back to article Nobody has any idea about new pension thing happening

More than half of workers are "totally unaware" that they will be auto-enrolled into a pension plan when changes to the law come into force next year, according to a survey. The Chartered Institute of Personnel and Development's (CIPD) quarterly 'Employee Outlook' (12-page/370KB PDF) revealed that young people and those in non …

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  1. TonyHoyle

    Hmm.. news to me

    I'm a bit worried about what this will cost. Last time I asked a pension guy what one would cost he said about £500 a month, and I walked away laughing.. that's a quarter of my monthly income.

    If my employer is going to be forced to reduce my income by 25% I'd rather know now...

  2. Simbu

    Case in point...

    This is the first i've heard of this! I'm 25 and already on a pension scheme, but i can see why young people wouldn't want to bother. Almost every working person under the age of 30 has the exact same financial goal - save enough for a mortgage deposit. It's my goal.

    To most young people a pension is something that erodes their pay packet (and saving ability) for something they don't think they need to worry about for 40 years!

    1. Anonymous Coward
      Flame

      How much it costs...

      ...depends on how big you want the "pot" to be and how quickly you want to grow it; the actual %

      25% is not an unreasonable contribution to a personal pension.

      If you are a civil servant you don't have to worry about this as your fat, gold-plated pension is paid by the taxpayer. Meanwhile, in the real-world people have to fund their entire pension themselves and increasingly with no employer contribution.

      If you are an MP and want more money to by fine wines in your dotage - just vote yourself a bigger one! It's not like your employer (the increasingly impoverished and disenfranchised UK public) can do anything about it. Duck ponds all round!

    2. Anonymous Coward
      Pirate

      Too true...

      But oh how those years roll by.

      Money saved/invested when young has the biggest impact in later life.

      1. Craigness

        The "gold plated pension" lie

        is a lie.

        1. Anonymous Coward
          FAIL

          @Craigness

          Try having a job in the private sector (unions not recognised - a common occurrence), then decide how big a "lie" it is.

          1. Craigness

            I do

            @ANONYMOUS COWARD, I do have a job in the private sector (self employed and, obviously, un-unionised). It's because I know people in the PUBLIC sector that I know it's a lie.

      2. Craigness

        Depends when you're born

        I started my pension a few years before the crash in 2000. It's not had a great impact on my life yet, except that it's made me invest even more into my pension to cover the appalling performance to date.

      3. Anonymous Coward
        Thumb Down

        @AC 09:52

        Paid by the taxpayer?

        I must be dreaming that 10% of my income is taken from my salary every month. Something else you overlook is that we are taxpayers too. Oh, and the argument about those in the public sector not doing anything for the countries economy - do you know just how many PRIVATE companies do incredibly well out of the public sector, we still have to buy consumables, equipment and services. Just look at how many private sector jobs have been lost since the government started cutting its spending because those businesses no longer have the income they used to. Most of those job losses are then costing the tax payer more money as benefits have to be paid.

        As for gold plated, here is a newsflash.

        My pension is now effectively 2 pensions. One will be at the rate I was eligible for up to 2008 then they changed the rules and I get a different rate for the years after even though it is the same pension being paid into. Not only that, they are threatening to change it again meaning my pension will be calculated on 3 rates and every time they change it it reduces the amount I will actually receive for my retirement. Don't believe the daily mail either, we aren't on megabucks. The figures are skewed by those at the top creaming off stupidly high salaries and by outsourcing all the lowest paid jobs like cleaners to private companies. My salary is far less than I could earn in the private sector but I stuck with it because of the pension and because I enjoy what I do and pride myself on providing a good service. I have too many years invested in my pension to make it viable to leave for the private sector and to see it being snatched away is gutting. I would be very happy to pay more for my pension IF my salary was increased to private sector rates. Just think how much that would cost the tax payer if tens of thousands of public sector workers suddenly had a salary increase to bring them in line with the private sector.

    3. Anonymous Coward
      Unhappy

      So true...

      ... when I was younger I started working for an FE College, opt'd out of the Local Authority pension scheme, that was my biggest mistake as I ended up being there for 10yrs off and on but did enough hours that it was counted as continual employment. Suffice to say I'm gutted I didn't as that would have been 10yrs local authority pension scheme paid up.... oh the folly of the youth (although I did enjoy the parties, drugs, alcohol and women the spare cash allowed me to aford, so not all bad).

    4. Anonymous Coward
      WTF?

      WTF?

      £500 a month! He must of been on some serious percentage based comission.

      Well unless you're 55.

      Have a look here.

      http://www.timesonline.co.uk/tol/money/pensions/article721035.ece

      1. Anonymous Coward
        Anonymous Coward

        @AC - 09:54

        I'm nowhere near 55 and that calculator tells me I need to save £750pcm! (And this includes my employer's contribution). So £500pcm does not seem unreasonable.

    5. Craigness

      I'll tell you know...

      Your employer is not going to be forced to reduce your pension by 25%. Look on the NEST site if you want to know more.

      If you're going to get the government to force me to pay for your retirement out of my own taxable pension income whilst you enjoy a spending power £500 more than mine per month during our working lives, I'd rather know now.

      1. Anonymous Coward
        Anonymous Coward

        Minor technical point....

        ...but it's likely to be your kids and grandkids that pay for his pension. Your taxes / contributions never pay for your own, but for the current retired population.

