Pensions envy. Are we heading for financially comfortable but socially uncomfortable retirements?

Sea_Shell

MalMonroe said:

Sea_Shell said:

pensionpawn said:

Sea_Shell said:

It's not just the pure financial element of "envy" either, but also the ability to early retire, if you choose to, as opposed to those who are paying something into a pension, but will still have to work until they get their SP.

I've kept my early retirement on the down low, as to not be accused of rubbing anyone's noses in it.   

We could have kept working and swelled the coffers even more, but we decided to call time on work!!

Same for us. Time remaining is more important than size of treasure chest.

And then family expect that time to be at their disposal!!!   

Do they??? 

Mine don't. And my time is my own. 

Lucky you! 

SouthCoastBoy

bluenose1 said:

Never like to self congratulate myself too much as per the famous Baz Luhrmann Sunscreen 
Whatever you do, don't congratulate yourself too much
Or berate yourself either
Your choices are half chance, so are everybody else's...............

If you have never heard it lyrics worth a read
lyricshttps://www.justsomelyrics.com/1811514/baz-luhrmann-baz-luhrmann-the-sunscreen-song-lyrics.html

For some reason I remember listening to this while driving around the M25 in the late 90s (around about Junction 9 )

jamesd

Workerdrone said:

"Who on earth has a million pound pension:", "It's the governments fault we have the lowest state pension in Europe" 

With minimum wage at £8.91 an hour from 23, a 40 hour week for 52 weeks and state pension age of 68 the 8% contribution on it all (not required by law) would produce £216k if growth is 4.5% plus inflation, assuming contributions are also increased with inflation. To get to a million in today's money would take increasing from £123.55 to £873 £573 a month. Using the 4% approximation the 216k would add an extra £8,640 of income a year,

British governments have chosen the approach of a state pension to pay the core income and personal choice on how far to go above this. Some other countries disadvantage large chunks of their populations with lower than assumed life expectancy by compelling higher contributions and not allowing the faster drawing that the UK's DC pension system provides.

Workerdrone

jamesd said:

Workerdrone said:

"Who on earth has a million pound pension:", "It's the governments fault we have the lowest state pension in Europe" 

With minimum wage at £8.91 an hour from 23, a 40 hour week for 52 weeks and state pension age of 68 the 8% contribution on it all (not required by law) would produce £216k if growth is 4.5% plus inflation, assuming contributions are also increased with inflation. To get to a million in today's money would take increasing from £123.55 to £873 a month. Using the 4% approximation the 216k would add an extra £8,640 of income a year,

British governments have chosen the approach of a state pension to pay the core income and personal choice on how far to go above this. Some other countries disadvantage large chunks of their populations with lower than assumed life expectancy by compelling higher contributions and not allowing the faster drawing that the UK's DC pension system provides.

Not sure I entirely agree with your figures. Let's assume a start at 18 on minimum wage of £6.45 per hour for a 40 hour week. So say £12900 for a 50 week year. If you've been well advised by your parents you could put away £201 per month. The tax man will take that up to £252.

Now lets assume you're not ambitious and stick to a minimum wage job. We'll also figure in a 2% yearly inflationary rise and a return of 5.1% before inflation. By 21 you will have put away £10,028.

Now your wage goes up to £8.36 an hour or £16720 per year. By the age of 23 your pension pot stands at £21,746

Now from 23 you are on £17820 per year with a 2% annual inflationary rise.  As you are earning a bit more you put your pension contribution up to £228.80 and the tax man makes it up to £286. You stick with that for the next 44 years of your working life. Theres a million pound pot.

I accept 1m won't be worth the same by then but the example shows if you start early and are well advised, it is possible even for a person on minimum wage.

And with the above I haven't factored in the employers 8% contribution at all.

Thrugelmir

bostonerimus said:

MK62 said:

bostonerimus said:

and if you have to largely rely on the UK state pension in retirement you will be getting one of the lowest state pension benefits in the developed world.

There are several reasons why it's difficult to objectively compare headline rates of different countries state pensions.....healthcare provision for one (though admittedly for obvious reasons the NHS has been under a lot of strain in the last few years).

