The Great Pensions Crisis - Channel 5

P933alilli

I bet the two presenters will be ok; Michael Beurk and the pensions expert!

Anonymous101

Brilley wrote: »

I think it's sad that some people will still need to "rent" in retirement, particularly given the above inflation rise in rental costs over the last decade.

Assuming the average rent is around £500/ month then this is only just covered by the average state pension with not a lot left over particularly if you are single and not eligible for the max. pension.

Double wammy of having to pay this as long as you live with no opportunity for equity release.

I would actually argue the opposite. I think the actual difference between renting and purchasing once you factor in costs of lending and particularly maintenance is minimal. There's lots of research in the States about this and in many cases its found to be cheaper to rent.


My opinion is that as we age the responsibility and cost of maintenance becomes unmanageable for many and that the majority of people would be better to take any equity prior to reaching that point out of their house and invest it, using the proceeds to pay for their rent.

Spreadsheetman

Anonymous101 wrote: »

I would actually argue the opposite....
My opinion is that as we age the responsibility and cost of maintenance becomes unmanageable for many and that the majority of people would be better to take any equity prior to reaching that point out of their house and invest it, using the proceeds to pay for their rent.

That is a good point re. maintenance. I'm not planning to go that far as renting has too many disadvantages e.g. being forced to move in your 70s or 80s - no thanks; but I will be downsizing into a low-maintenance flat or similar.

The 2nd program was interesting - two marginal businesses that didn't allow the owners to get ahead enough to build up retirement savings.

Dorian1958

One of my tenants is in her 90's. She moved in temporarily when her 5 bed house was flooded, but then sold her house when it was renovated. Her family are delighted that she now lives in a ground floor one bedroom flat and that I take care of all the maintenance (including changing light bulbs, blocked sink etc.). She can comfortably afford the rent from her SP and a widow's pension, and has a couple of hundred thousand in the bank to fall back on if she needs residential care in the future. Renting when you're retired is not bad news for everyone.

p00hsticks

DairyQueen wrote: »

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:

I think the problem with this is the figures involved really make fully budgeting for potential care costs unfeasible. If a couple both end up requiring residential care, then you're looking at costs of well over £1,000 a week, even in todays terms.

So you'd need a massive pension pot to fund that sort of expenditure. Personally, as a couple, even with two full state pension forecasts, a couple of reasonable DB pensions, a good savings pot and a modest lifestyle, our future care planning is little more than 'cross our fingers and hope' that at most one of us ends up requiring much care, and then for a relatively short time. There's no way we could fully cover the costs of both of us ending up in care for many years.

Wasn't the idea of everyone being able to buy some sort of 'governent insurance' mooted at some point ? You could choose to contribute a sum (I think £75,000 was mentioned ?) whilst relatively young and healthy and in return you wouldn't be expected to pay any more if care ended up being needed.

Sea_Shell

Dorian1958 wrote: »

One of my tenants is in her 90's. She moved in temporarily when her 5 bed house was flooded, but then sold her house when it was renovated. Her family are delighted that she now lives in a ground floor one bedroom flat and that I take care of all the maintenance (including changing light bulbs, blocked sink etc.). She can comfortably afford the rent from her SP and a widow's pension, and has a couple of hundred thousand in the bank to fall back on if she needs residential care in the future. Renting when you're retired is not bad news for everyone.

I think security of tenancy is the main factor stopping owners changing to renters in old age.

What sort of tenancy agreement is your elderly tenant on? What would happen to them if your circumstances changed and the property was no longer available to rent?

Mick70

MoneyWorry wrote: »

What was most interesting about the programme was that they had bought into the idea of the recent retirement living standards by the PLSA.

For a couple
£15,700 minimum
£29,100 moderate
£47, 500 comfortable

I think the programme made a good point in that couple A’s expectations were far in excess of their actual pension saving. We also have to remember that the target audience was the huge number of people who have no or little private pension saving. It wasn’t really aimed at the members of this forum who are a lot more knowledgeable.

think i would agree with those figures although would suggest 47.5k be bit more than comfortable

kev2009

I never saw this program, didn't know it was on. Out of interest, would you assume to half the £27k if single or not really?

Thanks

Kev

DairyQueen

p00hsticks wrote: »

I think the problem with this is the figures involved really make fully budgeting for potential care costs unfeasible. If a couple both end up requiring residential care, then you're looking at costs of well over £1,000 a week, even in todays terms.

Unfortunately, that £1000 per week figure is likely to cover the costs for one person, not two, at today's value.

I disagree that it's impossible to consider residential care costs when planning retirement finances. The worst case scenario (several years of care for both of a couple) is highly unlikely if you look at the stats. It's possible to plan only for probabilities, and probabilities are less scary for most people.

The probability is that, for an opposite sex couple where the female is a few years younger (our situation):

a) The male will die first and will likely be cared for at home by spouse with end of life support from family and/or state.
b) The female will likely require residential care for the last two/three years of her life.
c) Guaranteed income will offset a %age of care home fees (SP/DB). Drawdown/savings/home equity is required to cover the balance.

Worked example:

Care home fees = £50kp.a. x three years = £150k
State pension = £9p.a.k x 3 = £27k
Other guaranteed pensions (DB/annuities) = (say) £10k p.a. x 3 = £30k
Attendance Allowance = £4.5kp.a. x 3 = £13.5k

Balance required = £150k - (£27k+£30k+£13.5k) = £79.5k.

The vast majority of home-owning retirees will be able to fund the balance from their house equity.

Obviously, this is just an example and the less non-SP pension available then the higher the contribution required form other savings/DC pensions/home equity.

Ignoring the issue because the worst case scenario is unaffordable is akin to spending all of your assets the year in which you retire just because there is a statistically tiny possibility that you will die the following year.

Of course some people require care for several years. Of course a few couples both require care. Of course such situations would throw a spanner in the works of most people's assets and finances. However, the chances of such situations are statistically very small but the chances of the survivor of a couple requiring care in their final few years is pretty high. This is the situation that should be planned for.

Malthusian

p00hsticks wrote: »

Wasn't the idea of everyone being able to buy some sort of 'governent insurance' mooted at some point ?

Probably. Lots of aggressively stupid ideas to non-solve the usually made up problem of people with money having to pay their own living costs have been mooted.

You could choose to contribute a sum (I think £75,000 was mentioned ?) whilst relatively young and healthy and in return you wouldn't be expected to pay any more if care ended up being needed.

If I had £75,000 to spare for my future care needs I would either buy £75,000 worth of bigger house or put it in my pension. Which in due course, after several decades of investment growth, would be highly likely to pay for my care costs with plenty left over. *edit* And the crucial point here is not that I think it will guarantee to pay more of my care costs than the government insurance, but that I can enjoy my bigger house or more comfortable retirement while still providing for my care costs.

Lots of people will pay more than £75,000 on their care costs (like Couple C). That is not the issue. The issue is how you would persuade people whose care costs will be £0 or less than £75,000 to cross-subsidise the others, by taking out insurance against something they are likely to already be self-insured for.