Are pensions even worth it?

DiggerUK

borderline wrote: »

...... How can anyone on low wages, living in London put money aside...

Many sneer at those struggling to be financially responsible, why they do says more about their inadequacies, than yours.
For now it seems pointless for you to consider a pension, best to do all you can to economise, and put by what you can, when you can.

Aim for work in the local councils, Transport for London, Fire Authority etc., See if you can get in there asap, they still have the best pension schemes. Sorry I aint got a magic wand, but you know which direction you want to go in.
Best of fortune.
..._

atush

Nobody is sneering apart from you (about pensions).


We know things are hard, and we have given suggestions that are non sneering and helpful. I myself have benefitted just from reading the Debt Free and other boards- it is where I learned to use Topcashback (over 300 quid saved from money I would have spent anyway) and ebay etc.

bigadaj

It is difficult to save ona. Low wage but people need savings, for emergencies as well as the future and retirement.

For a low earner pensions may well not be the best method for savings, they are worthwhile of you pay higher rate tax, achieve employer contributions or get salary sacrifice, if none of these apply then my opinion is your better saving in isas. They areaccessible which means that people need to be disciplined, but the payout is tax free rather than the input for pensions, and they can often be cheaper than pensions.

dunstonh

When the media run articles where people complain about low wage or high cost of living and not being able to save for retirement, it is frequently done with the person sitting in a room with a large widescreen plasma tv with rows and rows of DVDs and platystation games etc in there and sky tv etc. The issue isnt really low wage for them but a choice of how they spend their money.

I've seen it where people tell me they cant afford to pay a certain amount but the amount and want to pay is less than their mobile phone or sky tv. Not saying that it is the case here but you do find that many of the low paid do have a consumer spending lifestyle as a priority compared to those in a similar position say 20 or 30 years ago.

A low earner doesnt need to put much towards retirement planning as they dont need much provision above state to make up the difference. Someone with £3000 in a pension fund in their 40s though has just planned badly. Even someone that started with £30pm at age 20 would have nearly £15k at age 40 (ignoring inflation increases). That £30pm over 40 years would give many thousands of pounds a year income in retirement. Added to state pension, that would make up a lot of the shortfall for a low earner.

sax11

I have one pension pot that i started in 2001 - only recently found the paperwork for it when clearing out as i had forgotten about it. The total in there was, at the time £3800. After checking the details and calling them they sent me a current statement which is valued at £20780

I also have a company pension at the moment which has about £17000 in it and i've paying into this one for at least 7 years. Am i able to transfer one to the other as the former is clearly outperforming the later ?

atush

I'd start your own thread. Before you do, see what each pension is invested in- it could be you chose better investments in the older pension. Nothing stopping you changing your investments in your current one to the same/similar?


In any case, past performance is not reliable guide to the future.

regprentice

Thrugelmir wrote: »

A wake up call to save more perhaps......

Presently saving £480 salary sacrifice a month into an employers pension with a projected total fund value of £400K. This is 13% of my salary. Most recent statement shows an fairly demonic predicted average payout value of £666 a month but a min of £400ish and a max of £900ish.. sorry i've filed the papers now)

I wasnt trying to state my pension would definitely produce less than my contributions, but trying to state that, with decades left to go, already telling me i might get out less a month than i save in is not an incentive to save more.

The main issue around pensions is simply their inherent volatility. I know one person who wrote to their pension company to collect their pension. They were given the monthly payments under their proposed pension in writing at this point. They forgot to send the original copy of their birth certificate so their original form was returned unprocessed so they sent the form back with their birth certificate and the pension transaction was completed around a week later. During this WEEK she lost ONE THIRD of her pension value because she crystalised her closure at the wrong time. This was during the 2008 collapse, but thats hardly her fault and she would not have been financially aware enough to do anything about that.

jem16

regprentice wrote: »

Presently saving £480 salary sacrifice a month into an employers pension with a projected total fund value of £400K. This is 13% of my salary. Most recent statement shows an fairly demonic predicted average payout value of £666 a month but a min of £400ish and a max of £900ish.. sorry i've filed the papers now)

I wasnt trying to state my pension would definitely produce less than my contributions, but trying to state that, with decades left to go, already telling me i might get out less a month than i save in is not an incentive to save more.

You are being given a projection, nothing more and nothing less. That projection is showing an average payout which is more than you have been paying in. That £480 is £384 after basic rate tax relief and you're also saving NI contributions so it's even less. If you're a higher rate taxpayer it's even less.

Pretty good value to me

During this WEEK she lost ONE THIRD of her pension value because she crystalised her closure at the wrong time. This was during the 2008 collapse, but thats hardly her fault and she would not have been financially aware enough to do anything about that.

As you move nearer to crystallising your pension pot, you would move to less volatile funds and possibly even to cash. The fact that she lost one third of her pension cash shows that she didn't do this so yes it really was her fault.

If she was not financially aware to do this herself then she employs someone who is. She really should have been using an IFA anyway to get the best annuity possible.

regprentice

atush wrote: »

So here is why pensions aren't rubbish. Say you pay in 80, and your employer does matching, then add tax relief.

So each 80 becomes 100, and then you have 200 in a pension fund that cost YOU only 80. Invest that in something (other than cash) and over periods of 10 years or more it will be worth much more than 200.

Typically this is how it can work. these types of figures can be misleading due to different types of set up at different employers/pension funds.

• My employer contributes nothing *
• I am salary sacrifice so when i pay in 100 only 100 goes in the pot. (i'm aware i've avoided tax)
• Despite this my employers pensions website still shows a table which describes the 'tax top up' you describe above implying when i put 100 in the pot the govt tops it up by a further 20 or 40... i have complained twice about this.

*My employer pays me a salary in components of which 15% of the main 70% total is allegedly for my pension. however i can simply switch this pension indicator off and take the cash (as approx 75% of my colleagues do) so i simply regard it as salary. My employer would emphatically claim they contribute, however they make no post contribution addition.

If you are fairly financially literate is a confusing system, most people don't stand a chance. My initial point several days ago was that people speak about 'top ups', 'employers contributions' or 'the miracle of compunding' in ways that are not universal or consistent and these concepts are where people get the idea that a small investment into a pension will produce a handsome pension in old age.

grey_gym_sock

a salary sacrifice saves you both tax and NI, so when 100 goes into the pot, you've effectively given up 68 of after-tax salary (if on basic rate; or 58 if on higher rate). so that bit is better.

though no matching employer contribution is a lot worse.