Raising the pension age in order to pay for pensions

N1AK

grizzly1911 wrote: »

I doubt I will be here in 40 years time but something tells me the position won't have altered materially.

Those with half decent jobs and careers have usually participated in pension schemes.

For those in the lower paid, temporary, part time jobs it will always be more difficult to make any meaningful provision.


Add that to the loss of public sector pension entitlement through privatisations and poorer employment terms (where the savings are largely made) and for many the position could be even worse.

It is certainly more difficult to make contributions on a lower income; I certainly don't envy anyone having to get by on NMW let alone get by and save for the future.

That said, I think part of the issue is that people see getting a decent pension as so difficult that only the rich can afford it. Partly the problem here is that no one really knows what they will get from the state, so it is very hard to know what your paying in money to top up.

I'm be strongly inclined to look at increasing the NMW by £0.25 while also requiring that all employees contribute at least £0.25 to a pension. As everyone would then have a pension it would at least slightly decrease the cost of providing support to the elderly in future and hopefully would encourage people to consider saving more.
Sure £500pa isn't going to get someone a good pension, but it's likely to be worth £1,500pa+ when they retire. To put that in context for a couple currently getting the full state pension of £9159.80 that would be a 30% increase in earnings, which is certainly a meaningful increase.

Thrugelmir

N1AK wrote: »

Sure £500pa isn't going to get someone a good pension,

That's precisely the issue. People need to start early and save whatever they can. Over the years the pot will grow. Too many people don't have pensions as a priority in younger life.

BTL isn't the answer either as many seem to think. Maybe part of good pension provision. However not the sole source of income. Not least the lack of tax efficiency.

grizzly1911

Thrugelmir wrote: »

That's precisely the issue. People need to start early and save whatever they can. Over the years the pot will grow.

I agree.

Thrugelmir wrote: »

Too many people don't have pensions as a priority in younger life.

Unfortunately many more young people have a lot of other things to contend with younger in life than in the past. Student debt, living away from home following graduation for instance. then 3 years or more qualifying professionally. Not quite the same as joining a local company or going to work for a blue chip at 18.

Could well be late 20s, early 30s before some form of stability kicks in.

Loughton_Monkey

grizzly1911 wrote: »

.......Unfortunately many more young people have a lot of other things to contend with younger in life than in the past. Student debt, living away from home following graduation for instance. then 3 years or more qualifying professionally. Not quite the same as joining a local company or going to work for a blue chip at 18.

Could well be late 20s, early 30s before some form of stability kicks in.

Youngsters can say this all they like. You can say it on their behalf. But that doesn't make it true.

About the only thing I sympathise with is the student debt, but that is a small 'delayed' problem to be dealt with only when 'good' earnings follow. In the meantime, they are in cash terms no worse off than anyone else.

If you were to say young people choose to contend with other priorities when they are young then I would agree. I see a lot of it first hand. Like a mid-20's lad with a good job, miniscule pension contributions, no pay freeze, but about £500 in debt. But buys a new £350 laptop despite his existing one being perfectly OK. Another mid 20-s lass. Again very good job. Company BMW. Proud she is 'not spending' all her income. But doggedly refuses to join the company pension scheme at 7% employee, 14% employer contribution!!!!! After about 5 years of this, I learn that she has finally joined now she is higher rate tax!

These are just real, but random things I see personally [not my kids, fortunately because I don't have any.] But this type of thing is just a 'serial' and continual conglomeration of extremely poor life choices [not through lack of brains].

This is later-life 'poverty' in the making, before my very eyes. Why, oh why, oh why am I supposed to have a milligram of sympathy? It defies all logic to me.

BobQ

There will always be people who make poor life choices, live for today and hope that tomorrow will sort itself out. Its not just young people. Many in their mid 30s-mid 40s still refuse to put (enough) money into a pension and will live to regret it.


The solution has to be to make pension contributions compulsory to a minimum level and incentivised beyond that. But this will not solve the problem of those in poorly paid jobs where they cannot afford decent contributions and its commercially uneconomic to have such a small pension pot.


I also agree with the OP that those who have manual jobs may not be well equipped to work until they are 78. That said, those with less physically arduous jobs may also struggle to cope with failing eyesight, repetitive strain injuries, back problems and the like. Those developing pension policies must take this into account unless we anticipate paying increasing levels of disability payments. Equally, those who want to retire at a younger age need to be prepared to plan for it and if necessarily make sacrifices to enable it.

New_and_Improved_Me

Thrugelmir wrote: »

BTL isn't the answer either as many seem to think. Maybe part of good pension provision. However not the sole source of income. Not least the lack of tax efficiency.

