The Great Pensions Crisis - Channel 5

Andy_L

savingpennies wrote: »

It certainly would. According to the programme you would need a pension pot of £500,000 to achieve £27000 p.a.

presumably that £27k is including the state pension rather than in addition. So the couple are only ~£10k short if they both have full state pensions

Also, I'm very suspicious about that £27k for £500k pot number - I'm guessing level, no spouse, high 60s start date? Even them it seems optimistic

Malthusian

JustAnotherSaver wrote: »

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%.

"She is paying the minimum into her pension *shocked face* and maximum into an HTB ISA" suggests to me that she could be paying more into the pension. If she is already maximising employer contributions then fair enough. If something is ambiguous then it's better to read it wrong and give redundant information than to read it wrong and withhold useful information.

crv1963

JustAnotherSaver wrote: »

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.

I agree, hence each must make the best of what they have available. My suggestion to my sons was/ is 1) make pension saving a priority,(one has a generous employer who does pay more than legally required so he is getting this while it is going, the other has a reluctant employer regarding contributions), 2) save towards a house deposit (both are but one lives with his mother, the other rents a flat with a friend), 3) always pay credit cards in full monthly, 4) start a rainy day fund, 5) pay for holidays from income not borrowing, 6) live a life while young!

Malthusian

Andy_L wrote: »

Also, I'm very suspicious about that £27k for £500k pot number - I'm guessing level, no spouse, high 60s start date? Even them it seems optimistic

If two full New State Pensions are taken out of the £27k then it's a rate of 2% which is highly pessimistic.

They are probably assuming þe olde inflation-linked joint-life annuity. Virtually no-one with two State Pensions to provide a 60% guaranteed underpin would use an entire pension pot of £500k to buy an inflation-linked joint-life annuity at 2%pa. Even Choi probably wouldn't do that. It would be recklessly conservative to the point of stark raving mad.

Mick70

a joint pot of £500k (or annual joint pension of 27k) to have an "ok" pension seemed quite high I thought, about 2/3 of the country wont be able to achieve that . the state pension age will rise again and before know it wont get access until 70

savingpennies

My daughter's pension is with NEST and she helps run a small Italian cafe/takeaway with her boyfriend (he's the owner and her employer). Her older sister also works for him part time. I'm not sure of the ins and outs of it but I will look into it further.

As a family we frequently have conversations about finance and she knows the importance of pensions. Her father and I both retired in our late 50's courtesy of DB pensions, contracted out SERPs and two private pensions we had been paying into since our late 20's. It is only recently she has started to save money every month after being constantly in the red since she started university, so she is taking on board what we are saying.

spadoosh

I think the £5tn or so in unfunded state pension is of a much bigger concern.

Ageing population and what appears to be a largely stangant economy for the last decade or so screams problems to me. I suspect State retirement age will be nearer 90 by the time i retire or the state pension will have become means tested.

Its the reason why the workplace pension was introduced. They all know the problem is there but i dont think anyone is being honest about their intentions with it. Ie to let the work place pension replace the state pension. Ont he face of it not too bad, when you realise most peoples work place pensions offer what is a tiny pension i can only see lots of problems in the future with pensions.

crv1963

If her boyfriend "is the one" then maybe she could learn a bit more about pensions and then have a conversation about finances with him? Including their joint planning for retirement as well as buying a house together?

The sooner they get started the better, keep a level base percentage going in.

DairyQueen

I watched it (and part 2 is on tonight C5 - 9:15).

To add a few more details of each couples' circumstances:

1) Couple A
Mid 40s and both working. They had a combined income of £45k and a combined DC pot of £80k. They also owned their own home (current value £180k) - presumably mortgaged but that wasn't mentioned. Their pension contributions were low and other savings were short-term and spent annually on things like holidays. They were hoping to retire to France and buy a property with earning potential (glamping/gites). An estate agent suggested that they would need around £135k at current values. Seemed low to me for SW France but I'm no expert.

The programme's spin was most evident with this couple as the value of their UK property was excluded from their projected retirement finances. Presumably, by age 60, the mortgage would be paid-off and the proceeds would easily cover the cost of the French property. The big hole would be bridging from age 60 to SPa given their relatively low non-SP pension provision (and no other savings) and the difficulty of producing sufficient income to meet expenses from a relatively modest holiday business.

The point being made was that their current pension, plus future contributions, would fall well short of financing the retirement they imagined. They hadn't costed it. Their's was very much a 'sleepwalking blindly' attitude.

2) Couple B
I believe they were in their 70s. It would appear that they were lifelong low earners and had been on the sharp end of policies like no pension for part-timers for most of their working lives. They lived in a mobile home which (presumably) they owned. It was a nice, bungalow-type home on a well-kept, over-55s site, and nothing like a caravan, but obviously not as efficient insulation-wise as a new, conventional property.

They both suffered from health conditions (lung related) which required them to stay warm 24/7. I suspect that the wife had little SP of her own - possibly paid only the reduced NI available to married women - and neither had any pension other than the SP. It was common for low earners to need those extra few NI pounds to pay for necessities back in the day. I suspect that their SP was supplemented by pension credit.

The high heating bills were unaffordable and had tipped them into debt. If the mobile home is owned then they would be at risk of losing it if made bankrupt. No doubt they would then be housed by the council but who needs that kind of stress when ill and in your 70s?

The point here being that a modest pension will be insufficient to cover the extra expenses of failing health.

3) Couple C
Late 70s and the husband was a long-term dementia-sufferer. He had been in residential care for 2/3 years having previously been cared for at home by the wife. His care was partly-funded by the state but the balance was paid from the couple's own means. They contributed his SP plus 50% of his private pension but they needed to cover an additional couple of hundred per month. The wife had sold their home and downsized to a one-bedroom in order to raise the funds required to pay the balance of the care. The programme reported that, so far, the couple had funded £75k of the husband's respite and permanent residential care (around a quarter of the cost).

The wife stated that their savings were now totally depleted.

Yet another example of how the health-lottery can seriously damage your finances.

Without explicitly stating, the programme made clear that the state cannot provide 'from the cradle to the grave' and we all need to budget for late-life health costs. Stats mentioned that 80% of those in their 80s require some kind of care, 1 in 10 of us will suffer dementia and 25% of us will require residential care. For those who reach 80 the stats on the last two increase at an alarming rate and the majority of those currently age 65 will live to be over 80.

The last point was well-made. Too many of us blithely assume that we will live long and healthy lives. For most of us these two aspirations are incompatible and if we don't face the financial reality then the final years of our lives could be both unpleasant and stressful. :eek:

Spreadsheetman

Interesting program. I found the plight of couple C pretty chilling as that is the one that concerns me personally the most and is the hardest to provide for since it's so unpredictable and the sums are potentially so vast.

I must admit I laughed when couple A walked into the caravan and were informed that 2 weeks of that by the north sea was the alternative they could afford vs. the dream retirement in the South of France.