MSE News: Automatic pension enrolment - what it means for you

dunstonh

Not so long ago early retirement age was 50 now its 55...this is my point...by the time I decide to retire will it be 60 or more before I take my 'tax - free ' lump sum.

Please point to any legislation, current or proposed that indicates that the minimum age is going to increase from 55 to 60?

I prefer control of my money - of course financial advisors will promote this as it keeps a job over their heads...but as we were taught in actuarial training 'money in your hands today is better than next year'....well sort of - there were a few monetary rate jargon/terms thrown in.

Financial advisers will recommend this as free money beats no free money every time.

If you are likely to retire at 55 (which is statistically unlikely) then fund age 55-60 using other means and use the pension with its free money to provide income post age 60. By not taking advantage of the free money you are making it harder for yourself.

Daniel_Elkington

Either save today spend tomorrow or spend today and struggle tomorrow.

I see too many people who have disposable income of about £1500 a month and they spend it all. They have no pension and are relying on their home to fund their retirement - not clever.

I'm saving into ISA at the moment as I'm young and have just started a business and never know when I'm going to need cash. When my income steadies a bit then I'll start paying into a pension to get the tax relief.

Tom_Brine

Hi Dunstonh

I have to admit to being a bit sceptical about pensions. I just last week contacted Wiltshire Council whom I remembered I had paid into a pension fund whilst employed with them over 6 years ago. I worked for them for two years. The other day I received my statement from them......

£46 a year and a lump sum of £103. Basically, completely useless.

I am paying into what I am told is a very good pension in my current job. I pay 6.5% of my £21,171 salary and my employer contributes 19%. Upon retirement I will get 1/90th X career average salary X service for my pension an a lump sum of 3 times the pension amount. I have been working here since March.

If I leave the job for another company I can not transfer my pension as it is salary sacrifice. So lets say after a year I look for and get a better paid job (As I have not yet stopped in my ambition to climb). I will get £235.23 a year (£19 a month) to add to my £46 a year (£3.80 a month) from my old pension. I pay £110.27 a month currently so over a year would pay £1323.24. So it would take just under 6 years to get back just the money I had paid in, never minds its reduced value due to inflation. So I would be 71 before saw the start of my employers contributions, which are three times my own. So another 18 years. I will be dead well before then. What happens to that money I have. Answer, I dont get it. Nor do I see much of the supposed benefits of having a pension due to death being not far off once they begin to be paid.

I will be honest looking at that it does not seem worth it. I would rather buy a house, rent a room out to help pay for it. Then in 20 years time buy a flat or second house and use rental income to fund my old age (and to add my little pensions I have built up everywhere to)

It just doesn't seem worth the time as not many people work for the same company for 60 years these days. I pay into them thinking its the right thing to do but think Id be better off funding my own retirement plan of a second property instead. A lot of people auto enrolled will think the same thing, especially those on minimum wage, and will opt out.

Daniel_Elkington

Are you planning on taking out 6 year mortgages to pay off those B2L's you are after?

Take your average 3-bed £90K house (as you need it in decent nick to keep the maintainence costs down). Over 6 years at 80% LTV and 5% interest you'll be looking at £1,200 a month on repayments alone, never mind all the other costs - this is pretty much your annual pension contributions at the moment, that aren't yielding enough for you.

I'm not sure you'll find that property in a place that resplendent with tenants.

Don't even mention interest only - you have to pay to collect rent, you have to maintain the house (and don't let it mount up as then in a few years it will be uninhabitable), you have to pay the interest, you have to pay B&C insurance.

Property is a fantastic thing as you can gear it easily, however it only works if you pay off the debt and then gear more property/ies until you have a portfolio that is valuable enough to pay a decent income. The whole point is to gear it and use all the rent to pay off the mortgage so in 15-20 years you have an asset that produces an income. If you don't do this you will struggle and fail.

