Can you live solely off state pension?

ukdw

zagfles said:

Having said that I'm sure MSE posters are not representative of wider society. The name of the site says it all. Posters on MSE generally understand financial issues, something which most people don't. People who don't understand loans, credit cards etc and buy stuff based on what it costs a month rather than the total cost, and so spend loads on interest, people who pay £60 a month for a mobile contract and think they get a "free" phone, people who say things like "you get what you pay for" and "you'll be disappointed if you spend less than £xxx on yyy". People daft enough to think there's always a correlation between price and quality. People who never switched their gas/electric supplier, even when it could have saved them a lot of money. People who go abroad and change cash in the UK before going, or use cards which markup the exchange rate, and get hammered by mobile roaming costs, or pay a fortune for an "exotic" package holiday to a country where everything is dirt cheap. 

Really like this paragraph - the only thing I would add is "people who think that just because it says 25%/30%/50% off then it must be a bargain" - although I sometimes fall for that myself!

Thumbs_Up

SouthCoastBoy said:

There is a housing crisis in the UK, I think most people recognise that, the income multiples are ridiculous, long gone are the days of 2.5 times joint income, or 3  times single income. I think a lot of younger generation feel that house owning is unrealistic and therefore they may as well enjoy life. I have a lot of sympathy for them, they have got the short end of the straw, when you add student debt and the removal of defined benefit pensions in the private sector.

I speak as a non house holder. Social history is not my strongest subject but one way or another this country always had a housing crisis. If your single and male no way in hell will you be entitled to council home, single females with a few kids will always get priority, fair enough from me. Other pressures on housing the government can’t control, I won’t touch on here due to sensitivities, but think about global issues, these issues will never ever go away!

There shouldn’t be arguments about the young vs the old, they are forgotten people now, but long told memories of people who suffered crisis after crisis in our histories past, whether it was  social problems or the bloody wars. The working class back then wouldn’t have private pensions and probably not a state pension if you didn’t complete your 45? Years stamp payments, and to rub salt in the wound Cynics will say if your job involved manual labour you wouldn’t live past 70 to enjoy your retirement or your state pension.

To wrap this up, the young will have to do is what they should do and that is adapt to situation that presents itself, with help from the policy makers.

ukdw

pseudodox said:

@ukdw
  I don't pay tax, my "emergency" savings pot sits in an ISA and my house is my pension - downsizing could get me a lump sum, selling would pay for residential care.  Instead of paying into pension schemes I moved up the housing ladder, via a series of "worst house in best road" scenarios, and so am cash poor but asset rich.  I have no-one to leave the house to and no-one to nurse me in old age.

Sounds fine and I am impressed by how low some of your figures are. But just for completeness - you don't have to actually pay tax to get £60 tax relief a month - up to the age of 75 you can for example put £240 a month into a pension (£2,880 PA), the government will top it up by £60 a month (£720PA)  to £300 (£3,600PA) - then if you are a non tax payer you can draw it back out again tax free - giving you a £60 benefit every month if you don't pay tax.

hugheskevi

SouthCoastBoy said:

hugheskevi said:

QrizB said:

MarkCarnage said:

This only shows the distribution of income from State Pension and does not include other benefits (which you note), nor does it include other sources of income including occupational pensions, personal pensions or investment income. Therefore I don't think it could be said that it indicates that many pensioners cope on full State Pension or less. 

How about the data table though?

Table 4.1 gives quintiles of pensioner incomes for single pensioners and couples.

Net income before housing costs, £ per week:

• Single pensioner quintiles: 153 / 222 / 277 / 355 / 507 mean 323
• Pensioner couple quintiles: 287 / 410 / 519 / 683 / 1041 mean 640
  

From those stats it seems that the least-well-off 20% of single pensioners, and married couples, are living on less than one full NSP per person.

