Pensions? Are they even worth it?

LV_426

Workerdrone said:

Sadly I think this might be a case of Trolling, we don't have any details on the OP's age or what the good salary is. If living expenses are crippling, and it's genuine, at least he is on the right forum. Im sure Martins money diet, downshift challenge etc could help trim those bills down freeing up some extra cash for investment.

But the attitude displayed in the original post does mirror a great deal of the comments I see on various pension articles. An earlier poster nailed it when they suggested he was heading for cardboard alley.

I think you could be right.

LV_426

JoeCrystal said:

ajfielden said:

Malthusian said:

The UK state pension is also tax free if you have no other income due to the personal allowance.

And I'd say £9339.20/year is barely adequate, and most people might to struggle to live on it.

I don't know. If you don't need to pay the mortgage or pay the rents and keep your spending low, then yes, one can easily live on such a generous income, providing you do not opt for many luxuries.  It is high enough to pay for all basic life needs and, indeed, designed to pay for the bare survival.

I wouldn't call it generous. My credit card bill alone is usually about £1500/month, including food. We don't lead an extravagant lifestyle, far from it. But I think we would really struggle on £9339 a year. When you factor in energy bills, and look how they are escalating, it does add up.
But maybe I'm not thinking in the extreme budget mindset.
There were some figures I read recently presenting the amounts needed for a 'basic', 'comfortable' and 'luxurious' lifestyle. I'm pretty sure they were a lot more than the basic state pension.

Malthusian

Albermarle said:

In the UK we no longer believe that rich people should get more taxpayers' money than poorer people. (Not when it comes to State Pension, anyway.)

As long as you discount , higher rate tax relief , ISA allowances etc , none of which are of any benefit to a significant part of UK society .

Rich people keeping more of their own money != rich people getting more taxpayers' money than poorer people. Higher State Pensions for rich people, paid out of general taxation, does.

ex-pat_scot

ajfielden said:

Workerdrone said:

Sadly I think this might be a case of Trolling, 

But the attitude displayed in the original post does mirror a great deal of the comments I see on various pension articles. An earlier poster nailed it when they suggested he was heading for cardboard alley.

I think you could be right.

My first thought, and I hesitated before responding.
However, for every poster there will be a number of lurkers with the same challenge, and with genuine thoughts and similar concerns.  
I tend to respond more for their benefit than the potential troll's.

It's also really easy to drift into groupthink and clique. It is healthy to have some of our core assumptions challenged, whether from desperation, ignorance or trolling.

mlv-1967

Malthusian said:

mlv-1967 said:

This is the system in the UK.  Most other developed nations have a much more generous state pension system - even the USA has a 'social security' pension that you can claim from age 62 which is paid TAX FREE if you have no other income.

"More generous" is debatable. State pensions in other countries are higher because they are earnings-linked. Other countries think it fine that if you pay more in you get more out. In the UK we no longer believe that rich people should get more taxpayers' money than poorer people. (Not when it comes to State Pension, anyway.)

If the basic rate of income tax was 53% as you would like (rather than 44% as currently, taking into account next year's increase) there would be no noticeable difference to State Pension provision and people would have a lot less money available to save for retirement.

The UK state pension is also tax free if you have no other income due to the personal allowance.

I don't think it's debatable at all - we have the lowest state pension among nations of the OECD, which is frankly shameful. In some countries the state pension is earnings related, but not in all - many nations (e.g. the USA) have a flat rate state pension, though still much more generous than the UK's.  The base rate of income tax is 20% in the UK, not 44% - even including NI the base marginal rate of tax is 32%. The problem with leaving it to individuals to invest their own money to provide a pension is twofold: (1) many people will be reluctant to save when they are free to spend their after tax salary on anything they want and (2) investing money in a defined contribution pension is very high risk for the simple reason that the final result of years of contributions is not defined.  You could, at least in theory, end up with less money than you invested after allowing for inflation. The whole point of state pension provision is guaranteed income that is enough to live on - the state pension in the UK is nowhere near enough to live on even assuming a modest lifestyle.  This is the problem.

mlv-1967

Malthusian said:

Albermarle said:

In the UK we no longer believe that rich people should get more taxpayers' money than poorer people. (Not when it comes to State Pension, anyway.)

As long as you discount , higher rate tax relief , ISA allowances etc , none of which are of any benefit to a significant part of UK society .

