Private sector pension contribution rates

richyggg

When I started , there were still DB schemes in the private sector. These have become unaffordable for companies, due to increasing length of retirement and government meddling - including GB taxing pension fund yields. So they have all but closed. The gov should have been happy that private companies were providing pensions for individuals - instead they dipped in and robbed.

To get just a reasonable pension, a person will have to accumulate a pot of £1m, or try to continue working. Very difficult to achieve, even on £45K at 29, for various reasons, including fund charges (1%-3% of fund value pa). I am sure that most people in the private sector won't even begin to try to get 100Ks in their pension pots. I'm not sure it's a good idea myself.

richyggg

I have had another look at my pension yearly report.
Projected pot at 65, if 7% growth pa (no chance), and 2.5% wage growth pa (unlikely) , £438,000 to buy a yearly pension of £12225.

Is that right ? Do they think I'm going to live to 100 ?

I have a change of plan - 10% in to get matching 10%. Have 15 years of decent retirement from 60 - after that I am going begging door to door of public sector pensioner households.

BobQ

Andy_L wrote: »

They are, however the good ones leave for the private sector as the public sector can't/won't pay as much

Very true, but I suspect they (public sector) are fed up with investing in training in scarce skills only to find those they train leave for jobs that exploit those skills in a highly commercial market. Far better to sub-contract the IT work.

redbuzzard

richyggg wrote: »

I have had another look at my pension yearly report.
Projected pot at 65, if 7% growth pa (no chance), and 2.5% wage growth pa (unlikely) , £438,000 to buy a yearly pension of £12225.

Is that right ? Do they think I'm going to live to 100 ?.

Sounds about right for an inflation linked annuity. Level would be about double.

Hits the nail on the head really. With current annuity rates, if you want a £25k pension with some inflation protection and spouse pension on death, not an extravagant ambition, then you need £1m in your pot. Insane. I can see drawdown really catching on, which could of course lead to widespread problems in a few years.

richyggg

I'm really glad I checked that. I will reduce my contributions to only that which is matched by employer. I might then get out what I put in.

tony4147

redbuzzard wrote: »

Sounds about right for an inflation linked annuity. Level would be about double.

Hits the nail on the head really. With current annuity rates, if you want a £25k pension with some inflation protection and spouse pension on death, not an extravagant ambition, then you need £1m in your pot. Insane. I can see drawdown really catching on, which could of course lead to widespread problems in a few years.

Do people need inflation protection on their annuities? In reality if I retire at 65 do I need the same income when I'm 85/90? can't see myself buying a new car when I'm 85 or going on holidays as often etc.

hugheskevi

Do people need inflation protection on their annuities? In reality if I retire at 65 do I need the same income when I'm 85/90? can't see myself buying a new car when I'm 85 or going on holidays as often etc.

Income needs over retirement are generally considered to be U-shaped. Folk need high income when in the early phase of retirement as they are still very active. Needs fall as they become less active, before escalating again at the end of retirement as they start to need care.

Despite the cost profile of retirement, I'd argue most people would want inflation protection on at least some of their income - inflation levels of the 1960s and 1970s can easily happen again and over a 30 year retirement period would massively reduce the value of a non-escatlating income. For some people, the amount provided by the State Pension may suffice. Others may have some Defined Benefit income which has inflation protection.

real1314

FatherAbraham wrote: »

This would be funny, if it weren't so sad.
If your argument for supporting the excessively generous public-sector pension scheme is that it helps the lower-paid
FA

jem16 wrote: »

Of course it is. That's why it's also meaningless to generalise that a public sector defined benefit pension is always miles better.

You've slipped up there jem - it's not that public sector pensions are "always miles better" it's that they are "excessively generous" or even "vastly overgenerous" or "the elite... ...nauseating public sector pensions" - which FA has agreed actually bias toward the lower paid and against the higher paid in the public sector.

Of course, giving lower paid people decent, even generous pensions is surely a bad thing. Thankfully I'm not a low paid public sector worker though.

Oh and for the public pay vs private pay and regional impact thing the cabinet office got an independant survey done by hays that was published in dec 2012 - it should be more valid than the vague and ideologically driven reports of the various pressure groups, whether left or right baised.

http://old.cabinetoffice.gov.uk/sites/default/files/resources/CO_Market_Facing_Pay_Report-10-Dec%2012.PDF