        One reason when singletons complain about funding child benefits, they are often to stupid / ignorant to realise that these "scroungers" will be funding them when they are shiting in their pants, dribbling in their soup and requiring 24hr care..

    6. Richard 12 Silver badge

      Strike that - it's almost everyone under the age of 40 now.

      House prices and the mortages to get them have got incredibly silly.

      And they wonder why nobody is buying at the moment...

    7. A J Stiles
      Meh

      Well, lucky you

      £500 is more than a third of my monthly income.

    8. Anonymous Coward
      Happy

      Sounds about right!

      Although it's based on how much you earn and how close you want your pension payment per month to be to your current salary. I have my employers pension plus personal contributions, up to about £450/month, plus a I have a personal stakeholder pension through another toally seperate company, just in case my company folds, paying in about another £425 a month.

      I may never get to enjoy any of it, could get flattened by a bus or die of a stroke 9 months before retirement just like my Mum did! You still need to stick something "under" the matress for a rainy day and I'd prefer someone to do it for me, as I can't save money for toffee, I have to have someone do it for me!

      I just cut back on the boozing a little, take a few less days out in the car prefferring to go walking in my local area ( just north of Enfield, I'm not in a posh bit of "the sticks" ). I don't buy many DVDs or CDs ( nothing I really want anymore ) and being a scruffy IT git my clothes are worn until they fall apart! I still buy gadgets occasionally, I just find the bargains online.

      I'm happy to cut back a little if it means I might be able to knock off early from this working-for-a-living bollocks I have to do every day, then I can go an do something more worthwhile like photography, with the few precious years I will hopefully have left!

  3. AndrueC Silver badge
    Childcatcher

    Another question

    Has anyone confirmed how much money contracted out workers will eventually get from the state pension? There's talk of a flat rate for anyone with over 30 years work. How do they factor in years worked while contracted out?

    More info for discussion here:

    http://www.bbc.co.uk/news/business-12954888

    Anyway I'm planning to retire (or at least semi retire) at 55 in around ten years time. One of the benefits of not having a family to pay for. Still - I want to be sure I get everything I can from the govt :D

  4. Anonymous Coward
    Thumb Down

    Is this about NEST?

    A quick summary of NEST:

    It mostly affects the lower incomes, the richer you are the more likely you are to not be opted-in and to take professional advice.

    It will put pension investments of the most vulnerable at increased risk on the financial markets

    Normally this would constitute mis-selling, but the government is exempting itself from having to follow its own rules.

    It will generate massive payments for the bankers etc. and as bankers etc (and their ability to provide perks) are all that matters; there is no problem.

    Nothing to here prole, move along and mindlessly obey your betters.

    This is the same thinking that keeps PFI going in the UK.

  5. GrumpyJoe
    Thumb Down

    Pensions just don't make sense as a concept any more

    They were fine when you worked for one company your entire life and retired at 65 and died at 67. They don't work any more. Yes, save, but don't tie it into an annuity, keep it handy, you'll never know when you may need it.

    Old idea is old. New idea please - one that keeps track with the notion that I may live for 20-30 years AFTER retirement?

  6. Vitani

    Ha!

    I *wish* I could afford to save for a pension! What with debts, kids, rent, and bills I can barely afford to save for Christmas (let alone a mortgage!).

    Good thing I'm planning to win the lottery before I retire :o)

  7. Sam Liddicott
    Big Brother

    Think of the country

    It's a tax scam by the government.

    They have a tax on pension funds and they want to rake in more money.

    1. Anonymous Coward
      Anonymous Coward

      ...and...

      shore up failing pension funds too no doubt.

    2. Anonymous Coward
      Joke

      Oi!

      That's my retirement plan, we'd best get our heads together to make sure we don't both win at the same time thus reducing our retirement fund :-)

    3. Anonymous Coward
      Boffin

      Agree

      I wish I could use the cash in my pension to pay off the mortgage on the family home.

      But apparently I'm not allowed to access my pension savings, the reason being 'just because...'.

      The rest of the explanation is presumably '... because we've gambled all your savings on the stock market, and spent it on bonuses for us, so there's none left for you sucker'.

      :(

      1. Craigness

        Access

        I think the reason you're not allowed to pay off the mortgage with your pension is that if you did you'd have no pension. Then you'd rely on the government taking money from people with mortgages to pay off and giving it to you.

        1. Just Thinking

          The deal

          I always thought the deal with pensions was that you get tax breaks in exchange for saving for your retirement (hence being less of a burden on the tax system later on).

          In other words, some of the money in your pension pot isn't really yours until you retire (in a sense), so you can't choose to do whatever you want with it.

    4. Craigness

      What tax?

      How are pension funds taxed? Lawson taxed surpluses back in the '80s but I'm pretty sure that one's been stopped now. Nothing has ever been taken out of my SIPP.

      1. Anonymous Coward
        Anonymous Coward

        Browns tax

        Your pension fund grows by receiving dividends and interest payments from investments. These dividends used to be exempt from tax until Gordon Brown changed the rules.

        As a direct result of this the growth of your pension fund is about 15%pa less than what it would have been.

        This tax grab by Brown is one of the main contributors to private sector pension schemes having to abolish final salary pensions.

        You will not see any money being removed from your SIPP for tax purposes, but the dividends paid into your SIPP from its investments will have been taxed.