Then there's the relative cost of living in each country, eligibility rules (some countries have higher eligibility requirements than the UK in order to get the maximum state pension level), contribution levels, treatment of couples......and so on.

This is not a defence (or otherwise) of the UK's state pension - just saying that comparing maximum headline rates can be misleading.

For anyone interested, there is an interesting paper here.... https://researchbriefings.files.parliament.uk/documents/SN00290/SN00290.pdf

Yes there are many complex variables, but the OECD did a pretty comprehensive analysis when the new flat rate pension came in and found the UK state pension to be quite low. The UK does have higher private pension amounts than many other countries, but that points to the UK's greater reliance on private DC pensions. The UK is great if you have a good job and can afford to use all the tax advantaged ways of investing and the stock market is kind to you over the years, but for many people the advantages of the system are out of reach.

The developed world faces a challenge across the board. As a declining birthrate is resulting in fewer new contributors to the state schemes. To replace those moving into the drawdown phase of their lives. While making headline comparisons draws attention to the variantion in benefits. It fails to address the reform that's required for countries such as France for example to sustain the schemes in existance. At every turn Macron has hit resistance. Meanwhile the clock ticks on and the underlying problem continues to manifest itself. 

NedS

Silvertabby said:

Part of my job as a LGPS administrator involved trying to pursuade members not to opt out of the scheme.  Most would listen to me reeling out the list of benefits they would be giving up, but then say that they still wanted to opt out because they 'needed' the money for X,Y or Z.

Many of these were people in their 20s or 30s, in well paid full time jobs.  I wonder if they will get to retirement age, consider the error of their ways and then try to complain that I wasn't 'pursuasive enough'!

@Silvertabby I remember my younger 20-something self having exactly the same conversation with the 'pensions person' in my first real job at a University (USS scheme), and them telling me this is the best pension you'll ever have when I asked them if it was any good. Luckily for me, I listened and didn't opt out. My older self now thanks them and considers myself lucky to have a reasonable amount of guaranteed DB income from that and other final salary/career average schemes. So thank you to you and your kind for helping me make the right choice.

cfw1994

bostonerimus said:

MK62 said:

bostonerimus said:

and if you have to largely rely on the UK state pension in retirement you will be getting one of the lowest state pension benefits in the developed world.

There are several reasons why it's difficult to objectively compare headline rates of different countries state pensions.....healthcare provision for one (though admittedly for obvious reasons the NHS has been under a lot of strain in the last few years).

Then there's the relative cost of living in each country, eligibility rules (some countries have higher eligibility requirements than the UK in order to get the maximum state pension level), contribution levels, treatment of couples......and so on.

This is not a defence (or otherwise) of the UK's state pension - just saying that comparing maximum headline rates can be misleading.

For anyone interested, there is an interesting paper here.... https://researchbriefings.files.parliament.uk/documents/SN00290/SN00290.pdf

Yes there are many complex variables, but the OECD did a pretty comprehensive analysis when the new flat rate pension came in and found the UK state pension to be quite low. The UK does have higher private pension amounts than many other countries, but that points to the UK's greater reliance on private DC pensions. The UK is great if you have a good job and can afford to use all the tax advantaged ways of investing and the stock market is kind to you over the years, but for many people the advantages of the system are out of reach.

Veering a bit off topic here, but don’t forget we do still have the NHS here: I have US pals (former colleagues) who tell me they will need the equivalent of around £4-6k pa for health insurance once they step away from work: I know it will keep some of them working longer than they might have otherwise hoped.

The NHS certainly has it’s challenges, & there are of course occasional horror stories, but in the various family interactions I am familiar with (including emergency laser surgery myself 18 months ago), the NHS has delivered.  I greatly value that as part of the “pension planning” process, & hope it will continue to deliver for many, many people 👍

MalMonroe said:

Sea_Shell said:

pensionpawn said:

Sea_Shell said:

It's not just the pure financial element of "envy" either, but also the ability to early retire, if you choose to, as opposed to those who are paying something into a pension, but will still have to work until they get their SP.

