my dads private pension

Shaunyboy

Well guys I have enjoyed that.

I am going to have to draw a line under this as obviously people on low wages are just wasters but should forget the present day and put lots of their hard earned into lots of ickle pensions.

I have read all your comments but I am still not convinced that for low paid workers it is worth the sacrifice in the present to pod good money into a pension for something you may or may not get back in 50 years time.
I wonder how many people actually die between 18 and 68. Does anyone know?

I have seen far too many real life examples including close members of my family for me to change my mind.

If you are looking at it from the view of "the state" or "all honest paying taxpayers" then yes I concede the best thing to do if you are earning very little is to throw as much money into a pension scheme so you struggle with your daily life for 50 years and then when you are 68 you will save the taxpayers lots of money. Ain't life grand.

However, on an individual basis it is simply not worth throwing your hard earned into a pension scheme when earning a low wage when you balance it with the benefits you can enjoy in the present day use of it such as:-

Going to a museum, I recommend the V and A at the moment and the Surrealism exhibition, very enlightening and entertaining, especially the old lobster phones, always a winner for me. The exhibition is £9 but a welcome treat.

Going to a local footy game, normally only a few quid but lots of fun for all the family. FC United is only £7 a pop.

Go to the theatre for an evening. You might even learn something!

Instead of getting those value sausages splash out on the premium pork and leek ones they are delicious and well worth the extra and actually contain a bit of tasty meat as well. About £2.50 for 8. Treat yourself and get 16 for a fiver. Delicious!

etc.etc.etc.etc.etc.etc.......

I think you get the message.

Paul_Herring

Found the thread I was thinking of: http://boards.fool.co.uk/Message.asp?mid=10490920&sort=whole

jdey is the person I remembered.

jamesd

jdey needs to do better research.

"The average annuity is just 4%"

When replying earlier I found that it would be about 5.9% for a 68 year old with 3% per year increase to cover inflation. But that's not comparable to the bank savings accounts because those are more like level annuities. The level annuity at 68 would be 7.9% for a man.

jdey also seems to ignore the expected 9500 of taxable pension income that's completely free of tax. Ignoring no tax on 182 of income a week, after having received a tax rebate on it when contributing, is significant.

ISA above that has some merits, though. That's pretty much the normal view here, so jdey is far from alone in having it. But we're talking more about poor people in this discussion and that first 9500 a year is most of their expected income.

jdey also has the right idea with "if you're the type of person who has no savings, long periods of unemployment, are long term sick but not likely to die until you're 80, then I guess pensions have their place".

That's exactly the boat many low wage people find themselves in: unstable jobs, lots of unemployment, tough work making them more ill than average and not enough money to build up large savings pots. And 86 is currently the average life expectancy for a man retiring at 65. Lower for those doing lots of heavy manual work, though.

EdInvestor

dunstonh wrote: »

It's well known that the Govt cannot sustain the current level of benefits in the years to come without either taxing everyone to kingdom come or stopping benefits. As either extreme is unlikely to happen, you are most likely to see a middle ground of less benefits and more tax.

I see.So that's why the Government has

a)lowered the number of years NI required to get the state pension to 30, doubling overnight the number eligible (from 2010)

b) Increased the personal tax allowance for pensioners from 2011 so that all income up to 10k will be tax free

c)promised to relink the state pension to earnings from 2012

Evidence please that the Government cannot afford to do this..

EdInvestor

Shaunyboy wrote: »

I have read all your comments but I am still not convinced that for low paid workers it is worth the sacrifice in the present to pod good money into a pension for something you may or may not get back in 50 years time.

I agree.Low paid workers should save and invest their money in ISAs, so that if the savings would deprive them of benefits when they retire, they can spend the money on something useful (new roof, new boiler, new car, new hip) rather than have it locked up in a pension where it can only pay out a taxable income which cuts their benefits.There will be p[lenty of things they will need to stock up on if they are existing on benefits.

But just because they shouldn't save in pensions doesn't mean the low-paid shouldn't save at all.

jamesd

EdInvestor, with the money in ISAs it's pretty clear whether their savings will deprive them of benefits when they retire: yes. ISAs count against benefit eligibility and they do it at a far lower threshold than if the money was in a pension instead.

If their objective is to be eligible for benefits in retirement they should be using investment bonds, not ISAs.

The evidence that the government cannot afford to do those things is the changing dependency ratio, which implies a substantially increased tax burden that may become unacceptably high. Raising taxes (or national insurance) or increasing the age of retirement faster will help to make it more likely to be affordable by keeping more of the costs with the large retiring generation who will be receiving the benefits instead of shifting it to their children.

shokadelika

dunstonh wrote: »

You could get upto £8000 a year from state pensions as a single person. That is only just short of the pension credit amount.

An 18 year old paying £35pm net keeping it up with inflation each year (so it remains £35 in real terms) would end up with around £10k a year income in retirement in real terms. There are not too many people in this country that couldnt afford that. Of course, it may mean that they cant have the full sky package or perhaps 1 less McDonalds a week.

Ahem have you tried living on £10K a year Today ! many people HAVE TO and don't forget that your cheapest Council Tax is going to reduce that figure to £9K then rent! gas electric water rates...........food..clothes ! Who are you kidding?


A friend has the princely sum of a £35 a week works (private sic) pension this person at the age of 70 is still working and has worked since they left school aged 14.
The pension pays her poll tax in with one hand out with the other so how is she better off for having that pension still on the "breadline!".


Oh and she doesnt eat Mcdonalds smoke drink gamble or have Sky!.


You fail to point out the fact that most 18 year olds are not interested in pensions or saving for their retirement because they are going to live forever anyway! and if you earn £80 a week then £8.75 (£35 a month) is a large percentage of their income.

The problem is the benefit taper penalises those on low incomes who are slightly above the earnings threshold.
I guess for a 18 year old retiring in say 47 years time that that wonderfull £10k you quote will penalise them in exactly the same way!.

Of course Dunstohn I guess your dealings with these type of people is minimal!.

dunstonh

Ahem have you tried living on £10K a year Today !

Have you considered living on it when you arent working 8 hours a day and have more free time?

Paul_Herring

EdInvestor wrote: »

I see.So that's why the Government has

a)lowered the number of years NI required to get the state pension to 30, doubling overnight the number eligible (from 2010)

b) Increased the personal tax allowance for pensioners from 2011 so that all income up to 10k will be tax free

c)promised to relink the state pension to earnings from 2012

Evidence please that the Government cannot afford to do this..

Um.... lets think..

Why are all these dates in the future? Why aren't they all effective as of, for sake of arguement, now?

Inquiring minds would like to know...

To address your points:

a) What about the people in the middle ground?
b) What about inflation in the interim? It's already devalued compared to today's prices.
c) see (b) but replace 'today's' with 'years ago'

To the inmplicit question I ask, which PM (or indeed party) will *definately* implement these changes? Before typing an answer, I refer the honorable poster to various pension changes the current incumbants have made over the past ten years.

jamesd

shokadelica, no problem for me to live on 10k a year after tax and NI, including all of the bills you mention, plus cable TV and internet. My current budget history shows I've been spending at just over that rate. It's still good to have more than this available.