contributions and pot required to retire at 55 with stable income

bigadaj

My original point was that there was recommendations for people on low incomes to not save as they would be better off on benefits. I heard this on different radio programmes such as money box, file on four, assignment and other news and magazine/ documentary programmes. Similarly interviews on TV, programmes such as panorama etc

Also many times on replies to queries in most of the broadsheet newspapers about planning and saving for retirement it was a concern. This was primarily a few years ago, but made sense at the time as the erosion of benefits was nearly pound for pound in terms of savings and pensions.

The situation was obviously unsustainable and is slowly being addressed by the Tories, but the question is what assumptions are people realistically making in terms of retirement income. Means tested benefits are being cut, but is the basic state pension to be maintained, people are assuming it will be phased out or at least reduced in real terms?

The safest assumption is to obviously make your own provision, which minimises teh impact that governments have, but issues such as the sheer poor value of annuities make saving look so difficult for many people on low to middle earnings. Of course there is drawdown but that looks too difficult for many people, or too expensive if arranged by IFAs on small pots.

This is a long way from the OPs original point, and we do need to make people more responsible for their lives, and reduce the nanny state but we are where we are. The uk is likely to get poorer over teh coming years and decades, in relative if not absolute terms, and the political balance between sustainability, meeting people's basic needs and not bankrupting the country are difficult to resolve.

jamesd

It's been seen and said many times. It's also usually wrong. If I recall correctly I calculated that a pension pot of £40,000 or so would produce an income that a retired means tested benefit recipient would be able to keep under the rules at the time. The flat rate state pension is likely to further reduce the number of people in the gap between means tested benefits plus allowed extra income and an income too high to qualify for means tested benefits at all.

It is a concern for those too close to retirement to do much to change their situation and sometimes I've suggested it to people here. But it is still good to remember that it's a pretty small niche and very low amounts of pension investing are enough to make a really substantial difference.

Consider just £10 a month increased with inflation for 40 years getting historic returns at 5%. That's enough to produce a pension pot of £15,260 in today's money. At 5% drawing rate that's enough to pay £63.58 a month for the rest of life. For an auto-enrolment scheme the employee net cost is just half of that £10, so they get £50.86 a month, £11.73 a week, of after basic rate tax income for a working years net cost of £5 a month.

It's pretty hard to argue that £5 a month is unaffordable for most of those in full time work or that it's impossible to make a significant difference with very low amounts invested. Even for a non-working person - say a woman in a household with a working spouse - it's not easy to argue that the spouse can't pay in enough to a pension pot for her to make a big difference to her and their future incomes in retirement.

jamesd

bigadaj wrote: »

The political balance between sustainability, meeting people's basic needs and not bankrupting the country are difficult to resolve.

Hardly. Those basic needs are shelter (with associated services) and food. Doing just that would allow a massive cut in benefits costs but I'm not aware of any political party proposing to just meet basic needs.

A basic shelter need can be fulfilled by a shared room with shared facilities. Say a barracks type of place. That shares heating and other services cost. A basic food need can be satisfied at very, very low cost using cheap staples.

Once we move beyond basic needs to things like one room per person but still shared facilities or more varied and costly diets the costs go up a bit and can become a lot more significant. If we consider way beyond basic needs like a desire to have a non-shared phone or a poverty standard set at 60% of median income it becomes even more costly. But those things are far more than just fulfilling the basic needs. They are more about deciding what level of non-basic luxury should be provided. Things like a one bedroom flat per person, with non-shared kitchen, living room and bathroom, say. Or with less unnecessary luxury, a studio flat.

bigadaj

jamesd wrote: »

Hardly. Those basic needs are shelter (with associated services) and food. Doing just that would allow a massive cut in benefits costs but I'm not aware of any political party proposing to just meet basic needs.

A basic shelter need can be fulfilled by a shared room with shared facilities. Say a barracks type of place. That shares heating and other services cost. A basic food need can be satisfied at very, very low cost using cheap staples.

Once we move beyond basic needs to things like one room per person but still shared facilities or more varied and costly diets the costs go up a bit and can become a lot more significant. If we consider way beyond basic needs like a desire to have a non-shared phone or a poverty standard set at 60% of median income it becomes even more costly. But those things are far more than just fulfilling the basic needs. They are more about deciding what level of non-basic luxury should be provided. Things like a one bedroom flat per person, with non-shared kitchen, living room and bathroom, say. Or with less unnecessary luxury, a studio flat.

Fair points, it's the social and political definition of basic needs as you say. Poverty seems to have focused on that 60% of median income which is a high hurdle and the definition is often quoted in child poverty statistics.

I don't disagree with your definition of basic needs, but many would, and provision of social housing is at a far higher level than basic needs, where it is available.

I've probably diverted well away from the origin of the thread and apologise for that, but it does concern me how prevalent benefits have become and the difficulty in weaning people back off them.

The government should better promote the value of long term saving particularly as the link between low earnings and the prevalence of gambling, smoking etc on which far more than £10 a month is spent. Though there is the issue of accessing stock market investments at very low subscription levels.