        1. Craigness

          Divi taxation

          Dividends are still exempt from taxation. When a company distributes £90 in dividends it pays out £90 but the certificates say that £100 has been paid and £10 tax has been retained. If you can't show me where the money comes out of my SIPP then you should be able to show me a set of company accounts where the dividend tax credit is paid to the government! Personally speaking, my accountant only asks me to pay tax on profit, not on dividends. Dividends come from post-tax income.

          There was no tax grab, so you'll need another excuse for your employer stuffing you on your final salary pension. I suggest you look at his school fees or his yacht. It was a good story though, and may have lost Labour a few votes in the last election, which I'll not begrudge.

          Even if you were anywhere near to reality, that 15% figure you plucked from the air could easily be got down to zero simply by investing in accumulation funds instead of income funds. Or in gold.

          1. Anonymous Coward
            Anonymous Coward

            You have it wrong.

            When a company announces a dividend of £100 then you (in the UK) will get £80 and the tax man will get £20. The £20 IS paid by the company to the tax man. If you are a foreign investor then you will get £100. If the company is listed on the London Stock Exchange in certain approved exchanges and your shares are held in an ISA or some other PERSONAL tax exempt investment then you will get £100.

            If the shares are held by a non-personal pension fund (eg. your companies) then it will get £80. It used to get £100 but Brown grabbed the £20.

            As for the 15% figure. If the funds were held entirely in shares and if the shares never changed in value then then figure would be 25% (£20/£80). But shares do change value and pension funds have multiple types of investment. Averaging it out reduces the figure from 25% to 15%.

            Finally, I have my own company that pays out dividends occasionally and I have to give the tax man his 20%. I wish I didn't have to, but I do.

    5. Craigness

      An accurate summary

      It will mostly affect those who don't currently have pension investments, therefore their investments cannot be put at risk.

      There is no compulsion to invest a pension in risky assets.

      The alternative is to fund pensions by taxing the prudent.

      Nothing to here troll.

    6. Craigness

      Drawdown

      You don't have to buy an annuity. You can draw down the equity instead.

      1. Anonymous Coward
        Anonymous Coward

        @Craigness

        "It will mostly affect those who don't currently have pension investments, therefore their investments cannot be put at risk."

        Incorrect. It is moving the current (reasonably secure) state pension off on to the vagaries of the stock market. This provides no benefit to the tax-payer.

        "There is no compulsion to invest a pension in risky assets."

        Incorrect. By forcing people to use NEST, they are forced into higher risk investments.

        "The alternative is to fund pensions by taxing the prudent."

        We do this already. Only difference with NEST is that the taxes raised are now being put at increased risk (and have their value reduced due to the eye-watering fees and set-up costs).

        And this is all before we get into the various accusations of nepotism/general mis-selling that surround NEST; the 9.5% cut in the pension rebate; the resulting potential rise in NI contributions.

        1. Craigness
          WTF?

          WTF?

          "It is moving the current (reasonably secure) state pension off on to the vagaries of the stock market. This provides no benefit to the tax-payer."

          Nest is not the state pension. The state pension is still there, but it's likely not to need to be so high if people are funding their own private pensions. Thus, a benefit to taxpayers in general.

          " By forcing people to use NEST, they are forced into higher risk investments."

          They're not forcing people to use it, only encouraging them. Everyone has the option to opt in or out. You can hold cash in a pension. You are not forced into high risk assets (not accounting for hyperinflation events!).

          "Only difference with NEST is that the taxes raised are now being put at increased risk..."

          Aha! You think that Nest is the new state pension, funded from taxes? It's not. It's funded from your own wage packet and you'll have your own account, with its own valuation, separate from other people.

          Considering the article is titled "Nobody has any idea about new pension thing happening" your comment is an absolute peach!

  8. Arrrggghh-otron

    Yup - news to me...

    Employee contributions starting at 2%, rising to 5%in 2016 and then 8% minimum in 2017 for qualifying gross income or some such ( http://www.hendersonstone.co.uk/pensions-reform-2012.html ).

    So not only am I paying for a state pension that is likely to be worthless they want me to pay towards a private pension that will likely be worthless on top of rapidly rising living costs. What planet are these people living on? Oh wait they are probably pension policy lobbyists right?

    I think I will stick to my plan to ignore pensions and buy another property to provide a retirement income and/or to sell should I need a large lump sum.

    (I too looked at private pensions a while back and was told that I needed to pay 10% of my take home pay. I was saving for a mortgage deposit so it was too much to lose. Now I am told it is a minimum of 30%, well I don't have more than 10% spare income on a good month let alone every month!)

  9. Anonymous Coward
    Anonymous Coward

    Nuanced ???

    "These findings suggest that both the government and employers need to take a nuanced approach ... ," said Charles Cotton

    No wonder the kids (and many smaller employers) don't know what's happening if those in charge use words like that!

    1. Gordon 10 Silver badge
      FAIL

      Sorry but you're an idiot

      The boom times for house prices are over, and as with any investment past performance is no indicator of future performance.

      Buying property is no more risk free than other forms of investments such as the stock market. Indeed such is the range of asset classes available within "the stock market" that you can choose a far less riskier proposition than dumping all your savings into one property.

      Ideally you should be aiming to get to the stage where you have a mix of asset classes to make up a retirement income.

      This should include one or more pensions with a range of risky and less risky assets and non-pensionable assets such as savings, ISA's and property.

      It also surprising how well a drip feed of small sums every month can grow over 10-20 years.

