Should pensions be compulsory?

EdInvestor

Hi loops,

A couple of years ago people would have said your attitude was very silly. That was because there were strict limits on how much money you could put into a pension scheme and get the tax relief - and if you didn't take advantage of them, you lost them forever.

But as of next year that's all changing.There will be a new "lifetime limit" on how much you can put in, not a year-by-year one.

Thus if young people can't afford to put money in a pension because they are paying off student debt/trying to buy an expensive house/ not earning enough to have anything to spare, it won't matter if they delay saving for their retirement fund till later.

They will be able to "catch up" , and still get the pension tax relief, when they are older. It's usually when people get close to 50 that they get that "Oops! I've got no money for retirement" panic feeling

dunstonh

First you have a house, then children, then when they have moved out, you realise you only have 10-15 years to go until retirement.

There is always an excuse not to do it.

Ideally get a 18-20 year old paying in £30-50pm in real terms throughout their working life and they will end up with a decent pension in retirement. Start at 30 and that same retirement pension would need a contribution around £150pm. So education of the young is certainly the way to go.

Debt_Free_Chick

loopy_lass wrote:

i havent got a pension and dont want one... dont care what happens when i retire....

is it me?

loops ;-)

That's fine. Just don't expect the taxpayers of the day to fund your living expenses, by way of a state pension and/or means tested benefits.

If I were you, I'd start to look for a nice strong waterproof box, so at least you'll have somewhere to kip at night

loopy_lass

Debt_Free_Chick wrote:

That's fine. Just don't expect the taxpayers of the day to fund your living expenses, by way of a state pension and/or means tested benefits.

If I were you, I'd start to look for a nice strong waterproof box, so at least you'll have somewhere to kip at night

thanks debt free ... i shall take your advice... but you know im 40 in 3 weeks time, and hopefully i wont reach pension age... so viola... i wont need a pension or a waterproof box ;-)

just for the record, i dont scrounge of anyone, i am self sufficient and will be so if i am unfortunate enough to live to pension age....

problem solved.
loops

margaretclare

It's a typical and normal feeling that when you're young you cannot imagine getting old. To a 20-year-old it seems the ultimate disaster to reach age 30, reaching age 40 seems unimaginably far off, and as for reaching age 60, or 70...well, life is over for anyone that age, isn't it? They don't need anything, they've done everything they set out to do, all there is left to do is to sit in a chair and await death. So whether they have an adequate income to live on, or not, couldn't be less relevant.

Isn't that how you think, loopylass? At 40 you're self-sufficient and you can't imagine not being. Another 20 or even 30 years may bring a lot of changes, and those years will go faster than you can imagine.

Years ago, in my first marriage, we were young with a young family, my first husband 'didn't believe in' life assurance. People used to say to me that I should get him to do it, because what would I do if he wasn't there to 'support me'? Well, I was very independent in those days and I hated the thought of 'being supported' by a husband. I worked right throught the 1960s and in 1971 I qualified as a midwife, had a good career from then on. So on the face of it I would always be able to work, earn my own living and be self-sufficient. Only it didn't quite work out that way...

He had the beginnings of heart disease from age 38, in 1972, so from then on life assurance was out of the question. But I had a good career, hadn't I? Well, he died in 1992 aged 58 and my senior job in midwifery disappeared at the same time, redundancy coincidental with widowhood leaving me with a £45K mortgage to pay.

What I would have thought of at age 40 simply didn't happen. And I have been jolly glad and thankful that I'd paid into the state system plus NHS pension contributions. I'm now remarried, I'll be 70 soon and I'm STILL paying into a pension, just because I think we may be glad of a bit extra when we're 75.

So, what you think in your 40s may not be how things turn out!

Aunty Margaret

EdInvestor

Re the original question on compulsion, the feeling on the board so far seems to be that pensions are a "Good Thing" - indeed perhaps even an "Indispensable Thing" - but that people should be educated to understand this, rather than compelled to pay into a specific pension.

Is that a fair summary?

If so, are there any views on the education aspect?

