Is the work place pension just ruining pensions for everyone else

mumf

As others have already said,I wish it had been around a lot earlier.I have always worked in the private sector,with zero pension provision.I have a modest private pension,and own my own house.However,the wage has always been mediocre in my field,and a couple of redundancies forced me into lower paid work,simply to survive.I understand totally the thoughts of the aforementioned warehouse workers who opted out.You have topay the bills now!

Its ok saying " if you can't manage on minimum wage now,how will you cope on state pension? ", but life chances and opportunities are very different for us all.I smile often when I look at this board and there is a thread along the line of," I have a million pounds in my pot, can I afford to retire? " And then there are the snotty answers from folks in a fortunate fiscal position who seem to belittle anyone who asks about what to do with their modest savings.

Pensions are TOO complicated,to the point that it appears like smoke and mirrors to those not involved in that industry.In fact,to many,it appears to be almost crooked in it's complexity of schemes and charges.

To me ,auto enrolment is a good thing,but if you are only just getting by ( have a look at the wage level on some employment sites), and many are in that position,then even modest AE contributions are too much.

hugheskevi

It will likely be that abolishing qualifying earnings and basing contribution rates on whole earnings will effectively become part of the phased increase of contribution rates that has taken place over the last few years.

I think too much emphasis is put on being in a statutory minimum pension when on minimum wage. The employer contribution for a person working 40 hours a week on minimum wage is £330 per year. Whilst something is better than nothing, opting-out for a few years isn't going to be the biggest financial decision/mistake individuals will make.

If individuals remain minimum wage their entire life, then State Pension, Pension Credit, Housing Benefit and Council Tax Benefit will meet most of their financial needs, as in practice very few people will work constantly at minimum wage - their employment will be broken with regular spells of unemployment, or they will progress to higher salary positions.

If individuals progress, then losing £330 of employer contributions for a year or two will be of little consequence, and the lost individual contributions are likely to be put to better use in improving earnings potential and meeting living costs. Use of a payday loan a few times a year could easily cost more than the value of the employer contribution, for example.

Re-enrolment will mean individuals are put back into the pension every few years, and hopefully if circumstances have changed they stay in the pension.

So whilst staying in the pension would almost certainly be best, opting out for a year or two is not going to be massively detrimental.

Bravepants

It's about time they started teaching personal finance in schools.



It's all very well getting qualifications to do a job or have a career, BUT the ability to look after one's own money and provide for one's future is probably the second most important aspect once in employment.



Did anyone catch the "Tonight" programme last week on pensions, and peoples' ability to live on what provision they had made?


Bit of an eye opener for those involved, but the eye opening needs to happen before it's too late.

tempus_fugit

woolythoughts wrote: »

Doesnt this just reduce the benefits bill rather than benefitting the retired person.

Unless your pension is of sufficient amount, all having one will do is reduce the amount of housing benefit/state support you get in old age.

Those in low paid jobs will struggle to put enough away to get a decent amount.

Therefore they are worse off when working for very little benefit in old age.

I'm not sure what you are wanting. Before auto-enrollment a large number of people had no workplace pension at all and had to rely on the state pension for their income in old age. Those days are gone and the scheme ensures that people have at least something to add to the state pension. Sure, it also reduces the burden on the state, which is a good thing in my view.

tempus_fugit

Bravepants wrote: »

It's about time they started teaching personal finance in schools.



It's all very well getting qualifications to do a job or have a career, BUT the ability to look after one's own money and provide for one's future is probably the second most important aspect once in employment.



Did anyone catch the "Tonight" programme last week on pensions, and peoples' ability to live on what provision they had made?


Bit of an eye opener for those involved, but the eye opening needs to happen before it's too late.

Yes, I agree, and one of the things that needs to be dispelled is the idea that the age you get your state pension defines when you can retire. People need to have it instilled in them that, in future, the bulk of pension provision has to come from employees themselves and that it is important to start paying in to one as early as possible. This will not only augment the state pension when they get it, it will give them flexibility as to when they can retire.

bowlhead99

tempus_fugit wrote: »

I'm not sure what you are wanting. Before auto-enrollment a large number of people had no workplace pension at all and had to rely on the state pension for their income in old age. Those days are gone and the scheme ensures that people have at least something to add to the state pension. Sure, it also reduces the burden on the state, which is a good thing in my view.