      1. Arrrggghh-otron

        I'm an idiot

        Having personally seen peoples private pensions reduced to a shade less than fuck all through no fault of their own and with little chance of anyone being held accountable or any recompense, along with other financial products sold to those who think they are doing the right thing, with those products going south also (with them left to find and pay the deficit). Couple that with the financial markets recent greed induced melt down, if my preferring to trust in actual, tangible assets makes me an idiot then sign me up!

        Besides I think you are a shill for the pensions industry... I bet you cried for days when you heard the option to opt out was kept in...

      2. JohnG Silver badge

        He's not necessarily an idiot.

        "The boom times for house prices are over..."

        Exactly - which means rental returns are actually very good at present. The housing market has highs and lows, much like the stock market. However, If you take a long term view, well maintained property in a popular location gives a reasonable rate of return and you always have the asset to sell.

        My pensions funds are worth damn all because administrators didn't see the need to pass on high returns in the boom years and have had only excuses every time the stock market tanks. Gordon Brown's raid didn't help either. The drip feed of small sums seems to have mostly benefited the pension companies and the IFAs.

        1. Arrrggghh-otron

          No, no, lets be fair... I'm an idiot

          It was clear from my first post that I was thinking purely about making my fortune over night on the property market and retiring early. Now that I've been told that "The boom times for house prices are over" that dream has been shattered and I may as well give up now and go and flip burgers.

          That my current property has more than doubled in value over the past 8 years and, despite the dip, continues to rise in value even today, is surely the ramblings of an idiot.

          <Aww... no sarcasm icon?>

      3. Anonymous Coward
        Trollface

        Sorry Gordon

        You said "The boom times for house prices are over, and as with any investment past performance is no indicator of future performance."

        Nice solid advice. May I suggest you look at property prices and how they've gone through this boom and stagnation for the last 50 years.

        I remember people saying in 1991 exactly what they are saying now :-

        First time buyers are out of the market for years

        House prices will stagnate for 15 years

        House prices will have to crash another 20%

        FTB - no they weren't I bought in 1994 (and only laziness stopped me buying earlier)

        Prices stayed steady from around 1991 to 1995 and then rose around 3% a year until 2000 and they went mad again (this refers to north of england not london)

        See line above

        Roughly the same thing happened in 1979/80 and roughly the same will happen again. Prices will remain static for a while until wages have caught up again.

  10. Anonymous Coward
    FAIL

    Pensions?

    If I am an employer, why do I have to get involved in somebody else's pension arrangements? It's nearly as stupid as US employers paying for health insurance. Why not phase out tax relief on pension contributions and just encourage people to save more anyway by taking away the threat of means testing their savings when they retire or become unemployed? Nobody on the minimum wage can afford to pay into a pension, after all. Only the comparatively well off benefit from this. The taxpayer is supporting a parasitic and inefficient part of the financial sector that helps itself to a ridiculous percentage of the money it handles and must be a drag on the economy in general. Just like tax relief on mortgage interest, this is a luxury the country can no longer afford.

  11. Outcast
    Thumb Down

    Maxwelled

    The so government rips off our pension funds and wants us to give them more. At least Maxwell had the decency to top himself.

    I was made aware of the new pension crap last year, I'm 50 years old so I'll be opting out <-- They'd probably want a grand a month from me !!

    1. Craigness

      Very sensible!

      Too good for here, how did you get past quality control?

    2. Anonymous Coward
      Happy

      Working for an American employer

      I get a fantastic deal on my pension - they double whatever contributions I make up to 12%.

      So in effect I am contributing 18% of my salary , still probably not enough but now the kids have all left home / school / college I'll be increasing my contributions for the next few years.

      I agree about the health care though, as part of my package I get a comprehensive healthcare package but then I get taxed on it! If I need an operation, I get it done private, taking a strain off the NHS but if I don't need anything doing I'm paying extra tax every month!

      Dont even get me started on company car tax!!!!

  12. jason 7
    Mushroom

    Pointless

    I am 40 years old and have spoken to four different IFAs re. pension.

    I left a final salary scheme after 16 years (took VR) and was wondering what I could do to improve it.

    All four said without hesitation "Dont bother! You and others like you are not going to be able to retire!"

    Even Legal & General tell me on the small private pension I have run since I was 24, that for every £1000 in pension I want, I have to put away £30000!

    When is someone going to have the the balls to stand up and say its all a scam and it just isnt going to work going forward?

    1. Craigness

      No scam

      They're telling you that you'll get about 3.33% income on the investments you've made. If you want a higher income you need to invest more. Why do you think that's a scam?

      1. Gordon 10 Silver badge
        Go

        Thats quite low

        That is a bit of a rip off.

        Even in the turbulent times of now - 4-5% should be fairly easily achievable for the average person - let alone "Pension professionals"

        If you dont like the private pension providers start a SIPP - there is huge amounts of advice available on them from sites like the motleyfool.co.uk

  13. Anonymous Coward
    Stop

    Pensions: the new tax

    Problem is, people have now wised up, and know that any money you put into a pension, will be raided by the government, and you'll be left with **** all.

    Witness one G. Browns nasty little trick of slicing the tax relief off pension funds, netting £5 billion ... A YEAR.

    I'm so pleased I never signed up for a pension ... I may be poor in my old age, but at least I won't have the pain of having my delusion of being provided for in my dotage smashed.

  14. Joe Harrison Silver badge

    Time Travel

    You know how you get up every day and go to work as normal... It won't be like that forever. Imagine one day when your body is too old to let you do that any more. You are sitting there going omfg now I'm stuffed where am I going to get money now.

