was still going to retire at Retirement Age, regardless of when my SPA was....I don't know how many there are of us???

Funding the gap between retiring and receiving the state pension was something that I did think long and hard about while I was still working, especially as I was the main earner for quite a few years. My husband worked from age 15 but never earned very much, and took early retirement, also at 60, nearly 3 years ago, as he could take his (small) LA pension due to length of service. We consciously lived below our means, paid off the mortgage and saved with this gap in mind, but to be honest, 6 months on, we still haven't touched our savings, and have even added to them a bit.

Our income is hugely reduced, as I was on quite a good salary, and only had a limited number of years pension contributions, as I stayed at home with my children when they were young, and then went to university, worked for a few years and then went back to uni to do postgrad before returning to the workforce again. I went from around 40k salary to a pension of about 7k. OH's pension is about the same. We don't get any pensioners discounts, and pay in full for everything except for prescriptions which we get free now being over 60 We don't get any benefits or anything, and never have except for child benefit when the kids were at school. But then we don't need it to be honest, as we have enough - unlike many, we are lucky enough to have a warm house and good food.

Our house is modest (we couldn't afford to buy until we hit 50, as we had kids to educate and debts to pay off before we could start saving for a deposit). We both came from very modest backgrounds, with no help from family, so my country cottage / smallholding dream will not become reality except in the unlikely event one of our premium bonds comes up :rotfl: Instead, we live in a terrace with a small garden with our little dog, 2 chickens, and as many veggies, fruits and flowers as we can fit in We both have tiny businesses, hobbies more than anything, which make very little if any profit (but because we sell things need to be properly registered with HMRC etc, even though they make little or nothing out of us :rotfl:), and still run our 2 vehicles at the moment, though we will go down to one at some stage.

There is no secret at all really, we just lead fairly simple lives and don't spend much Not sure this is of any help though

jk0

This might interest you guys:

http://www.democracynow.org/2014/9/29/how_the_us_concocted_a_terror

[Deleted User]

DAWN you have found the way to contentment, the perfect formula to happiness and I can tell you are completely content with what you have and have tailored your needs and wants to your means. You are where most of us only dream of being,thank you for sharing your story it will be the inspiration that leads us to the belief we can all do it too, wonderful stuff!!!

Perplexed_Pineapple

Interesting discussions as always. The pensions thing, the whole state/private career average/final salary thing is about who gets the biggest slice of the pie, but the elephant in the room is that the pie is getting smaller. This article from ZH tells us why: http://www.zerohedge.com/news/2014-09-30/why-europes-doomsayers-are-right-one-chart (see the graph at the bottom).
In the next twenty years the ratio of people of working age supporting each pensioner will drop from about 2:1 ten years ago to 1:1. That's about when I expect to retire, but whether that will be possible and on what terms is unknowable at this stage. So planning for possibility of existence on a low income even while trying for better...