Lifestyle From Pension At Minimum Wage After 40 Years Service

[Deleted User]

Some of the assumptions made her about people on the minimum wage I find rather shocking.

Workerdrone

[Deleted User] said:

Some of the assumptions made her about people on the minimum wage I find rather shocking.

[Deleted User] said:

Some of the assumptions made her about people on the minimum wage I find rather shocking.

Specifically which ones?

Kim1965

I guess the point i was aiming at is it would be impossible to get a mortgage and buy a property on 2 x nmw. So unless the council hose route or inheritance the likle hood is they will be renters. Would autoenrolement pension cover rent? Would a couple with 2 x sp get pension credit and possibly housing benefit?
 I am not advocating that people on nmw dont autoenrole, just musing how beneficial it might be under current benefit entitlement.
 

Dazed_and_C0nfused

Workerdrone said:

I'll have a stab. I'll keep it paid weekly. So lets assume minimum wage is £9.50, and full time employment of 40 hours a week. £380 a week gross. 8% auto enrolment contribution of which employee 5%, employer 3% so £30.40 per week plus the 20% tax relief £36.48pw.

Let's assume a 3% annual pay rise on the minimum wage and retirement at 68 and because the person is young they pick slightly riskier funds giving 5% return over the lifetime of accumulation. Sticking all that into a compound interest calculator gives a fund of £145.6k at 68.

If they were to draw down from that at 3%, that would be £4.3k a year, plus of course their SP of 9.6k per year £13.9k per year in todays terms.

I don't know what sort of lifestyle that would buy you. Its been a while since I was a 20 year old on that sort of money.

Im sure someone will be along presently to correct any errors in my assumptions/calculations.

This thread seems to have gone a bit off topic but I think the figures quoted are a little misleading.

The tax relief equates to 25% of the employee contribution and there is no tax relief at all on the employer contribution.

And it can actually mean a 4% contribution from the employee with the tax relief making it up to the 5%.

So sadly I think £36.48/week could actually be as little as £30.40

£11.40 employer

£19.00 employee (inclusive of tax relief)

And if the employer uses the qualifying earnings limits that drops it down to £20.80

£7.80 employer

£13.00 employee ,(inclusive of tax relief)

RobM99

Youngster and pension - I'm not paying into one of those!
Same person at 67 - Blimey, is that all I get?!

Albermarle

Kim1965 said:

I guess the point i was aiming at is it would be impossible to get a mortgage and buy a property on 2 x nmw. So unless the council hose route or inheritance the likle hood is they will be renters. Would autoenrolement pension cover rent? Would a couple with 2 x sp get pension credit and possibly housing benefit?
 I am not advocating that people on nmw dont autoenrole, just musing how beneficial it might be under current benefit entitlement.
 

Not an expert but the topic comes up occasionally on other threads. If seems that if you are a retired renter with a low income ( say SP only) and not much in the way of savings, you can get Housing Benefit that will pay some/most of the rent . Presumably some pension credit as well.
The same I think applies if you are paying a mortgage but different rules apply.
If you have a pension income, it will drop the amount of these benefits. If you have a pension but deliberately do not take it, a nominal income from it will be taken into account.
So yes AFAIUI, having a small private pension may be actually detrimental to your retirement finances in certain circumstances.

Kim1965

Looks likely the benefit system will be less generous in the future. 

jennystarpepper

Baron_Dale said:

Some of the assumptions made her about people on the minimum wage I find rather shocking.

I do.

 I know a number of couples who have bought a property on min. wage,  although the area they live in makes this possible.  I also know people earning above the min. wage and have not saved to buy who are in the same area. I do sympathise with those in areas where even for an above average wage it is still not possible. 

So not impossible, but as usual down to many different factors.  

barnstar2077

I work with many people who are on (or close to) minimum wage.

Most of them rent, they would love a council place, but they are very hard to come by in my area.

Also, sadly, people who live their lives on minimum wage are not very likely to have wealthy parents, so are unlikely to inherit as a way out.

I do know of one lady who is retaking a GCSE in order to qualify for training for a higher paid career, but this is a bigger ask of people than some might assume as it depends on people's intelligence and, more importantly, their self-confidence!

Having talked to them over the years and heard their stories, self-confidence is not something that most of the people on minimum wage that I work with have a lot of.  A combination of poor parenting, slipping through the cracks at school, and/or years of being bullied in dead end jobs has left them feeling like this is just their lot in life.

Clearly not everyone on minimum wage is going to be in the same boat as my colleagues, but I feel a great sympathy for those that are.

[Deleted User]

thriftytracey said:

yes, the thrift I inherited from growing up in the 60's and 70's has always been with me and particularly in the present economic climate.  Perhaps the generation growing up now may learn about saving, cutting back and frugality, although it is worse now, at least my single parent could always feed me.  It was blooming cold in the winter though, no central heating, a coal fire in one room, a gas fire in the "front room" which was only switched on occasionally.  One "treat" a week and I always chose a Fry's Chocolate Cream which I ate very slowly.  

Of course, back then consumerism was not the main driver for a healthy economy. As a child there was no financial education but my primary school ran a 50p saving stamp scheme and I think that type of initiative and my mother's frugality taught me a good life lesson.  Also, green shield stamps!

It is sad that you can't talk to your nephew - could you take him out on his own?  

Your sister in law is probably unhappy which makes her defensive.  Obesity must be an awful condition to live with, and her self-esteem must be low, hence splurging on retail therapy for comfort.  

The current generations Millennials (1981-1996) and Generation Z (after 1996 to around 2004 to allow for entering workplace) have lived through multiple once in a generation events (Credit Crunch, Covid, Ukraine War) and are stuck with earnings that have not matched the rises in things like house prices.

Many of us could never afford a house as the prices go up so much in relation to earnings. Such that while your generation could buy a house on 1 manual worker's salary while the wife could stay at home and raise the kids, for most people born in the 1980s, house prices require 2 people on an average salary just to get a mortgage and even then, usually needs a substantial deposit that is unaffordable while rents are so high. Pensions (and I do pay into work and a personal one) are largely DC only certainly away from the public sector, and even those are now career average not final salary - so we pay into a system to keep boomers and generation X on their cushy pensions while we get screwed as the previous generations pulled up the ladder.

It's hardly surprising people want to live for the moment as they know their retirement will be terrible and keeps being pushed back - the GRASPI women argue even now they should have been able to retire at 60 on full pension while 68 is the earliest I can get it and even then it'll probably be pushed to 69 or 70 if not for me then the ones coming into work now. Add on all the patronising inherited wealth types claiming we could save for a deposit by cutting out anything fun - despite the fact dropping a netflix subscription would still take you 156 years to get even a 5% deposit - it's just out of touch nonsense from people sitting on paid off homes looking forward to a decent retirement while sneering at the younger ones who have to choose between food and heat - no winter fuel allowance for us!