    What if you could use time travel (which will be invented by then obviously) to send your 40-year-younger self a message. "Start a pension and then there will be some money coming in after I pack in working." You contrive to get this message onto an interwebs message board 40 years ago where your younger self will see it. Fantastic, it seems to have worked.

    Srsly there is currently only one way to solve this problem and that is via the magic of compound interest over a long period of time.

    1. Craigness

      Slicing off?

      "Tax relief" is money given to you by the government to offset the tax you paid. But pension funds didn't pay the tax which led to the relief (which was related to notional dividend tax credits), so they were getting money for nothing. In other words, you, with no pension but paying income tax and VAT etc, were funding the pensions of CEOs with expensive accountants and offshore tax havens.

  15. Anonymous Coward
    Meh

    I started saving young.

    I saved with a respectable pension provider too - Standard Life.

    My savings are worth *exactly the same* as if I had put all the money in a biscuit tin under my bed. If not, slightly less.

    The only difference being I am not allowed to access the savings in my pension fund until I retire.

    I wish I had never ever bothered with a personal pension, and kept the Cadbury Roses tin from Christmas 1988.

    Personal pensions are a scam. Kids: pay off your mortgage first.

    1. Craigness

      Please explain the scam!

      A pension is just a wrapper for investments in many different types of asset classes: unit trusts, companies, bonds, etc. If you choose an investment which goes nowhere it is not the fault of the wrapper. There is no pensions scam, just bad decisions on your part.

      1. Anonymous Coward
        Mushroom

        Re: Please explain the scam!

        "If you choose an investment which goes nowhere it is not the fault of the wrapper."

        What the hell are you talking about?! The whole point of choosing a pension provider or fund manager or whatever is that they do all the legwork and bloody well make sure that the investments actually appreciate in value, not that the punter has to work the stock and bond markets themselves, placing orders every day while they are actually supposed to be working. You know, in that real job that pays the money the punter has to invest in the first place.

        "There is no pensions scam, just bad decisions on your part."

        Bollocks! I'm tired of all this "ooh, shop around" where you spend all of your fucking time doing that because a bunch of people are unable to do the job they have been asked to do. If they can't make a better return than the market, for example, they should stop pretending to be in the investment business. It should not be the job of the punter to nanny the different fund managers and/or jump from horse to horse like in some fucking western movie.

        People wouldn't be so pissed off at the finance industry if those working in it actually owned up to their failings, but given that they appear to take a management fee regardless of how shit their performance is, no-one should be surprised that the pitchforks are out when these people reward themselves handsomely year in, year out as the punter's investments can't even match inflation.

        1. Craigness
          FAIL

          Re: Re: Please explain the scam!

          Did you get a guarantee? No? So where's the scam?

          I think what you mean is "I made some bad decisions and it's someone else's fault". What I asked was "please explain the scam".

          1. Anonymous Coward
            Mushroom

            Re: Re: Please explain the scam!

            "Did you get a guarantee? No? So where's the scam?"

            I think that if people are being truthful and really have seen their pensions evaporate gently rather than appreciate then that is a scam in itself purely because of the general perception of what pension funds are supposed to do.

            Or is anyone allowed to call their product anything they like, using commonly understood words, and then have the product do anything but, with a bunch of small print to let them off the hook? If it's like any other finance-related set of small print, it's the length of a small novel, standardised with all the other players so that the punter is screwed regardless.

            Yes, you fail, even as an apologist for the incompetent end of the finance business. There are good reasons why markets are regulated, why bad products should not be on sale, and why bad providers should not be able to weasel out of their commonly understood obligations.

  16. Anonymous Coward
    Gimp

    Another Slush Fund..

    For the government go to out and spend before going "sorry! was that yours!?, guess we'll have to raise taxes to get it back" or "ah well though luck! you should of prepared yourself!".

    And all the money going in is next to pointless anyway, with the amout of inflation and devaluation at work you'd be lucky to afford to put a roof over your head by the time some of us get to retire (if ever).

    1. Craigness

      Another one

      The funds are not under the government's control. If they wanted another slush fund they'd have increased NI and kept the money instead of telling us to pay into pensions and keep it ourselves.

  17. AndrueC Silver badge
    Happy

    And yet..

    ..noting all the comments about lousy pensions and surprise I'm puzzled. I got my first full-time job in 1987. That very lunch time I went into town and set up a private pension. Even back then I knew that I couldn't rely on a government handout. Throughout most of my working life my payments have been a fairly low %ge. They've risen a lot recently but that's because I asked for a 10% escalator over a decade ago which has outstripped pay rises and I can't be bothered to reduce it.

    Anyway my projected pension is looking very healthy and should allow me to retire comfortably at 55 in ten years. Cold comfort to some of you I expect but my observation can only be:I saw the problem over twenty years ago. I fixed the problem over twenty years ago. Why didn't you?

    Now for those of you still in the early years (like your 20s) maybe things are different but my experience suggests that if you start early it will all come good. Oh and BTW - I paid off my mortgage last year as well :)

    1. Craigness
      Thumb Up

      Timing

      Well done, but you sure picked a very good time to be 21!

