What is the point of paying into a private pension?

FIREmenow

On top of all the reasons people have explained above and the key piece of information that the NHS pension is one of the best pensions in the UK, and also bearing in mind your figures and percentages are not correct;

If you were to live 9 years after state pension age, as in your example, and did not pay into any pension you would be spending the last 9 years of your life surviving on state pension, which to put it into perspective is currently a maximum of about half of the full-time minimum wage. 

So unless you think £11,500 per year in today's money will afford you a nice retirement, paying into the NHS pension is a fantastic opportunity to look after your future self.

Also, if you've been working for the NHS for a while and are just having a wobble now about whether it's worth it, contributions from older versions of the scheme have earlier normal retirement ages than the state pension age, which are protected in the pension scheme rules.

LHW99

And if you are / will in the future marry and have a family, then there is (I think) provision for for a spouse / civil partner to receive a pension if you die first, and for any children still in education to get a small pension until they leave.

MetaPhysical

Aretnap said:

Average life expectancy at birth is a fairly meaningless number - it is heavily driven by the small number of people who die very young. A child who dies aged 1 has about 4 times as much impact on average life expectancy as someone who lives to 100. If you make it to middle age without getting leukemia, or being hit by a car, or overdosing on drugs, then you can expect to live much longer than whatever the published national average life expectancy is.

If you're an NHS worker then you can expect to live longer still, because you are more likely than not better educated, better paid (if not necessarily rich), in a less manual role, and generally more middle class than the average person. And also less likely to smoke etc. And you are definitely not an unemployed homeless drug addict, or any of a hundred other categories of people who have well below average life expectancies.

So do not get hung up on whatever the average age at death is - it says very little that's useful about how long you personally can expect to live.

I take your general point, it's the nature of statistics but the fact remains you should be prepared for the statistics not being on your side, as they weren't for me.   My wife died at 49 - healthy, fit, slim, none smoking marathon runner hit by breast cancer leaving me widowed with two young children.  I was in an absolute mess wondering how I would keep the roof over our heads.  Fortunately (if I can use that word), her Teacher's Pension had a £165k death in service benefit and I also have a pension for life from her.  Thank god we were financially prepared.

From the comfort of our own life and relationships we think these tragedies happen to other people, not to us.   My counsel is one should always be prepared and take measures for the statistics not being on our side.

penners324

You could just live in poverty for 30 years after retirement....

Undervalued

OuroborosMatt said:

Hey all,

I want to ask a general question, please.

If the state pension age is raising to 71, and the average age of male fatality on the UK is 80 years, what is the point in paying 20% of salary per annum into the current NHS pension scheme (which starts paying when a candidate reaches state pension age) for 40+ years of a working life when you'll only benefit from the pension for - on average - 9 years after the government allows one to begin claiming a state pension?

At face value, it doesn't seem like a good deal (and it seems like an investment that will pay out significantly less than what is contributed by an individual).

So, my general question is, what's the point? Would it be better to invest that 20% into something else that allows me to benefit from a retirement where I can choose when I retire as opposed to be effectively worked until death?

Thank you for the opportunity to ask this question on this forum.

Kind regards,

Because, to an extent you are insuring yourself against living too long! Life expectancy is complex and affected by all kinds of factors so no one size fits all. Also, you won't know what happens after you die but you will be well aware of poverty in old age while you are still alive.

Most, if not all, company pensions can be taken earlier (obviously at a reduced amount) unlike the state pension. Plus, there are many different ways of drawing a company or private pension instead of the simple annuity for life if you are happy to take the risk of the money running out before you you do.