I've kept my early retirement on the down low, as to not be accused of rubbing anyone's noses in it.   

We could have kept working and swelled the coffers even more, but we decided to call time on work!!

Same for us. Time remaining is more important than size of treasure chest.

And then family expect that time to be at their disposal!!!   

Do they??? 

Mine don't. And my time is my own. 

We have some caring responsibilities that will stop any adventurous long holidays in the near future (elderly MiL), but don’t begrudge that: the frail benign matriarch of the family, really, & was always generous with their time over the 30+ years I’ve known her: I must have married well 🤣

Aside from that, we are quite lucky with family members: never any demands on time, and indeed we get to chose to spend more time with them now than we could whilst working.

Time.  That is the beauty of it all, eh!

ComicGeek

cfw1994 said:

Time.  That is the beauty of it all, eh!

And that's why I try and balance enjoying life now, while I'm still working, and saving for retirement. I worked hard at school and in my early career to get the best possible start, picked a career that I really enjoy - life doesn't only start when you retire, you have to make the most of all the time you get.

My brother in law passed away last year at 41, and that really hit home. No point only saving and not enjoying life when you don't make it to retirement, or don't have the health to enjoy it.

My wife has chronic pain and long term health issues, so we have always looked to balance living now and saving for the future.  

Flugelhorn

NedS said:

Silvertabby said:

Part of my job as a LGPS administrator involved trying to pursuade members not to opt out of the scheme.  Most would listen to me reeling out the list of benefits they would be giving up, but then say that they still wanted to opt out because they 'needed' the money for X,Y or Z.

Many of these were people in their 20s or 30s, in well paid full time jobs.  I wonder if they will get to retirement age, consider the error of their ways and then try to complain that I wasn't 'pursuasive enough'!

@Silvertabby I remember my younger 20-something self having exactly the same conversation with the 'pensions person' in my first real job at a University (USS scheme), and them telling me this is the best pension you'll ever have when I asked them if it was any good. Luckily for me, I listened and didn't opt out. My older self now thanks them and considers myself lucky to have a reasonable amount of guaranteed DB income from that and other final salary/career average schemes. So thank you to you and your kind for helping me make the right choice.

Remember exactly the same in first days as a junior doctor "tick here and when you get to 60 you 'll be really glad you did"  at that stage having worked the last 30 hours I wasn't sure that I would survive until the end of the week but hey I ticked the box,  things did get a bit better in the working day and at 60+ I am now grateful that they stood over is while we did all that.

Wish the scheme had been a bit less complicated though - maybe those in the 2015 will at least have some insight as they go along as to what they might get at the end 

pensionpawn

ComicGeek said:

cfw1994 said:

Time.  That is the beauty of it all, eh!

And that's why I try and balance enjoying life now, while I'm still working, and saving for retirement. I worked hard at school and in my early career to get the best possible start, picked a career that I really enjoy - life doesn't only start when you retire, you have to make the most of all the time you get.

My brother in law passed away last year at 41, and that really hit home. No point only saving and not enjoying life when you don't make it to retirement, or don't have the health to enjoy it.

My wife has chronic pain and long term health issues, so we have always looked to balance living now and saving for the future.  

Couldn't agree more. As a family of five over the decades we've enjoyed good holidays to the continent and Florida and have not bought a second hand car since the mid 90's. We've also experienced redundancy and periods out of work. Tomorrow is never promised so living in the here and now is just as important as saving for retirement. Also we value quality time over amassing wealth so we're planning so retire at 57 / 58, having dropped our hours for a couple of years first to test the water. We've never been Olympians nor have we (fortunately) suffered any major illness. However since turning 50 the wheels are starting the grind, if not fully fallen off the bus, so if we're going to enjoy retirement it needs to start soon! Returning to the title of the thread, we haven't experienced any envy yet, however we have, on many occasions, elicited surprise that we're planning to retire before 58 (not early by any means on this forum). We've explained our strategy and have so many times received the stock answer, "I / we don't understand pensions", the latest from a university lecturer. I also teach (electronics) and as a numeracy starter I use pensions as most of the maths supports the lesson learning objectives. Kill two birds with one stone!