Pension,is it relly worth it?

neil298

Just a quick question,My wife has decided recently that at the age of 53 she should really try and put something away in a pension fund,We are well covered with life insurance and house equity but she is worried that if anything happens to me she needs to have something.She now pays £100 per month and has been notified that her pension will be £117 per month from her retirement age(66).Now to me that seems a liitle bit ridiculous.It basically means that if she is to see any benefit at all she will have to live beyond 76 years of age.Surely the £15,000 plus that she will pay in contributions between now and the age of 66 could be better used elsewhere?.Judging by what the government have done with my pension(albeit a very small one)pensions just dont seem to be a very good way of investing.

JoeCrystal

£100 per month at age of 53 is far too low. As matter of fact, most personal pension funds requires £100 per month at minimum. Here is pension calculator that may help you to figure out just how much is needed.

The simple fact is that saving for retirement should be done over working life (Basically forty years). Your wife got lot of catching up to do.

On other hand, if this is her sole pension, then providing she keep it below a certain amount, she can withdraw the entire amount as lump sum. Bearing in mind that you get a tax relief of 20%, that may be worth doing. Where else could you get 20% extra on top? Of course, the governments may change the rules in the future so that itself is unpredictable as well.

Cheers,
Joe

neil298

I appreciate that it is not a lot of money but the rest of her wages are needed to live on,Looks like the bungalow is going to have to fund whatever lifestyle we want in older age!!.I did have about 28k in my pension but the government has reduced that to well below 20k over the last few years so maybe if i do reach 66 I could buy myself a nice 3 piece suite!..result!

Linton

neil298 wrote: »

......She now pays £100 per month and has been notified that her pension will be £117 per month from her retirement age(66).Now to me that seems a liitle bit ridiculous.It basically means that if she is to see any benefit at all she will have to live beyond 76 years of age.....

If she is of average health she can expect to live about 10 years longer than that so it's not so bad. If it and State Pension will be her only income after your demise then she should be below the tax threshold. Which means she is getting tax relief for her contributions now and wont have to pay tax on the pension income. This sounds like a Good Thing.

But £117/month is not very much. Retirement is really something that should have been considered many years ago. Wont she gain anything from your retirement provision?

Linton

neil298 wrote: »

I appreciate that it is not a lot of money but the rest of her wages are needed to live on,Looks like the bungalow is going to have to fund whatever lifestyle we want in older age!!.I did have about 28k in my pension but the government has reduced that to well below 20k over the last few years so maybe if i do reach 66 I could buy myself a nice 3 piece suite!..result!

Oh dear, I am sorry it does look like you have a problem unless you can rapidly save up quite a bit of £££. I dont see how the government has reduced your pension pot. It has never taken money from existing pensions. The cause of your problems would seem to be that you never put enough into your pensions.

CLAPTON

you wife is likely to contribute for say about 14 years and draw out for maybe 25 years
the maths is pretty easy to do

dunstonh

.She now pays £100 per month and has been notified that her pension will be £117 per month from her retirement age(66).Now to me that seems a liitle bit ridiculous.

£100pm is a good contribution for a 20 year old. It is dire for a 53 year old. However, remember that the projection will be in todays terms. So, you cant compare £100pm (gross or net) with £100pm in retirement.

Surely the £15,000 plus that she will pay in contributions between now and the age of 66 could be better used elsewhere?

Such as?

As pensions will provide her the highest income of all the conventional options, what do you propose as being better?

Judging by what the government have done with my pension(albeit a very small one)pensions just dont seem to be a very good way of investing.

What have the Govt done to your pension?

Thrugelmir

neil298 wrote: »

It basically means that if she is to see any benefit at all she will have to live beyond 76 years of age.

Average life expectancy is now well into the 80's. Living into your 90's isn't going to be uncommon for many.

webmasterpolo

Hi Neil

"I did have about 28k in my pension but the government has reduced that to well below 20k over the last few years"

What are you talking about????

I can only assume that you have a pension scheme that is invested and the investment has fallen by £8k over "the last few years". This will be very little to do with the current government, and more about the economic downturn across the globe.

-Web

neil298

Yes exactly that but can I not hold the government responsible for the economic downturn?

thanks for the other replies and yes we should have thought about it more but ive still yet to find many that think the pension they thought they were going to get was what they've ended up with.Unfortunately I had to start from scratch in my forties and these fantastic monthly figures that are quoted to give you the 'lifestyle' in your retirement were always needed just to live at the time.In fact I think there are very few people that can put aside the amounts recommended.

I think Ive really answered my own question really and that downsizing when older to raise funds is probably the way i'll have to go.Having had cancer recently means i probably wont have to worry about too far ahead but was really looking to make sure that 'er indoors' wasnt wasting her time putting this small amount by.
Thanks to all your replies people:)

dunstonh

Yes exactly that but can I not hold the government responsible for the economic downturn?

No. You get recessions and you get growth periods. You know you will get both at times and every now and then a major event will occur. As this was a global event, which Government do you wish to make responsible?

ive still yet to find many that think the pension they thought they were going to get was what they've ended up with.

Not uncommon but its usually because people start a pension that gives an illustration of benefits that looks quite good. Problem is that the contribution they pay never gets topped and inflation erodes its value in real terms. I see people that started £30pm in 1988. that was a good contribution back then. However, they are still paying £30pm now. In 1988, you fill a tank of petrol for under £10. Your gas bill was 1/10th of what it is now. Houses, cost a third of what they do now. All these other things people pay more for but they leave their pension at the same amount and then wonder why they dont get more. Typically, they go on to blame the pension but in reality it is their failure to increase the premium into the pension in real terms.

In fact I think there are very few people that can put aside the amounts recommended.

25 years ago people were more prepared to save and put money aside and could easily achieve it. Today, they would rather buy consumer goods and say they cant afford it.

downsizing when older to raise funds is probably the way i'll have to go.

Rarely works as planned. You can often lose around £20,000 in costs in downsizing and unless you have a particularly high value property to sell and can move to a cheaper area, people rarely achieve what they think.

It isnt easy when you start late. A 20 year old can do £100pm (increasing annually for cost of living) and end up with a pretty decent pension in retirement.
Unless you start young, you are always going to find it hard. If you have children, get them into the savings and planning habit