There is more recent data available for this, from 2021/22. Table 4.1 from 2021/22 shows:

Net income before housing costs, £ per week:

• Single pensioner quintiles: 159 / 233 / 288 / 372 / 530 mean 337
• Pensioner couple quintiles: 299 / 428 / 544 / 715 / 1082 mean 665

Interestingly, the income of the lowest fifth of single pensioners actually fell slightly in real terms over the ten-year period to 2022, both before and after housing costs.

How are these figures calculated? As when I retire I will be using a combination of savings and drawdown so maybe not all of it will be classed as income, therefore figures above may not be that accurate?

I find the Pensioner Income Series information on this frustratingly brief. In general, the background data is annoyingly poor - it isn't even straightforward to obtain the template Family Resources Survey from which the pensioner income series is derived.

The survey uses categorisation of investment income, occupational pension and personal pensions. This means that DB and employment-based DC pension is all lumped together which is very unsatisfactory. At the moment most income is from DB pensions, but that is changing over time. 

There is no detail given on how drawdown is treated - therefore one would infer it is simply income taken within the survey year, but I dislike having to make inferences such as this and would prefer a detailed description.

So I think if someone had an ISA or a general investment account, it would only be the income derived from this that would count in the figures (would this be interest plus dividends paid out on an income basis, but not an accumulation basis? The metadata is not detailed enough to answer questions such as this).

However, with income dominated by State Benefits and Occupational Pension which is mostly DB, for the time being at least questions such as those above are not of huge importance.  

Silvertabby

ukdw said:

zagfles said:

Having said that I'm sure MSE posters are not representative of wider society. The name of the site says it all. Posters on MSE generally understand financial issues, something which most people don't. People who don't understand loans, credit cards etc and buy stuff based on what it costs a month rather than the total cost, and so spend loads on interest, people who pay £60 a month for a mobile contract and think they get a "free" phone, people who say things like "you get what you pay for" and "you'll be disappointed if you spend less than £xxx on yyy". People daft enough to think there's always a correlation between price and quality. People who never switched their gas/electric supplier, even when it could have saved them a lot of money. People who go abroad and change cash in the UK before going, or use cards which markup the exchange rate, and get hammered by mobile roaming costs, or pay a fortune for an "exotic" package holiday to a country where everything is dirt cheap. 

Really like this paragraph - the only thing I would add is "people who think that just because it says 25%/30%/50% off then it must be a bargain" - although I sometimes fall for that myself!

Not just youngsters.  My late parents could never see past 'cost' versus 'value'.  If a pack of 2 toilet rolls cost £1, but a pack of 9 was on special offer at £2, they would buy the pack of 2 and congratulate themselves on saving £1.  They only had 2 houses - 15 years in the first, and 25 years in the second, each time taking out the maximum mortgage term. Because the monthly payments were less, so it was 'cheaper' to take out the longer term.  I'm just glad that interest only mortgages weren't a thing back in the 1970s, because they would have gone for that in the absolute belief that a lower mortgage payment meant saving money.

And I won't print what my mum said when she realised that we were voluntarily moving from our (heavily subsidised) Armed Forces married quarter into our own home, and that our mortgage payments would be double our rent payments....

MeteredOut

SouthCoastBoy said:

There is a housing crisis in some parts of the UK, I think most people recognise that, the income multiples are ridiculous, long gone are the days of 2.5 times joint income, or 3  times single income. I think a lot of younger generation feel that house owning is unrealistic and therefore they may as well enjoy life. I have a lot of sympathy for them, they have got the short end of the straw, when you add student debt and the removal of defined benefit pensions in the private sector.

