I started thinking about pensions at around 1986 aged 37. Like many others on modest salaries, contributing to a pension was impossible prior to this unless I planned on eating fresh air. At that time, the complexity caused by the proliferation of "products" and the level of jargon involved made the whole process less than easy. I purchased two pensions, one to mature at 60 and one at 65 and used equal, one-off, cash payment for each. I then forgot them.
Aged 60, I was informed that the first pension had involved an investment that was only 45% of what I actually paid - the second 55% of the actual amount. The pension to be paid at 60 was £90 a year - before tax. This was 1/3 of the value that I was sold.
Trying to trace the company that sold me the pensions to find out what happened to 50% of my money proved to be fruitless as they had disappeared.
A works pension has proved to be of some value, but a modest AVC pension has lost over 10% of its value in the last 2 weeks due to "market changes". Time will tell if the value will be recovered.
The question is therefore, how can ordinary people actually afford the pension contributions the government keep demanding we purchase? If you can afford to pay in, there is no way of knowing which "product" will prove to be good value; All pension providers are gambling on the stock market and using your money; If you die early you lose most / all of your money; The tax man "helps" when you pay but then takes a cut of what little is paid; Inflation of 4-5% a year will reduce your investment to next to worthless by the time you need it; The only people who make anything from pensions are those flogging them (charging annual fees) and those "advising" on the initial purchase or the purchase of an annuity - these guys really do VERY well. Will I ever be able to afford to retire? I doubt it unless I can live in a field and eat grass.
Is this current system of pensions provision really a satisfactory way for any country to manage the issue? What do you think?
Can I just say a big thank you to all of you who have taken the trouble to express your thoughts on this topic.
The level of debate and the manner in which it has been conducted has been exemplary, showing courtesy and toleration for differing viewpoints. Truly an adult discussion.
Many thanks :-D
In the Metro paper today - Page 12-13
Private pension costs:
Earn £15K pa may = pension of £6600 requiring savings of £200 per month throughout full career employment
Earn £30K pa may = pension of £13100 requiring savings of £400 per month throughout full career employment
Earn £50K pa may = pension of £21900 requiring savings of £650 per month throughout full career employment
Earn £112K pa may = pension of £49000 requiring savings of £1300 per month throughout full career employment
The term "full career" is stated as being 35 years.
I don't know about you but 35 years ago I was earning about 1/8 of what I ended up with earning. To reach the figures quoted I would have had to invest more than I was earning 35 years ago. Alternatively, I could have invested 50% of my later salary perhaps. One question crosses my mind - how exactly does one avoid starving to death whilst saving for a pension? Perhaps that's the point - if I snuff it the fund gets to keep most or all of my investment. Wow, what a wheeze.
Should have abandoned my current career and gone into pensions insurance....
I've been saying it all my working life.
British pensions are a rip off.
Just look at the Australian State pension because they have been addressing these well known demographic issues since the end of the second world war.
Do you think it's because the people in Australia won't let their government get away with what we allow ours to? I have not studied the Australian economy myself, so I cannot say that I know anything about their pension saving schemes. I spent a bit of time in Africa where, if you don't have a pension, you're basically on your own. Everybody had a company pension - whether a large or small company - that they relied on when they were ready to retire. If you changed jobs, the idea was to transfer your pension over to the new company - because of this, pension schemes were never plundered by imaginative bosses.
Of course, I'm going back some years, and things might have changed. If the companies go down, so, perhaps, do their pension pots, as in so many other countries. I very much doubt that their governments underwrite pensions. The plain truth of the matter is that, in the UK, if you don't have enough money you are supposed to go and beg for more in the form of income support or benefits. Unfortunately for us all, the people in charge seem to think that we can all comfortably live on a pittance. And, as retirees, we shouldn't have to go forth with a begging bowl. This would be addressed by receiving a good government pension in the first place. Unfortunately, in my humble opinion, the government is still on the road to destruction as they continue to pay for today with money they should be using to pay for tomorrow. And people who work in government should be forced to take out private pensions, and the inherent risks of doing so, as we've had to - and not expect the taxpayers to keep doling out for them. What will happen when there are five workers to every 20 retirees? Of course, it won't be that extreme, but definitely a possibility.