Lifestyle From Pension At Minimum Wage After 40 Years Service

NannaH

I think auto enrolment is a conniving way of keeping people juuust above the limit for extra benefits.  It’s not set high enough,  especially for future single pensioners - a couple would do ok, as long as they didn’t have to pay high rent,  £28k income between them isn’t at all bad. 

What would the level of contributions have to be for an income of £10k plus SP?   that should be the aim.  

MK62

Auto enrollment had to start at some level though, and there was and is simply no appetite to set contributions at a level which would result in a minimum wage earner generating a £10k pa pension after 40 years (in today's money).
All they can do is edge the contribution levels up over time, and hope there's little pushback.
In the bottom deciles of earners though, it can be a tough sell, even at current contribution levels, for those who are really struggling right now........

As for the level of contribution required to produce a 10k pa pension (in today's money) in 40 years, you need to make a lot of assumptions, but for a 28yo you'd probably need a final pot of something iro £165k (in today's money), which, assuming a real return of 2%, would require contributions of around £3150pa, or around 17% of gross pay for a minimum wage earner earning c£18500pa......and tbh there's not a hope in hell of that happening.

Albermarle

NannaH said:

I think auto enrolment is a conniving way of keeping people juuust above the limit for extra benefits.  It’s not set high enough,  especially for future single pensioners - a couple would do ok, as long as they didn’t have to pay high rent,  £28k income between them isn’t at all bad. 

What would the level of contributions have to be for an income of £10k plus SP?   that should be the aim.  

The higher you set the minimum contribution level, the more people will opt out. Probably more mileage in upping the employers minimum to 5%.

NannaH

Yes I agree, employers should definitely put more. 

17% just isn’t going to happen,  even at double minimum wage.
My Daughter contributes 12% to the TPS and it’s a struggle,  £50k salary sounds like a lot but she pays over 40% of her income in tax/NI/ student loan and pension,  add in nursery fees and she sometimes wonders why she bothers. 

JoeCrystal

TPS is certainly should only be opted out as only as a very last resort since it comes with very generous bells and whistles along with death in service benefits and so on. Even 12 percent is a bargain in the grand scheme of thing I am afraid. That sound really high for a public sector pension scheme for someone on her salary. I think it is 10 percent or so in her position. So if you include tax relief, it is basically even cheaper. Her take home pay won't really increase that much in the end sadly so potentially extremely expensive mistakes.

EDIT: looking at the TPS, if she is paying 12 percent then she is on £84k plus salary. If she is actually paying that percent rather than 10 percent but only on £50k, she should check with her HR on that one!

Kim1965

What is the liklehood of two minimum wage earners being mortgage free/owning property at retirement?

Workerdrone

Kim1965 said:

What is the liklehood of two minimum wage earners being mortgage free/owning property at retirement?

Start early, council house, use right to buy?

Workerdrone

NannaH said:

Yes I agree, employers should definitely put more. 

17% just isn’t going to happen,  even at double minimum wage.
My Daughter contributes 12% to the TPS and it’s a struggle,  £50k salary sounds like a lot but she pays over 40% of her income in tax/NI/ student loan and pension,  add in nursery fees and she sometimes wonders why she bothers. 

JoeCrystal makes a good point. Certainly worth checking if the percentage is right. You do seem rather aggrieved at your daughters financial circumstances whilst still on a good wage. This is the second thread you've mentioned it on, but you don't give the bigger picture. Does she have a partner, what's their wage etc. She might well be paying a decent whack out in tax, ni, student loan, nursery etc, but if her partner is say also a teacher (quite common), between them the nett household income would be quite high.

You were quick to judge the £15kpa contribution on a £38k salary which I'll once again repeat since the phrase annoyed you "I scraped together". I illustrated at length how my finances were structured to allow me to do so and what sacrifices I make.

Now perhaps its your turn rather than repeating your complaints about her TPS to illustrate to us the financial and lifestyle literacy you have imparted to your daughter.

Unless you clarify the whole picture, nobody on here can give advice in how she might better her financial circumstances.

Flugelhorn

Workerdrone said:

Kim1965 said:

What is the liklehood of two minimum wage earners being mortgage free/owning property at retirement?

Start early, council house, use right to buy?

inherited property

Workerdrone

Flugelhorn said:

Workerdrone said:

Kim1965 said:

What is the liklehood of two minimum wage earners being mortgage free/owning property at retirement?

Start early, council house, use right to buy?

inherited property

Quick marriage then divorce and take half of first partners home?