      1. AndrueC Silver badge

        Yeah

        >picked a very good time to be 21

        Very true. To be honest I think the idea of what a pension is will change now. It's going to go back to 'If you're unlucky enough not to die on the job then you'll have an income to keep you going until you do'. The current idea of retirement being the third phase of life (Education, employment, retirement) appears unsustainable. I'm just old enough to be able to have that luxury. Today's teenagers are probably going back to 'work until you die'. Poor buggers :)

    2. jason 7
      Meh

      I did take stock. Still isnt working.

      As mentioned I was in one of the best final salary schemes around from the moment I could join it. And at age 24 I spoke to an IFA about early retirement so made provision to pay extra into AVCs so I could get out at 55.

      After all that the figures still dont add up and its not going to be anywhere near enough to get me to retire at 75 let alone 55. It appears the sums needed go up exponentially.

      Dont rely on pensions. It appears property and hoping on the lottery are still better options.

    3. Anonymous Coward
      Mushroom

      Best of luck to you

      and as you start paying more taxes on fuel, VAT and anything else the government (of any stripe) can think of, you'll see all those that didn't pay a penny are busy voting for governments that will tax YOU and pay THEM.

      And this being a democracy, who'll win ?

  18. Kenno
    FAIL

    Pensions don't pay back

    Seriously they don't..... you need 20 to 40 times the amount of your pension pot vs the amount of income you want.

    So you want 10K? you need about 400K in your pension pot.

    You reckon you'll have 400K in your pension pot?..

    This forgets inflation. Go ask your dad how much a beer cost or a loaf of bread cost 30 years ago. £10,000 in 2050 or 2060 when you retire will be WORTHLESS....

    My dad paid massive amounts into his pension when he was young. In the 70s and 80s he was promised about 130 a month a lot of money they.... 2011 he gets 130 a month. Which buys bog all compared to the purchasing power he put into it.

    1. Anonymous Coward
      Anonymous Coward

      I think you are being somewhat pessimistic here, Kenno Old Chap

      Firstly, you can work out the rough relative worth of your cash by dividing 72 by your chosen inflation rate - if you say inflation will be a constant 5% per annum (unlikely but hey, you get to chose your own numbers) then you get 72/5= 14.4 which means your money will halve in value in 14 years. If you pick a more reasonable 3% then your money will halve in value in 24 years.

      So, I intend to retire in about 20 years, which means I would need roughly twice as much money when I retire to buy the same things. As your dad has just retired I assume you are a similar age to me and will broadly need the same requirements.

      Now you need to decide how much you will need to live on when you retire. But first you need to accept a few facts, that most people ignore when they look at funding a pension:

      Firstly you will have paid off your mortgage. This is almost guaranteed as your mortgage lender will not just let you retire before the mortgage term is up (you are asked about this when you take a mortgage - good luck on lying about it). That is a lot of disposable income returned.

      Secondly, you may want to downsize your house, you may not, but with no kids at home and no need to be in the commuter belt anymore you may find it makes sense to move house. If you do so you can get a nice big chunk of equity towards your pension.

      Thirdly, you won't need the same amount of cash as you do now, you won't need two big cars, you won't do all that commuting miles and you won't need to pay all of the work related outgoings that you do now, and you won't pay the same level of income taxes as you do now - pension tax rates are quite generous and with the rise of the tax free level to £10,000 you will get a far bigger percentage of your money as take-home than you get from your salary. Obviously you won't need to pay into your pension either.

      Finally, it is unreasonable to expect that you will get the same amount of money when you retire as you get when you are working - even final salary deals (if you can get one) work out your pension based on 60ths if you are lucky or more likely 80ths - realistically a final salary pension should be expected to pay about half your final salary, as a good guideline.

      So, how much do you actually need? My monthly outgoings less pension and mortgage are about £600, not including food, petrol etc (I am basically talking about direct debits here), we spend about £150 a week on food and need another £300 per month for yearly car stuff like tax and insurance, and another £300 for fuel. So if we look at a base of about £1500 per month which is about £18000 per year, give or take.

      And there are two of us, so that equals 9 thou a year to pay all the bills, run a car and eat stuff. Obviously if you are on your own you need to earn the money all on your ownsome, but you would need less food, a smaller house, fewer cars etc and you'd have to do your own maths.

      However, £9k in today's cash would need to be £18k in 20 years time. To achieve that, and starting now, I would need to put away somewhere in the region of £600 per month to meet that, which is an amount I can justify (I already put £600 a month away and I have been paying into various pensions for the last 15 years) - I know my maths don't include any spending money, but I am assuming the reductions in current spending will make up for that, particularly the car running costs.

      OK, if you are planning on working for the next 40-50 years like you say then you would need more money in the pot, but you would have more than twice as long to pay for it (and assuming you are at least mid thirties now you would be 75-85 so you would get a very good deal on your pension) and if you are much younger than that then what the hell are you doing worrying about pensions for? Buy a house for Christ's sake.

    2. Craigness

      High yield and drawdown

      Kenno, you should look at Stephen Bland's articles on High Yield Portfolios for the Motley Fool. He created a hypothetical portfolio of shares in 2000 which was designed to provide a growing income (from dividends) and growing capital, starting with £75,000. In the first year the income was £3451 (4.6%). There are plenty of companies and funds which increase their dividends faster than the rate of inflation. Nothing has been done to the share selection since 2000 (AFAIK) so it's not a great example, but the income did grow to over £5000 in 2007/8 (40% in 7 years). It fell back since but the capital value at the end of last year was £114,000 and, if you're not planning to live forever, you'd be able to spend some of this. If you have someone manage the investments (and who uses a similar strategy) then you might not fare so badly on the income front. So, with maybe 5.5% income/year if you include drawdown of capital, you'd need about £180,000 to get £10,000 per year. It's useful to have the security of an annuity alongside this, of course. Consider moving your pension into a SIPP sometime before retirement so you have more control over what you can do with it.