Tom_Brine

I would not purchase either as buy to let. I would live in the first property and rent a room (or two) to expediate paying the mortgage (In my area a room goes for on average £450 a month, two tennants equals £900 extra income per month - tax). All of that money goes into paying off the mortgage along with an input from myself (the small input means I am able to save £400 a month towards a future house deposit). In 20 years time that would have meant the house has paid for itself due to me probably being able to pay £1000 or more a month towards the mortgage. I then own the property and have a substantial saving for a second deposit.

I then buy a flat or smaller house for myself to live in, without selling the first. I rent out a third room in the property, my old room, meaning the income becomes a possible £1350 a month, lets say £1250 if one of the room was smaller. That money is not needed for that house as the mortgage is paid. I use it on top of my salary to pay of the new smaller house quickly.

In old age I have my own house paid for and a pension income of £1250 a month rental from my second property.

My point is that plan (simplistic I know but a good core) makes sense to me, and I can see the goal and that it is obtainable. My pensions seem worthless for what they are supposed to provide and in no way able to self fund my old age. With the above plan they become a tertiary addition to my main, liveable income.

When I feel I only have 5 years or so left I sell the second house for a lump sum and live up my last days on this earth

Pincher

You should do a thread, and update it once a year, to report on your property empire. When you retire, let's see how you have done. we need somebody to start one based on the Auto-Enrolment path. Could do it using the same thread.

You never know with life.

I had a lecturer, who turned up in the 60's in London from Australia. Bought a house, and played landlord to his fellow students. Got a property empire together and couldn't just let it tick over. Sold most of it to start an IT company. Lost it all in the 80's, and started teaching computer programming.

I can't wait, is there a time machine so I can the see result now?

julytex

Does anyone know what happens if you change jobs, I already have a stakeholder plan from when I was self employed - I don't want to end up with lots of different pots

dunstonh

I have to admit to being a bit sceptical about pensions. I just last week contacted Wiltshire Council whom I remembered I had paid into a pension fund whilst employed with them over 6 years ago. I worked for them for two years. The other day I received my statement from them......

£46 a year and a lump sum of £103. Basically, completely useless.

It probably cost your a fraction of that. its useless because you were only in it a short time.

I am paying into what I am told is a very good pension in my current job. I pay 6.5% of my £21,171 salary and my employer contributes 19%. Upon retirement I will get 1/90th X career average salary X service for my pension an a lump sum of 3 times the pension amount. I have been working here since March.

The employer contribution is irrelevant to the benefits. The council scheme you said was useless is better than this one. The difference will be time of membership.

If I leave the job for another company I can not transfer my pension as it is salary sacrifice.

Yes you can transfer it. Although it is unlikely to be of benefit to do so.

So lets say after a year I look for and get a better paid job (As I have not yet stopped in my ambition to climb). I will get £235.23 a year (£19 a month) to add to my £46 a year (£3.80 a month) from my old pension. I pay £110.27 a month currently so over a year would pay £1323.24. So it would take just under 6 years to get back just the money I had paid in, never minds its reduced value due to inflation. So I would be 71 before saw the start of my employers contributions,
which are three times my own. So another 18 years. I will be dead well before then. What happens to that money I have. Answer, I dont get it. Nor do I see much of the supposed benefits of having a pension due to death being not far off once they begin to be paid.

You are not calculating it right. You are seriously understating the benefit. Plus you are ignoring tax relief and lower NI payments.

The defined benefit scheme should easily beat property on a like for like basis for every £1 of cost.

dunstonh

Does anyone know what happens if you change jobs, I already have a stakeholder plan from when I was self employed - I don't want to end up with lots of different pots

Transfer them to consolidate them.

tenbags

Eellogofusciouhipoppokunu wrote: »

Whenever I see a post like yours I always ask the following question: "So what are you doing to provide for your retirement income?".

I rarely if ever get a reasonable reply but I live in hope.

Well nothing unless you can afford to, many people nowadays are living on the breadline, and this is just another stealth tax on individuals to be invested in some public schoolboys future?....Why shouldn't people use money now and worry about this later? instead of relying on some Pension scheme to flit your hard earned money away while taking huge profits now and spending them now on property/pensions for their retirement?

it looks great on paper but can they guarantee the money will have a guaranteed return?