The Great Pensions Crisis - Channel 5

savingpennies

Did anyone catch the programme on last night looking at pensions? They focused on three couples: couple A were in their forties with plans to retire to France by the time they were 60; couple B had only the state pension to retire on but both had health problems which had unfortunately led to debt; couple C had to pay for social care for one of them and focused on the huge costs to them for that care.

The message was quite clear; Are people really planning/doing enough to have a reasonable retirement?
By reasonable the programme estimated that a couple would need £27,000 a year or £2200 a month.

I watched with my 25 year old daughter, who was astonished at couple A who had not thought about how they were to achieve their goals and appalled at the costs of social care.

grnglide

An income in retirement of £27,000 will be a severe challenge for those who do not achieve that income in employment, won't it?

savingpennies

It certainly would. According to the programme you would need a pension pot of £500,000 to achieve £27000 p.a.
The programme also stated that to have a basic retirement, no bells and whistles, a couple would need £14000 p.a. Couple B were struggling to manage on the SP, especially as their health required them to keep their heating on, which is how they got into debt.

My Mum, was telling me about two women she used to work with many years ago in the NHS, who have returned to work. Both are 67 - they can't live on their pensions.

swindiff

£27,000 is for a couple. Full State pension is around £18k for a couple so that only leaves a shortfall of £9k or £4.5k each. Not that much of a stretch if you start saving for retirement early enough.

Malthusian

savingpennies wrote: »

Did anyone catch the programme on last night looking at pensions? They focused on three couples: couple A were in their forties with plans to retire to France by the time they were 60; couple B had only the state pension to retire on but both had health problems which had unfortunately led to debt

If they've literally got nothing but State Pension then the debt is essentially free money as they have nothing to lose. (Other than their credit rating.) Bankruptcy trustees can't garnish State Pensions.

If there's something we've not been told about, like their own house, naturally the equation changes.

By reasonable the programme estimated that a couple would need £27,000 a year or £2200 a month.

Then they're defining "reasonable" as significantly higher than the average person would. £27k is pretty much the median UK working income and income needs in retirement are typically lower. (How much depends on the individual but 66% is the standard rule of thumb, with people on lower incomes needing a higher %.) Lower commuting costs, no childcare costs, lower insurance costs and no pension contributions, and someone with a £27k pa working income could reasonably aspire to be rent-free in retirement.

For a couple, over half of that is taken care of by State Pensions.

I watched with my 25 year old daughter, who was astonished at couple A who had not thought about how they were to achieve their goals and appalled at the costs of social care.

How much is your daughter paying into her pension?

The programme also stated that to have a basic retirement, no bells and whistles, a couple would need £14000 p.a.

A couple with full NI records would be sorted in that case, even with zero other provision, as two New State Pensions is 25% higher than that.

A couple relying on Pension Credit would be slightly below that as the minimum income guarantee for a couple is £13,300pa.

savingpennies

swindiff wrote: »

£27,000 is for a couple. Full State pension is around £18k for a couple so that only leaves a shortfall of £9k or £4.5k each. Not that much of a stretch if you start saving for retirement early enough.

I agree, but the couple had no other pension provision. Hopefully for future generations the picture may be different.

savingpennies

How much is your daughter paying into her pension?


Like her older sister, she is paying the minimum into her work based pension scheme:eek: However, she is paying the max into her HTB ISA currently and hoping to buy a house next year with her bf. After last night's programme she is coming round this afternoon for me to talk to her about SIPP's.

crv1963

savingpennies wrote: »

The message was quite clear; Are people really planning/doing enough to have a reasonable retirement?
By reasonable the programme estimated that a couple would need £27,000 a year or £2200 a month.

I watched with my 25 year old daughter, who was astonished at couple A who had not thought about how they were to achieve their goals and appalled at the costs of social care.

I missed the program, but think that what you describe is not unexpected. No one knows what healthcare needs/ costs are awaiting them in the future. All one can do is to make the best provision that you can within your means.

27k pa pension for a reasonable retirement seems on the high side but given that a couple should expect to get full SP then they have to save over a lifetime enough to generate 9-10k pa in retirement, so not impossible if they save i) early enough and ii) regularly.

How much does your 25 year old daughter save? Or does she like many think "I'll worry about that later"?

My 22 year old has 11% of his salary going into his pension- a rate he started with at 18 when he started employment. My 23 year old is saving into pension, LISA and ISA with a self imposed target of retiring by age 55.

Malthusian

savingpennies wrote: »

I agree, but the couple had no other pension provision. Hopefully for future generations the picture may be different.

Nope. In every single generation some people will save money to ensure their lifestyle isn't reduced when they stop working, and some won't want to.

Which couple are we talking about? Can't be couple C as they were paying their own care costs, which means they had personal provision. Couple A still have time to make provision even if they've started late. (Retiring to France is not expensive. Retiring to some sort of posh chalet is expensive but retiring to France is not.) Couple B kind of are where they are; they are living off state benefits and there's not many options other than debt relief / bankruptcy.

Like her older sister, she is paying the minimum into her work based pension scheme:eek: However, she is paying the max into her HTB ISA currently and hoping to buy a house next year with her bf.

She should be maximising employer contributions before saving into an HTB ISA.

For every £4 you pay into an HTBISA you get £1 from the government. If you are a basic rate taxpayer, for every £4 you pay into an auto-enrolment pension you get £1 from the government and £3 from the employer. Many employers operate 1:1 matching on their pension schemes which is even better.

Saving into an HTB ISA but not maximising employer contributions therefore makes no sense. If you spend your life working for free you can't later complain about having less to live on in retirement.

crv1963

savingpennies wrote: »

How much is your daughter paying into her pension?


Like her older sister, she is paying the minimum into her work based pension scheme:eek: However, she is paying the max into her HTB ISA currently and hoping to buy a house next year with her bf. After last night's programme she is coming round this afternoon for me to talk to her about SIPP's.

That she is seeking to talk about money with you is good! I accidentally fell into this with my sons as they asked about what provision we were making for our retirement.

My 22 year old was sat down by his boss and advised to make the most of the company pension scheme - he upped his contributions as the company matches contributions up to 7%, so effectively he has 18% of his salary going in. He chose to be in 100% shares and is hoping for a market downturn so he gets more for his money. He also saves into a H2BISA and has opened a LISA but I'm not sure how much he puts into them.

Before your daughter looks at SIPPs she should explore if her company will match any increased contributions- she may be like Mrs CRV and it may be something like NEST and no employer matching contribution above the legal minimum but worth checking.

JustAnotherSaver

Maybe just maybe the OPs daughter has an employer like the rest of us mere mortals who will only pay in the minimum (& begrudges having to pay that!) rather than the employer many members on this message board seem to have who pays in 9000%.

Not everyone has an employer who goes above and beyond.
Not everyone is a HR tax payer.