25 - Starting Pension Planning - What's your best advice?

graceygirl

Thanks for your thoughts on the LISA!

Grace

wjr4

I'd also recommend ensuring you have enough money to cover life cover/income protection costs every month when you own a property (maybe concentrate on income protection if you are single but I'd recommend getting proper advice for this as and when the time comes).

agarnett

PeacefulWaters wrote:

Despite state pension age increasing, the average retiree now can expect to draw an income from their pension for longer due to increased life expectancy.

It might be relevant to point out that the average retiree isn't aged 25, but probably around 60 currently, and that the average retiree when the OP gets to age 60 around the year 2052 - that is perhaps 20 years after the first man or woman lands on Mars - will probably be aged around 75!

Retirees in the 90s and noughties probably never had it so good. Currently new retirees incomes are likely to already be declining versus their counterparts who retired 10 and 20 years ago. Job security decline is a big reason for that. Jobs for life are just not a common feature now.

Methinks things will be even more different by 2052. There may still be property hotspots, but will they be in such places as Central London? How will we get to work? Will we even need to leave the house? Will we even need to be in the same country as our employer? Our internet based shopping will arrive in minutes via drone whether we live in Rotherhithe, Rothesay, or Rouen. So where will we actually choose to invest our "equity" in buying houses? Will houses be as important an investment in 2052 as now? Are they actually important now?

Might we in 2052 hanker after simple sameish underground capsule type dwellings sealed from that craze outside created in the late 20 tens by a madman in charge of the nuclear button in USA? What will have happened to house prices ? Will we choosing to invest our money into filtration plants and life support systems, and total immersion virtual reality instead by then, and never mind the four walls that we support with the plant? Will the value of a dwelling be based on the sweetness of the air you can breathe in it, and the number of guests you can safely invite to party in it without risk of the whole party suffocating if there is a power outage? :rotfl:

When I started work in the late 70s, it was in vogue to suggest that "leisure industries" might be a good investment because people were working less and playing more. You could play a sort of tennis on a rudimentary computer, and you even could play indoor tennis and squash of course at the new fangled sprawling edge of town leisure centres! It was just a suggestion, mind! Most people after work just wanted to get home for the weekend and flop into an armchair and watch a bit of telly and maybe read the kids a bedtime story before the nine o'clock news! Personal computers came of age in the late 80s and early nineties. Up until then, I had to sweet-talk the typists in the typing pool just to prepare a letter to my clients before the end of the day. If I had to do it myself on one of their IBM golfball typewriters after they'd gone home, then I might just catch the last post on the way home.

It wasn't the done thing for us to type our own letters when the typists were still in the office! Personal word processing finally caught on big time in the early nineties. A personal Windows computer finally arrived on my own desk at work! A blessed relief. I had hated dictating machines. And would you believe that in the mid nineties in just two minutes you could save 1.44MB of computer files onto a floppy disk that you could transport to another PC! In fact the whole Windows operating system on my first Compaq laptop arrived on just 6 x 1.44MB floppy disks

Then in the late 90s when you were almost ready to go to school, there was a even a suggestion that the internet might just possibly become a worthwhile marketing channel for some businesses, so might be an idea to keep a weather eye on it - personally I wasn't sure - by then, my home modem was pretty fast (64000bps), and maybe you might have been allowed to play on one at home, but it wasn't like it was as good as the telly for getting the 'Every Little Helps' message across, was it?

And I haven't even mentioned mobile phones. I went for an interview with IBM in the mid 80s and in a group interview exercise they asked us to consider how we might design and market a newly suggested "cellular" telephone network idea ! Up until then, our idea of mobile telecoms was limited to those great big walkie talkies we saw soldiers using in War movies!


So - things change. Things do not stay the same during the lifetime of your earliest pension plans.

I will say however, that my first final salary DB pension scheme is still (touchwood!) in existence. Yes, a kind of magic! That's much more by luck than by judgement. I have been a member of three other final salary DB schemes which have all been wound up against members wishes. Not because the companies went bust, but because the finance directors decided they didn't want to keep the pension promises to employees. That should tell you something - 3 to 1 chance that with typical British workplace culture, whatever you start now will not exist in 40 years. Someone will have unilaterally decided to stop it, and to force you to consider something else (always inferior to what went before in my experience).