I think its important to note the bit I've added. The are still many parts of the UK where houses are available and affordable, and jobs are available, but many do not want to move there, either through choice or because of family/occupation constraints. 

zagfles

2childmum2 said:

Pollycat said:

barnstar2077 said:

pseudodox said:

Where did the ability/inability to manage one's own finances stem from?  I got my ability from my parents, who got it from their parents - no-one in my family ever had much to spare, but no-one got into debt.  Everyone benefits from education now up until the age of 18 - money and life skills should be part of that education, especially for thiose who get no example to follow at home.  My example of someone in the queue at the food bank who apparently had money for tattoos, bling, fashion clothes, iPhones along with the example above of someone putting beer and ciggies before their child's school clothes are examples of people who are not really poor, but they are tarring the really struggling with the same brush.  Foodbanks are such a good idea, but they are abused by the likes of those benefit cheats in Benidorm on the sick.

But I wonder if the top of the slippery slide was the descent into living on credit and max-ing out credit cards because everyone wanted everything they saw other had and wanted stuff today.  My family could not afford a colour TV and Dad was not prepared to go into debt to get one.  He could not afford a car until I was in my teens, when a he bought a second hand one outright, having saved for it.  I could not have a record player like a lot of my friends because as Dad observed even if he was prepared to buy the player where was the money for records coming from?  But I had Radio Caroline and the new Radio One on my tranny so I never felt I missed out.  I saved a lot of my pocket money so I could buy more than comics, pop and sweets and earned money from age 11 to save for my holiday spends.  Today was my SP day and because I have been careful the last month there was still money left over at the end of that month, not month left over at the end of the money!  So I gave myself a treat of a new pair of jeans AND a bar of good chocolate.  They are as satisfying to me as any meal out or foreign holiday.  The jeans will last several years.  The chocolate . . . . . . will be enjoyed.

And hasn't the housing market created a "us and them" society?  Houses are no longer purchased purely as homes - they are assets, a means to make money.  And must be furnished with the latest items and gadgets.  As financial institutions have been amenable to lending more and more in relation to people's incomes the price of property has escalated.  And buy to lets are now a business for many who years back would have been content just to own their own home and not the roofs over other heads.  Recent years saw people getting on the housing ladder higher up than they might have if interest rates had not been so low.  They wanted to be as high if not higher than their peers.  And now they cannot afford to be up there, cannot climb higher, and in many cases cannot downsize because they cannot sell.  And who really wants to move from their modern detached with garage and garden to a Victorian mid-terrace opening onto the pavement?  Not enough "affordable" housing is being built, which pushes people to buy above their comfort level.  Many in rented are trapped by escalating rents, which in many case cost more per month than a mortgage would.  Something has gone horribly wrong.

I think the problem is that house prices are too high.  If people weren't allowed to buy dozens of residential houses in order to rent them out, then house prices would be lower.  If there was a cap on the number of homes you could buy, then surely it would have to bring down prices, and free up housing for people.

Don't even get me started on the whole "Help to Buy" idea!  House prices are too expensive and their solution is to lend people a proportion of the money?  What does that do I wonder..  Oh yeah, it keeps the prices high!

I know too many good, hard working, honest people that just can't get away from the renting rut.  

I think the problem is that young people have other priorities in life than saving for a mortgage.
Newest model i-phones, expensive foreign holidays, top-of-the-range cars, designer clothes and shoes - mostly put on credit.

When I started work over 50 years ago, you set up an account at a building society and saved regularly and hoped they'd give you a mortgage when you found a house you wanted to buy.
You furnished that house with family cast-offs.
We had sheets at the windows of our first house because we couldn't afford to buy the curtains we wanted. So we saved up.
We didn't have new cars, we didn't have any cars - we just used the bus.
Nowadays, young people just jump in and out of taxis.

I don't recognise that picture of young people either in my own children (both in their 20s) or their friends. They have bought cheap phones, with cheap SIM cards, neither own cars nor designer anything. They live cheaply and attempt to save.

When DH and I bought our first flat it cost about twice our joint income (trainee accountant and new teacher) and we had a 100% mortgage. The same flat now costs 5 times the joint earnings of a trainee accountant and new teacher.
And 15% interest rate on what we borrowed is less than 5% interest rate on what would need to be borrowed on the mortgage to buy that flat now.