I disagree with this statement.

BT L 'CAN' be the answer IF planned properly.

Look at it this way -

Scenario A - 6/8 BLT properties, giving you a yield of circ. 2500 per month after tax. With 20% mortgage.

Scenario B - 6/8 BLT properties, giving you a yield of 2500 per month after tax, with 80% mortgage.

scenario A would work perfectly well for retirement but scenario B would NOT because if you had a problemand 2/3 properties were empty your up Creek. You will struggle to make motgage payments

so in my opinion BTL CAN work if planned correctly and the properties are NOT mortgaged to the hilt.

CLAPTON

BobQ wrote: »

There will always be people who make poor life choices, live for today and hope that tomorrow will sort itself out. Its not just young people. Many in their mid 30s-mid 40s still refuse to put (enough) money into a pension and will live to regret it.


The solution has to be to make pension contributions compulsory to a minimum level and incentivised beyond that. But this will not solve the problem of those in poorly paid jobs where they cannot afford decent contributions and its commercially uneconomic to have such a small pension pot.


I also agree with the OP that those who have manual jobs may not be well equipped to work until they are 78. That said, those with less physically arduous jobs may also struggle to cope with failing eyesight, repetitive strain injuries, back problems and the like. Those developing pension policies must take this into account unless we anticipate paying increasing levels of disability payments. Equally, those who want to retire at a younger age need to be prepared to plan for it and if necessarily make sacrifices to enable it.

how exactly does 'compulsory' contributions differ from taxation?
one significant difference, one assumes is that the richer people in employment will get a higher pension that the poor?

vivatifosi

I attended a pensions meeting yesterday. It was interesting to hear how successful auto enrolment has been, with relatively few people opting out. Having said that, the base is low at which they are contributing, so it depends on whether you subscribe to the "anything is good" view. My own view is that state top ups won't exist, so any extra is good, plus of course people benefit from the employer top up.

I do think that in the future the state will give a base and then say "you opted out and made no provision, your problem". Though given that governments of all colours like to tinker with pensions, making financial planning with or without the state element v difficult; I could be completely wrong.

Thrugelmir

New_and_Improved_Me wrote: »

I disagree with this statement.

BT L 'CAN' be the answer IF planned properly.

Look at it this way -

Scenario A - 6/8 BLT properties, giving you a yield of circ. 2500 per month after tax. With 20% mortgage.

Scenario B - 6/8 BLT properties, giving you a yield of 2500 per month after tax, with 80% mortgage.

scenario A would work perfectly well for retirement but scenario B would NOT because if you had a problemand 2/3 properties were empty your up Creek. You will struggle to make motgage payments

so in my opinion BTL CAN work if planned correctly and the properties are NOT mortgaged to the hilt.

Most people can only dream of a portfolio of 6/8 properties with only a 20% mortgage.

The one thing most people lack is capital. Once you've got capital which for most people can only be obtained from working for years or an inheritance.

Loughton_Monkey

New_and_Improved_Me wrote: »

I disagree with this statement.

BT L 'CAN' be the answer IF planned properly.

Look at it this way -

Scenario A - 6/8 BLT properties, giving you a yield of circ. 2500 per month after tax. With 20% mortgage.

Scenario B - 6/8 BLT properties, giving you a yield of 2500 per month after tax, with 80% mortgage.

scenario A would work perfectly well for retirement but scenario B would NOT because if you had a problemand 2/3 properties were empty your up Creek. You will struggle to make motgage payments

so in my opinion BTL CAN work if planned correctly and the properties are NOT mortgaged to the hilt.

I tend to sit back and look at all my options....

Personally I would reject BTL for the main reason that the average yieds quoted, over long periods (5%/7%) do not compare favourably with pension/S&S ISA investments (6%/8%). Pensions have tax relief to boot!

Other things I don't like about BTL (for retirement savings) include:

1. Unlike traditional investing, BTL comes with "hard work" and physical hassle from time to time.

2. Approaching retirement, a landlord would find it hard to "tone down" the risk of a 6/8 house portfolio. Indeed a very risky, hard to sell, hard to rent scenario could come just at the wrong time.

3. Planning cash flow (once retired) is a nightmare compared with the 'smooth' results you can get from a range of pensions and other funds.

4. Having all your retirement capital in assets (Cash, Houses, etc.) cannot underwrite for longevity. Pensions are a good hedge against living a long time.

5. Tax planning - particularly CGT - would be a nightmare.

So all in all, I would use a BTL route (over a more tradional pension/investment fund route) only if it gave significantly extra long term growth. I doesn't. So I don't.