Dunstonh, who's at the sharp end of the issue, so to speak, thinks people always have some excuse not to have a pension and have to be talked into it- they are "sold not bought". Yet the latest figures show that people are pouring money into their bank and bsoc accounts at present, April was the strongest month for 4 years. So motivation seems not to be the problem.I'd hazard a guess that higher interest rates have something to do with this attitude to savings: many people might question the point of saving if you only get a 3% return, better to borrow if it's that cheap?

So do pensions need to be made more attractive, with higher returns, to get people to save in them? Or more safe? Should more incentives should be provided? (One of the concerns about compulsion is that existing incentives - eg tax relief - might be removed.) Will the changes next year, reduicing many of the old restrictions, make a difference?

Debt_Free_Chick

Editor wrote:

So do pensions need to be made more attractive, with higher returns, to get people to save in them?

A pension is only a tax wrapper. The underlying investments are what they are. Should we be "manipulating" the markets to provide better returns for pensions? Is that allowed? Or desirable?

Or more safe?

what do you suggest? Doesn't "safety" come at a price e.g. the Pensions Protection Fund is to be (largely) funded by those good employers, who have prudent funding plans. They will pick up the bill for those who are less prudent and go to the wall. Is that another stealth tax?

Should more incentives should be provided? (One of the concerns about compulsion is that existing incentives - eg tax relief - might be removed.) Will the changes next year, reduicing many of the old restrictions, make a difference?

There is no tax relief (apart from 25% of the fund that can be taken tax-free).

why are tax incentives needed? Can't people see the need to save now, so they can spend (live) later?

When working life is over, what, exactly, do people expect will replace their salary?

Why is this so difficult? Do we really expect that we should work for 40 or more years; spend all we earn and then, magically, expect someone to pay our bills when we are no longer working?

[Deleted User]

Debt_Free_Chick wrote:

why are tax incentives needed? Can't people see the need to save now, so they can spend (live) later?

When working life is over, what, exactly, do people expect will replace their salary?

Why is this so difficult? Do we really expect that we should work for 40 or more years; spend all we earn and then, magically, expect someone to pay our bills when we are no longer working?

This is such a good point and clearly illustrates the ethos of today - live now, spend now - worry about tomorrow - tomorrow. You only have to look at the debt board on this site to see examples of this.

Today's pensioners - and by pensioners I mean those only living off the state pension and nothing else - had fewer opportunities in their younger years to provide for themselves for the future. This is especially true of female pensioners.

Now EVERYONE has the opportunity to provide for their old age IF they are so inclined. However - YOUNG people with no financial commitments don't usually wake up one day and think about pensions. This is where education comes in and perhaps the compulsory deduction of pensions savings on school leavers and continuing thru their working lives will make the most inroads into providing people with better security for the future.

In the absence of this the main problems as I see are -

1. Many people with existing financial commitments will not be able to afford compulsory savings into a pension. What is the answer for them?

2. How do you make the whole subject of pensions as important and CLEAR CUT in peoples minds as their mortgage, or the latest mobile phone, or their plasma TV currently is?

nrsql

One thing is to give guarantees about pension funds. When they will be available to you. What conditions will be prevalent when you access them. How much control you wll have up till then...

Removing dividend tax relief did a lot to stop people investing in pensions and also has a lot to do with the deficit.
Increasing the age at which you can take the state pension sends a similar message.

I no longer contribute to a pension scheme (outside ni) and won't until I consider the benefits outweigh the risks. All it takes is for companies to offer uncompetitive annuities and high transfer fees or for the government to raid funds and you are stuck. Maybe they'll decide that those with large private funds should subsidise state pensions?
Doesn't mean that I'm not saving for retirement though.

roger56

An interesting article at
http://www.thisismoney.co.uk/retirement/article.html?in_article_id=400185&in_page_id=6

"Edward Whitehouse, pensions analyst at the OECD, said Britain's pensions system is now 'fiendishly complicated' thanks to reforms by successive governments. He said there is a case for moving back to a flat-rate State pension, with people being encouraged to make their own provisions on top

According to the latest research, private sector pensions have lost nearly three-quarters of their value since Labour came to power. "

So mayba e compulsary flat rate scheme and leaving the individual to plan for retirement luxuries privately (no government dabbling) is a workable compromise?