      1. Kenno
        Thumb Down

        And where do I get this money from?

        I'm not exactly well paid.... my job has been outsourced multiple times and salaries are absolutely static and have been for years. So all this put 2K aside a year doesn't really work as rent is cripplingly high as is cost of living and my wages aren't great either.

  19. big_Jim
    Mushroom

    Political Pension

    Alternatively get old with your peer group and around aged 65 vote in your millions for a Government that will pay out for you and stiff's your children.

    Worked for my parents.

  20. Anonymous Coward
    Meh

    Blindingly obvious.

    "I wish I could use the cash in my pension to pay off the mortgage on the family home. But apparently I'm not allowed to access my pension savings, the reason being 'just because..."

    Would not be much of a pension if you could put the money in at 25 and take it out a few years later to pay down your mortgage. They give you tax breaks on investing in a pension but you lose the flexibility of being able to draw it until pensionable age.

  21. Anonymous Coward
    Anonymous Coward

    My plan is to die.

    I am 38 and honestly cannot afford to pay for a pension. I plan to work until I die as its my only choice.

    Apparantly I need to save around 25% of my income. I do not have £500 (before tax NI etc)

    Oh well I suppose I better start drinking and smoking more so i die early.

  22. Anonymous Coward
    Angel

    Pensions are tax allowable.

    What people forget is that pensions are tax allowable - so if you are a high rate taxpayer you are effectively getting £100 into your pension for £60 (or £50 if you pay the 50% tax) of your own money.

    Of course the flip side is that the government gets to tax your pension as income when you draw it later in life - but the idea is you put money away today when you tax rate is (probably higher) and draw it later in life (when it's probably lower).

    1. Anonymous Coward
      Thumb Up

      And

      it's always good to invest other people's money and only pay tax if it turns out well!

  23. b-a-r-k-i-n-g-m-a-d
    Devil

    Phasing them out...

    The problem is many people start a pension far too late in life and £100 put in 10 years ago is (typically) going to be worth a lot more than £100 put in today.

    I'd guess most people need to be putting in 15-20%+ of their income into a pension - although by the time you get tax relief and some employers will match your contribution the actual cost out of your pay will be much less.

    You can expect to put in 0% now and enjoy anywhere-near the same standard of living when you retire and don't rely on a state pension - the fact is they can't afford to pay for them with people living longer etc. My guess is these reforms are the first part in phasing them out.

  24. Anonymous Coward
    Boffin

    The Lotus Eater

    now, hands up who didn't have to Google that !

  25. Anonymous Coward
    Linux

    Better than nothing!

    "I am 38 and honestly cannot afford to pay for a pension. I plan to work until I die as its my only choice. Apparantly I need to save around 25% of my income. I do not have £500 (before tax NI etc)"

    Most employers will contribute to your pension and it's tax allowable so would not actually cost you 25% of your take-home income. The simple fact is you do need to find some money to put away as a pension unless you want to rely on the state (don't!!) and the longer the leave it the worse it gets.

    See what scheme your employer offers - some will match your contribution - so that's a great offer for a start! Even if you put in £50-100 a month it's better than nothing...

    1. dz-015

      "Most employers will contribute to your pension"

      Not nowadays they won't. There just isn't that kind of money knocking around any more.

  26. jason 7
    Mushroom

    Seems there are three types of folks in the pensions scenario.

    1. Those that havent a clue and will go on regardless.

    2. Those that think they have done well with their pension provision but will find it doesnt work when they get there.

    3. Those that have tried and now know its pointless and just resign themselves to looking at their babyboomer parents in disgust.

    I always get a feeling that those in the first group will probably fare much better.

    1. Anonymous Coward
      Anonymous Coward

      Don't blame baby boomers

      I'm not in that category myself but it's often portrayed that these people are somehow robbing current and future generations. In reality when working they were told if you pay X you will get Y when you retire, so they did. If you were told now that if you contribute a set amount into a pension you would get a guaranteed return, you'd no doubt jump at the chance. Yes the provision of current "baby boomer" pensions is probably unrealistic, but they just did what they were asked at the time. The fault lies with those who designed pension provision at the time.

      1. jason 7

        Dont get me wrong....

        ..I agree its not fair to blame them re. their pensions. After all how well will the system work to support them 30+ years into their retirements?

        I think its the fact many of that generation were the ones that have put in place the total clusterf*ck of a world we have today and in which future generations will have to endure.

        "Thanks folks, I've screwed it all up but now I'm off to my retirement villa in Italy!"

  27. Anonymous Coward
    Gimp

    @Lee

    "However, £9k in today's cash would need to be £18k in 20 years time. To achieve that, and starting now, I would need to put away somewhere in the region of £600 per month to meet that, which is an amount I can justify (I already put £600 a month away and I have been paying into various pensions for the last 15 years) - I know my maths don't include any spending money, but I am assuming the reductions in current spending will make up for that, particularly the car running costs"

    I like the sound of you Lee you sound like a chap with his head screwed on and sleeves rolled up (which is alot more than I can say about some of my own peers these days)

    However you've managed to do fairly well for yourself, However £9k a year is more than most people make in this country, the government has used the figure £7,475 because it believes that is the optimal earnings for the largest population grab without it causing too much uproar.