Another possibly interesting snippet. My grad starting salary nearly 40 years ago was £3,500 per year. After 10 years my leaving salary was £15K. The transfer value when I left that first job was £10K. I didn't transfer it. The latest transfer value of that same pension into which I have never paid a penny (because it was non-contributory - you won't hear of many like that anymore except perhaps in Executive branch of the Civil Service?) is probably nearer £230K! I haven't checked it this year yet. 14 months ago it was £200K. It's kind of interesting, and it's kind of nice for me to still have such, but I don't think it is typical. You can't rely on such in your plans.

Grace, I think that rather than read about what retirees did to get where they are now, you might first start reading some decent science fiction to help the way you form your ideas of where you might actually be at when you retire

I am a so called baby boomer, so I am part of the generation who, ostensibly, are already living in clover at the expense of future generations. We aren't taxed anywhere near enough even to pay to educate our kids at the expense of the state. A low tax low wage economy isn't good for me or for you.

I do feel for all millennials. It is disgraceful that those who make the decisions to reward you guys in such rubbish ways are often some of the ones who were rewarded twice as well at your age without actually having to be any great shakes in the heap themselves. I know you said you work for a small company so I don't want to knock your bosses' spirit of enterprise, as it could well be an exciting and good company to work for, but definitely in my book, it is the big nationals and globalised companies who are the ones whose culture stinks most, with a few at the very top constantly with their snouts in the trough, and constantly encouraging others further down the food chain to think the way they do in order to 'get on'. I hate it.

So I feel for you guys.

Nevertheless I do envy the young for what you will witness and potentially be part of in your lifetimes.

Yes in the meantime, you can stuff what little money is left over each month under the traditional, supposedly magic, pensions mattress and hope the old ways will still work by 2052 (even get 'free money' from your employer and the government in the form of deferred taxation on contributions - yippee!) - sort of ..., but don't let any of the older baby boomers kid you that they struggled like you guys are now forced to do to get on. They didn't struggle much. In very many cases it was all handed to us on a very full plate, and even those who never got much of an education found that their pensions turned out quite well for them without them having to noticeably lift a finger, but merely to sign on the dotted same as all their peers.

I got a 2:2 science degree at a good uni, and after my final exams I didn't even use it to get a job, other than as a meal ticket that marked me as above average numerate and fast to learn new stuff. Nevertheless I got a choice of job offers from international companies well before I graduated, and consequently I was a member of a non-contributory DB final salary pension scheme within a week of taking my final exams. I was still two months short of age 21. I was very hesitant about using the telephone. I did some years previously get a telephone badge as a cub scout though! My parents got their first landline when I was 18!

I was only a glorified sale rep to start. By 22 I had a 100% mortgage on my first property - organised by my employer, and a company car which in those days was not taxed as a perk. And I'd started putting the maximum into an SAYE scheme.

I had no carefully plotted household budget. We didn't need to think much about what we spent, not until we had kids later on in our 30s, and after I had started suffering redundancies once I got to about 40. Before that point, when I moved house to follow the job and upsized each time, the company had even paid all the expenses!

As I say - it was largely on a plate for us, and let me tell you I was pretty mediocre as a graduate recruit. For me in this forum, there's rather too much "(unsaid) 'Don't do as I did') - 'Do as I say' about the advice.

I can only suggest you think as widely as possible whilst you are still young and perhaps truly mobile - consider what it might be like to live and work in other countries in Europe while it is still easy. Some of those actually still treat their workforces with profound respect and wages, and state pensions and other welfare benefits are much more meaningful.

Whatever you decide, all the best!

graceygirl

AGarnett, thanks for this comment. Great read! Really enjoyed your wisdom sharing!

agarnett

I dunno about wisdom-sharing, but its 'tined out nice again' now I have looked up and out from my computer

Have a good summer and many tens of them!