Pensions? Are they even worth it?

Silvertabby

mlv-1967 said:

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.

Not this old chestnut of Euro pensions  being so much more than the UK State pension.... The truth is that Euro pensions are hybrid schemes, part State and part private with an element of an earnings link.  Both employers and employees pay in way more than we do in just NI.  A much more accurate comparison would therefore be a Euro pension against the UK state pension PLUS all the private/occupational pensions that the UK pensioner paid into (or should have paid into).  Or the UK state pension plus all means tested benefits which, when including housing benefit,  can easily reach £18K (tax free) per year.

As for the American pension, again, that is their lot.  No housing benefits, and a health system which gives the options of pay up or die. Medicare for the over 65s only covers the very basics.

[Deleted User]

mlv-1967 said:

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. 

Let’s check out the facts:

1. Canada is in OECD. 

2. Maximum state pension in Canada is $1203 or 713 GBP per month (CPP).  This pension is linked to earnings. Few people get this maximum.   

3. The full state pension (new) in Britain is 802 GBP per month. 

4. Poor people in Canada get top up benefits, like Old Age Security.  I suspect that UK also has benefits supporting the poor.

In summary, you don’t know what you are talking about.  

Your general sentiment that nanny state should take care is in fact “debatable”. 

[Deleted User]

If you are a toilet cleaner or a scrapyard worker, are you likely to be able to save any reasonable amounts?

That’s up to a particular individual.  Here: https://www.nbcnews.com/news/us-news/sylvia-bloom-frugal-secretary-hid-9m-fortune-she-joins-list-n871996

And if not… Its called life.  Eventually you run out of other peoples money. 

LV_426

Deleted_User said:

If you are a toilet cleaner or a scrapyard worker, are you likely to be able to save any reasonable amounts?

That’s up to a particular individual.  Here: https://www.nbcnews.com/news/us-news/sylvia-bloom-frugal-secretary-hid-9m-fortune-she-joins-list-n871996

And if not… Its called life.  Eventually you run out of other peoples money. 

Wow that's an impressive pile of cash. But it strikes me as odd that someone would live a very frugal lifestyle, but amass millions. To do what? Surely wealth has a purpose, and that's mainly to enjoy the things in life that cost money.
But I suppose people have different views and goals.

[Deleted User]

ajfielden said:

Deleted_User said:

If you are a toilet cleaner or a scrapyard worker, are you likely to be able to save any reasonable amounts?

That’s up to a particular individual.  Here: https://www.nbcnews.com/news/us-news/sylvia-bloom-frugal-secretary-hid-9m-fortune-she-joins-list-n871996

And if not… Its called life.  Eventually you run out of other peoples money. 

Wow that's an impressive pile of cash. But it strikes me as odd that someone would live a very frugal lifestyle, but amass millions. To do what? Surely wealth has a purpose, and that's mainly to enjoy the things in life that cost money.
But I suppose people have different views and goals.

Suspect she was impacted by stories of the Great Depression. She donated the money to charities in her will.  And is remembered for it. People have different objectives.

LV_426

Deleted_User said:

ajfielden said:

Deleted_User said:

If you are a toilet cleaner or a scrapyard worker, are you likely to be able to save any reasonable amounts?

That’s up to a particular individual.  Here: https://www.nbcnews.com/news/us-news/sylvia-bloom-frugal-secretary-hid-9m-fortune-she-joins-list-n871996

And if not… Its called life.  Eventually you run out of other peoples money. 

Wow that's an impressive pile of cash. But it strikes me as odd that someone would live a very frugal lifestyle, but amass millions. To do what? Surely wealth has a purpose, and that's mainly to enjoy the things in life that cost money.
But I suppose people have different views and goals.

Suspect she was impacted by stories of the Great Depression. She donated the money to charities in her will.  And is remembered for it. People have different objectives.

That's a very fine objective. Respect to her.

Thrugelmir

mlv-1967 said:

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 USA funds itself by printing money.  The day of reckoning draws ever closer. 

Thrugelmir

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.

Auto enrollment is starting to address this issue. Cannot be resolved instanteously. Will take time to build up. The greatest problem is the UK's preoccupation with property. Property doesn't create real real wealth. Money needs to redirected into wealth creating assets. 

LV_426

Thrugelmir said:

Auto enrollment is starting to address this issue. Cannot be resolved instanteously. Will take time to build up. The greatest problem is the UK's preoccupation with property. Property doesn't create real real wealth. Money needs to redirected into wealth creating assets. 

You mean primary residence? I suppose if you have a portfolio of properties, that's a wealth creating asset?

[Deleted User]

Clearly property, including private residencies, have generated a lot of wealth for an awful lot of people.  

Real estate is a different type of investment than stocks, has advantages and disadvantages but to say it does not generate wealth is to deny the obvious.