    Now £7,475 / 12 = £622.91 - so £622.91 per month might be enough to have your happy future retirement but they just may just starve before they get there. ;-)

    But seriously, rent (which is what most people do) or depending on mortgage rates your looking at between £300 and £450 per month then food heating and travel costs, your average person isnt going to put very much into this at all.

    You took in inflation but you didnt put in devaluation, I dont know if you are aware of the race to the bottom at the moment going on in most of the major currencys in the world but if it keeps up at this rate come 20 years from now your notes could have extra zero's on the end of them but yet buy less than a pound coin does now. (your right you can use any figure you like in there but in my opinion your being far to conservative, almost generous in fact)

    And most governments around the world are already dipping their fingers into public sector pension funds and moving the figures around, put that together with the fact that most banks only hold 7% of the funds they lend out, then there is a good chance the company you have your pension with will no longer exist by the time you come to collect.

    The issue isnt simply with pensions, its the whole entire monetary system that is at fault.

    For too long it has rested on Greed and Fraud and its getting to the point where its going to fail (and fail it will because that is the only logical out come) it may not fail this time or the next but each time the problem gets bigger and the results of which become more devastating.

    The "pension crises" is just one small area of a much much larger monster, a monster everyone is ignoring because they dare not look under the bed and face it.

  28. Anonymous Coward
    Anonymous Coward

    Pension or mortgage

    Could this have been done via the already high employer and employee national insurance contributions?

    Is this an effective tax increase by reducing beneifts while maintaining revenue?

    Would it be more effective and of benefit for the youngsters to pay off their massive mortgages first?

    Just another stealth tax IMHO personally i'd raise the tax and national insurance free allowance up to full time min wage level and let the money circulate (and tax revenue increase - yes you govt twits you have the math wrong)

  29. James 47

    Total scam

    Just buy a bar of gold every few months

    1. Kenno
      Happy

      I prefer Sovs

      As Sovs have no CGT on them.... I;ve a stack of them since Sovs were £130 each, they are now £290 each....

      Sovs and gold are 100% inflation proof as you cannot printy printy the purchasing power away..... like you can with paper money and electronic money...

  30. Anonymous Coward
    Anonymous Coward

    Don't forget inflation...

    ... the biggest hidden tax of all. Governments borrow on an industrial scale, then deliberately devalue their own currencies to reduce the value of what they eventually pay back. Inflation is also a neat way of encouraging borrowing by individuals and companies, who are invisibly subsidised by the retired and others living off their savings.

    If you don't include allowance for inflation in your calculations - for pensions or anything else - don't be surprised when the outcome is nothing at all like what you expected. In this wonderful advanced oh-so-civilised world of ours, money behaves jsut like ice cream on a hot day: it melts rapidly.

  31. Herby Silver badge

    There is another option...

    You can move to Greece, and "retire" at 50-55 years. They seem to have a nice scheme.

    Oh, wait that country is going broke.

    Originally the retirement age of 65 years was set when the mean lifespan was 64 years. Now that healthcare has improved (at great cost to governments everywhere) the lifespan has improved so that we net a few more years (15-20) over the "retirement" age.

    The only solution is to raise the retirement age a few years (which they are already doing here in the states!).

    Oh, well.....

  32. Eden
    FAIL

    Kidding right?

    I earn what is meant to be an above average, even decent wage, but with cost of traveling , rent etc I barely scrape through each month with food in the cupboard and rent paid.

    I like many others are in a catch 22 where we can't afford NOT to put away for our future but neither can we afford TO put away for our future as it's hard enough just surviving day to day.

    There is no way I'll ever save up enough for a deposit for a Mortagage, let along have assets for retirement, I'm just another work till I die pleb :(

    My company has a very generous contribution plan for Pensions but I need to put something insane like 1/4 of my monthly take home in which I can do if I stop paying my rent and eating maybe....

  33. Anonymous Coward
    Anonymous Coward

    I'm glad I bit the bullet..

    ...sure I got the feeling I was being ripped off for all the years I paid into a pension but I am now retired on about about 60% of my final salary. I remember thinking when I was paying in around 20%-ish of my salary "Is this really worth it?", especially when friends were going for fancy holidays three times a year and buying a new flash car every 3 years - while I went away once a year and made my cars last 10 years. But I stuck with it and now I feel relatively comfortable (definitely not "well off") and secure. I also stretched to pay off my morgage early.

    Friends who did nothing are now in a bind, they have the minimum company pension (around 15-20% of their final salary and are wondering how they are going to survive. I retired early (I had just about enough of the company I worked for) - some of my friends will have to slave on to the bitter end of their 65th birthdays and then even beyond if they want a reasonable lifestyle.

    Would I have done anything different? - probably. I should have diversified - some into the company pension scheme and invested some in property - and tried to invest even a bit more than I eventually did (say 25-30% of my income).

    Sorry if all this seems a bit of a preach or smugness but I was just lucky. I didn't understand this pensions stuff - I just stuffed some money into it and got on with my IT'ing around the world. But suddenly one day you discover - without warning it seems - you are retired and you have no more salary coming in - shock horror. What must have is a plan, any plan, maybe a pension, property, a croft in the Shetlands -whatever - but it must be a plan! When you are in your 30's or 40's it seems that you will go on working for ever - you are everlasting, you are invicible, but it does end, and end suddenly.

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