Their point is presumably that from the low-paid worker's perspective, under the old system they would have to rely on the state pension and some welfare provision, while under the new system they have to rely on the state pension and their small personal pension pot and less welfare provision - but don't necessarily end up with more money, if the 'burden on the state' (i.e. the government helping them out with welfare provision) is going to reduce.

In other words the fact that their last 20 years of taking lower net pay has built up a £50k pension pot and can buy £1.5k extra pension income, is scant comfort because they are still at a low level of total income and reliant on welfare benefits to help them out of a poverty situation, and maybe building themselves a small independent income stream which felt very costly to be doing over 20 years (due to getting lower takehome pay) does not give them a nice retirement to compensate for losing the takehome pay.

I do approve of the AE concept, and importantly the pension pot is being built up in part from a mandatory contribution from employer so the burden of reducing the welfare burden is not falling entirely on the worker's shoulders, but I understand why some workers will still think "it's still not worth it" just as they had previously thought it wasn't worth it when the employer wasn't helping.

tempus_fugit wrote: »

People need to have it instilled in them that, in future, the bulk of pension provision has to come from employees themselves and that it is important to start paying in to one as early as possible.

I do agree with this, but can see the point being made by the earlier poster that the individual may not actually benefit a whole lot if the amounts are very low or the pay on which it's based is low.

Silvertabby

It isn't just the new workplace pension that is being shunned. The opt out rate from the LGPS, believe it or not, is still considerable.

When I first started work as a LGPS administrator I made a list of the funny/sad reasons people opted out.

From memory, some of my 'favourites' were:

My husband has a good pension so I don't need one as well.

It's just another council tax - and if I don't have to pay it I won't.

The LGPS is a rip-off - you are charging me £100 a month, but I can get a Stakeholder pension for just £20 a month.

The money is better off in my pocket rather than the council's.

Now that the State pension will be the same as my wages, I don't need a pension. (After I had explained what restoring the link between the State pension and earnings really meant...) Well, the money is better off in my pocket rather than the council's.

JillyC8

mumf wrote: »

I understand totally the thoughts of the aforementioned warehouse workers who opted out.You have topay the bills now!

Its ok saying " if you can't manage on minimum wage now,how will you cope on state pension? ", but life chances and opportunities are very different for us all.I smile often when I look at this board and there is a thread along the line of," I have a million pounds in my pot, can I afford to retire? " And then there are the snotty answers from folks in a fortunate fiscal position who seem to belittle anyone who asks about what to do with their modest savings.

Pensions are TOO complicated,to the point that it appears like smoke and mirrors to those not involved in that industry.

Well said. Ive had some excellent advice on here, but you do have to fight through the gloaters.

atush

stronginthesun wrote: »

i work in a warehouse where most of the workers are on minimum wage and in their early mid twenties . Against my advice and the companies most of them have opted out of it . simply cant afford it with rent car and bills even thou they are turning down free money , lets hope they see sense in the future or the state pension stays .

Maybe some of these workers should move in together and lower their outgoings? Maybe they could afford to save?

atush

Silvertabby wrote: »

It isn't just the new workplace pension that is being shunned. The opt out rate from the LGPS, believe it or not, is still considerable.

When I first started work as a LGPS administrator I made a list of the funny/sad reasons people opted out.

From memory, some of my 'favourites' were:

My husband has a good pension so I don't need one as well.

It's just another council tax - and if I don't have to pay it I won't.

The LGPS is a rip-off - you are charging me £100 a month, but I can get a Stakeholder pension for just £20 a month.

The money is better off in my pocket rather than the council's.

Now that the State pension will be the same as my wages, I don't need a pension. (After I had explained what restoring the link between the State pension and earnings really meant...) Well, the money is better off in my pocket rather than the council's.

Such ignorance.

It should really be covered in education, though since it hasnt i schooled my 3 on pensions. And all 3 have them.