Rich people keeping more of their own money != rich people getting more taxpayers' money than poorer people. Higher State Pensions for rich people, paid out of general taxation, does.

You statement is nonsense because under a salary linked state pension there would surely be a cap on how much you could receive - i.e. someone earning £1M a year would not be able to receive £500k a year as a pension.  Anyway, it is possible to have a higher state pension without it necessarily being earnings related. If we had a state pension based on say, two-thirds of the median salary, this would be around £20-21k a year and provide a decent personal income for most people to live on without the need for taking high risks with investments.  Of course this would NOT prevent people from boosting this pension with additional investments if they so wished.  In order to achieve this level of state pension we would not need to impose huge taxes - much of the money could be sourced by closing tax loopholes and eliminating various tax free allowances which are only to the benefit of the wealthy.

mlv-1967

JoeCrystal said:

ajfielden said:

Malthusian said:

The UK state pension is also tax free if you have no other income due to the personal allowance.

And I'd say £9339.20/year is barely adequate, and most people might to struggle to live on it.

I don't know. If you don't need to pay the mortgage or pay the rents and keep your spending low, then yes, one can easily live on such a generous income, providing you do not opt for many luxuries.  It is high enough to pay for all basic life needs and, indeed, designed to pay for the bare survival.

I DO know and I can assure that it is NOT near enough to sustain even a basic lifestyle, unless you count spending nearly every single penny on bills and food is acceptable.  A state pension designed for 'bare survival' is understandable in a developing country with a weak economy but not in one of the richest countries in the world.

LV_426

mlv-1967 said:

JoeCrystal said:

ajfielden said:

Malthusian said:

The UK state pension is also tax free if you have no other income due to the personal allowance.

And I'd say £9339.20/year is barely adequate, and most people might to struggle to live on it.

I don't know. If you don't need to pay the mortgage or pay the rents and keep your spending low, then yes, one can easily live on such a generous income, providing you do not opt for many luxuries.  It is high enough to pay for all basic life needs and, indeed, designed to pay for the bare survival.

I DO know and I can assure that it is NOT near enough to sustain even a basic lifestyle, unless you count spending nearly every single penny on bills and food is acceptable.  A state pension designed for 'bare survival' is understandable in a developing country with a weak economy but not in one of the richest countries in the world.

Good point, and IF the OP is serious, or for anyone else interested for that matter, the takeaway message from this thread is that your own personal pension is not just worth it, but vital.

mlv-1967

Deleted_User said:

Usually such comparisons encourage large mandatory contributions (aka tax) which makes Nordic countries top of the list. 

Personally, I like a small pension tax (national insurance/CPP contributions, etc) and encouragement for people to invest in their retirement.    Gives one freedom to reduce or increase contributions depending on whats going on in your life.   With freedom comes responsibility.  Thats the bit that some complain about. 

The problem with this approach is that our system fails to provide an adequate safety net.  Many people could spend a lifetime in poorly paid jobs and not have enough to save for a decent pension - what are they supposed to do?  If you are a toilet cleaner or a scrapyard worker, are you likely to be able to save any reasonable amounts?  I would say no. I am all in favour of people being able to invest for their future, but this needs to be tempered with a social balance to ensure that the poorest in our society are able to live decently in old age.  A state pension of at least half of median salary (ideally two thirds) would ensure this.

cloud_dog

mlv-1967 said:

Deleted_User said:

Usually such comparisons encourage large mandatory contributions (aka tax) which makes Nordic countries top of the list. 

Personally, I like a small pension tax (national insurance/CPP contributions, etc) and encouragement for people to invest in their retirement.    Gives one freedom to reduce or increase contributions depending on whats going on in your life.   With freedom comes responsibility.  Thats the bit that some complain about. 

The problem with this approach is that our system fails to provide an adequate safety net.  Many people could spend a lifetime in poorly paid jobs and not have enough to save for a decent pension - what are they supposed to do?  If you are a toilet cleaner or a scrapyard worker, are you likely to be able to save any reasonable amounts?  I would say no. I am all in favour of people being able to invest for their future, but this needs to be tempered with a social balance to ensure that the poorest in our society are able to live decently in old age.  A state pension of at least half of median salary (ideally two thirds) would ensure this.

Ummm, pension credits?