Pension contributions up from 6% to 8.5%!!

I'mcomingbackasaman

My pension scheme contributions with local government are going up from April and I'm serously considering ditching it. People I know have popped off before they've had the pleasure of claiming pension back so what's the point of it all?

I've believed the hype about investing for your future so far but when you can't 'afford to work' it seems pointless paying x amount of money in towards retirement age and struggling trying to get there.

Anyone any views on a good private pension scheme or some scheme where you pay in for x amount of years then matures and pays out.

jem16

The local government pension scheme is one of the best around and you would be a fool to leave it. No personal pension scheme will be able to get close to it either in security or benefits.

You are only paying in 8.5% - to get close to the amount on a personal pension you would need to pay in around 15-20%.

No pension scheme will allow you to pay in an amount and then it matures and pays out. The whole idea of a pension is to give you income in retirement.

The state pension is £87.30 per week - can you live on that if you make no other provision?

I'mcomingbackasaman

Sorry I didn't make myself clear. I'm after some kind of investment as an alternative to a government pension plan. Whereby you pay in each month say for 10, 15 years then you recieve a lum sum when it matures to live on.

Government pension scheme may be best around but I'm not a high earner and it's taking nearly a 10th of my monthly income which I could use to pay for the here and now ie. Council Tax, Buidlings Insurance etc. etc.

XRS

With the new LGPS your contributions are linked to your income, but they only go up to 7.5%, and then only if you are earning over £75,000, so I am not sure where 8.5% came from.

I would advise you look closely at the AVCs provided with the LGPS as you may have the option to take the entire amount as cash when you retire.

Stevenic

jem16 wrote: »

The state pension is £87.30 per week - can you live on that if you make no other provision?

I'm never quite sure why this figure gets banded about so much, with Pension Credit the minimum figure would be £119.05 a week.

http://www.thepensionservice.gov.uk/pensioncredit/home.asp

Not great I know but higher than the basic State Pension figure.

I would only save what I could afford to and not put myself in financial difficulties now for the sake of money you will not see for many years to come.

jem16

I'mcomingbackasaman wrote: »

Sorry I didn't make myself clear. I'm after some kind of investment as an alternative to a government pension plan. Whereby you pay in each month say for 10, 15 years then you recieve a lum sum when it matures to live on.

Government pension scheme may be best around but I'm not a high earner and it's taking nearly a 10th of my monthly income which I could use to pay for the here and now ie. Council Tax, Buidlings Insurance etc. etc.

As XRS says contributions will now be on a tiered rate from 5.5% to 7.5%. See http://www.lgps.org.uk/latest/contribution-rates.html.

If your rate is 6% that is from your gross pay so is actually 4.68% that you will pay(tax relief) - how does that equate to 10% of your monthly income?

An alternative would be a S&S ISA but you would get far less benefit for your money. How much would you plan to contribute each month?

jem16

Stevenic wrote: »

I'm never quite sure why this figure gets banded about so much, with Pension Credit the minimum figure would be £119.05 a week.

http://www.thepensionservice.gov.uk/pensioncredit/home.asp

Not great I know but higher than the basic State Pension figure.

That assumes that Pension Credit will remain the same. Who knows? Still not a lot to live on though.

I would only save what I could afford to and not put myself in financial difficulties now for the sake of money you will not see for many years to come.

That's true.

Although you do have to think about those years as it will not be much fun living with financial difficulties then.

dunstonh

I'm after some kind of investment as an alternative to a government pension plan.

Nothing will come close to the LGPS in returns or money for you.

People I know have popped off before they've had the pleasure of claiming pension back so what's the point of it all?

The stats are that 1 in 5 men will die before retirement. 4 in 5 will live to hit retirement.

Anyone any views on a good private pension scheme or some scheme where you pay in for x amount of years then matures and pays out.

You will have a hard job finding a provider that will take you on. The minute you tick the "have you opted out of your employers scheme" box, they will usually refuse the application. Mainly as nothing will be better than the employer's scheme in this case.

You appear to have misunderstood you pension by quoting inaccurate contribution levels. You have also failed to take into account that the contributions come off before tax. You need to look at the net contribution, not the gross. So a 6% contribution is only costing you 4.8% if you are a 20% basic rate taxpayers.

If you wanted to match the benefits of the employer's scheme but not use the scheme it would cost you around 15-20% of your income. So, 6-7.5% is very cheap.

I'mcomingbackasaman

XRS "I would advise you look closely at the AVCs provided with the LGPS as you may have the option to take the entire amount as cash when you retire"

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I looked into AVC's a few years ago and it was about paying additional voluntary contributions to up my pension -fat chance. But I'll look into it again with regards to the lump sum.

On my way into work one morning i saw a man in the road staggering round happy as larry, with a bottle in hand (before the alcohol in the street ban)
looking like he didn't have a care in the world, and I was there banana in hand heading into work thinking whose happier me or him ....

Ian_W

Don't listen to this lot!
As a council tax and income tax payer, I think it's the best decision you could make and if you can persuade a few thousand more of your colleagues to do the same, better still! Straight away every £100 you don't pay to the pension means £20 more tax in the pot and longer term lower council tax bills.

People I know have popped off before they've had the pleasure of claiming pension back

Case in point is my late FIL [dead before I met the Missus]. Worked for the council for 20odd years and slipped off the plate suddenly with a heart attack, so what did he get out of it? Waste of time for him - MIL still draws a council pension though 30+yrs later and I suppose she got a lump sum of 2 or 3 times salary - but him, nowt!

On my way into work one morning i saw a man in the road staggering round happy as larry, with a bottle in hand (before the alcohol in the street ban)
looking like he didn't have a care in the world,

Hmmm, you wouldn't have wanted his hangover though, would you? :eek:

EDITED to add:
The new contribution rates are HERE
Can't see how you're low paid if you're going to be paying 8.5%, anyone on £30K or less will be paying 6.5% OR LOWER.

I'mcomingbackasaman

According to the contribution rates table I should be paying 5.9% from April 2008 so I'll look into that on Tuesday with my pensions dept.

As for lower Council Tax bills if we all opt out of the LGPS I doubt that. I've never known a tax to be lowered yet. Council Tax pays towards a lot of things needed to maintain where you live including policing the area.