Same with our kids. They are incredibly good with money, never waste money on taxis, stupidly expensive phones, or even booze. Cook from scratch. Saved loads, even from their time at uni. But when the average house price in England is £310,000 and anywhere decent in their area is at least £250k, saving a few £ on curtains isn't really going to cut it.

Down to the stupidity of successive govt policies, and the stupidity of voters who think high house price inflation is a good thing resulting in these policies. But getting a bit OT here...

michaels

MY kids have part time jobs while at school uni and blow every penny on 'fast living' (probably best left to your imaginations what that means).  Despite having no commitments the money always ends before the month and any shortfall in hours means they are skint.  This is the opposite to the environment they have grown up in.  They have the same views re the environment - YOLO and the future is fooked anyway.

All those who think house prices are too high don't seem to be able to see that it is as a result of supply and demand, prices rise to the point where enough can't afford them for demand to equal supply - in a normal market demand would increase but due to planning restrictions this does not happen in housing.  Separately for many the value of their output is not enough to give what society considers to be a minimum standard of living hence housing needed to be subsidised even if costs simply reflected build costs rather than the artificial scarcity created by planning controls.

My house was built on what were fields on what was the edge of town but it is over my dead body that any of the fields on what is now the edge of town are used for housing.

Pat38493

michaels said:

MY kids have part time jobs while at school uni and blow every penny on 'fast living' (probably best left to your imaginations what that means).  Despite having no commitments the money always ends before the month and any shortfall in hours means they are skint.  This is the opposite to the environment they have grown up in.  They have the same views re the environment - YOLO and the future is fooked anyway.

All those who think house prices are too high don't seem to be able to see that it is as a result of supply and demand, prices rise to the point where enough can't afford them for demand to equal supply - in a normal market demand would increase but due to planning restrictions this does not happen in housing.  Separately for many the value of their output is not enough to give what society considers to be a minimum standard of living hence housing needed to be subsidised even if costs simply reflected build costs rather than the artificial scarcity created by planning controls.

My house was built on what were fields on what was the edge of town but it is over my dead body that any of the fields on what is now the edge of town are used for housing.

I'm not sure if I understand your post - are you suggesting that kids could easily afford housing even at current prices if they didn't spend their money on "fast living"?

Or are you suggesting that the planning system is at fault (but you personally agree with the planning system because changing it might result in a financial loss to you personally)?

I'm not quite following what you are saying?

michaels

Pat38493 said:

michaels said:

MY kids have part time jobs while at school uni and blow every penny on 'fast living' (probably best left to your imaginations what that means).  Despite having no commitments the money always ends before the month and any shortfall in hours means they are skint.  This is the opposite to the environment they have grown up in.  They have the same views re the environment - YOLO and the future is fooked anyway.

All those who think house prices are too high don't seem to be able to see that it is as a result of supply and demand, prices rise to the point where enough can't afford them for demand to equal supply - in a normal market demand would increase but due to planning restrictions this does not happen in housing.  Separately for many the value of their output is not enough to give what society considers to be a minimum standard of living hence housing needed to be subsidised even if costs simply reflected build costs rather than the artificial scarcity created by planning controls.

My house was built on what were fields on what was the edge of town but it is over my dead body that any of the fields on what is now the edge of town are used for housing.

I'm not sure if I understand your post - are you suggesting that kids could easily afford housing even at current prices if they didn't spend their money on "fast living"?

Or are you suggesting that the planning system is at fault (but you personally agree with the planning system because changing it might result in a financial loss to you personally)?

I'm not quite following what you are saying?

I guess it is a combination:
1) Housing is overpriced because we refuse to free up land to align with the increasing population
2) Those who choose to prioritise house purchasing over other spending have to spend a large proportion of their income to do so and 'do without' some 'essentials' which bids up pricing to the point where supply and demand are in balance
3) This makes housing seemingly unaffordable to many who instead chose to spend their incomes on 'hedonism' rather than make the sacrifices needed to buy the overpriced housing