Pensions / Auto-enrolment

[Samdy Gray]

After reading some of the comments on the BBC article today, some of which made me nearly weep at the pure ignorance, I thought I'd start a thread to gauge the TEF's response to auto-enrolment or just pensions in general. Do people really think they are just a massive con and there is no point in saving for retirement? How do they expect to cope financially when they get there?

These are just a select few, but are indicative of the majority:

There is no point in saving for your own pension in the end. Particularly for the lower end of pay. All that happens is your savings get used instead of the state giving you a minimum anyway, through means tested benefits. Meanwhile the rapacious financial 'advisers', commission takers, have lived it up off your attempt to save.

Pensions are Ponzi Schemes, so this must be the biggest con in history. Only the fund managers will benefit via their normal embezzlement process ("management fees").

I am 31. I have put money into pensions, but I am of course completely aware that I may as well have burnt it. I know I will never be able to retire, I will work until I die.

The Tories are very happy with all of this I'm sure.

Pensions are a total scam.

The government now wants us, by law, to put our wages directly into the finance industry, run by their friends the big banks and the insurance companies. We won't see our money for 30 years. When we do, so many financiers will have taken their cut by then that it will be virtually worthless. And when we die, they get to keep it.

Absolute scam of the highest order.

Seriously, If you cannot afford at least £500 a month pension contribution, don't bother. Use the money to pay off debt, put it in an ISA. Try and build a 3 month income cushion to avoid overdraft fees and late payment charges. Don't even think that a few £ a month is going to make any difference or even grow enough to cover admin costs. The whole scheme will probably close within 10 yrs anyway.

Pensions are a big con - heads they win tails you lose. they take a % of everything I pay in - why not make them take a % of the profit - no profit no fee, cross all their to encourage responsible investments
I would have to live to 95 just to get the equity of my pension pot back, nevermind all the return on the investments made since retirement so when I die they keep my pension pot too.

[donkey]

 

[Sussex]

A couple of points I heard on the radio on the way home tonight.

If people are auto-enrolled would they then just assume that's got them covered for retirement and not worry about actually working out what they may get back at retirement or adding more to it off their own back?

And, that a pot on retirement of £112k (not sure if that was an example in relation to the point above) would equate to a pension of approx. £300 per month.

That's quite scary.

[Sippo]

Unfortunately, I came out of my LGPS simply because I can't afford it at present. Simple as.

[leefer]

Untill the/a government sorts a system that is fair to all then it will continue to be viewed with disdain by the workers.
It is simply not fair that a person working there balls off all there life and contributing a fair percentage of earnings is only marginally better off than than the person who contributes nothing when they retire.

As for the new scheme.....at my age i will be looking at the minimum amount to invest(16/18 thousand i think) and no more before i retire......this will be paid back in a lump sum i am led to believe on retirement.

[Samdy Gray]

If people are auto-enrolled would they then just assume that's got them covered for retirement and not worry about actually working out what they may get back at retirement or adding more to it off their own back?

I suppose some will, but I would hope that it gives some people the kick they need to take a good look at their retirement planning.

And, that a pot on retirement of £112k (not sure if that was an example in relation to the point above) would equate to a pension of approx. £300 per month.

That's quite scary.

£300 per month net would mean an annuity rate of 4%, which is on the low side of average but is a good indicator. But add that £300 on top of the State Pension and you've increased your income by 60%.

[Samdy Gray]

Leefer, how is the system unfair? Surely having that bit extra is better than no extra at all.

[janaage]

Pensions are a great idea, but unfortunately due to constant government interference they come with a heck of a lot of regulatory risk. For example pension commencement lump sum (tax free cash in it's more commonly known format) is fantastic. Currently set at 25%. What are the chances of that a. still being about when I retire and b. still being set at 25%.

Will tax relief still be applied to contributions, we've already seen HRT payers have their relief reduced, what are the chances of the broke govt making further reductions in this area?

The answer to all of the above is flip knows. So for that reason whilst I haven't got huge amounts of spare cash to put into a pension, I'll concentrate on contributing to the known 'permanent' ISA's. Least that way I'm in control of my income.

Plus rather importantly I have a final salary scheme still running, so with each year I accrue my pension earnings increase, index linked if I leave so I'll have a nice little base there.

The auto-enrolment idea. I can see why they've done it, but not sure if it's been done in the right way.  More worryingly for me is the lack of action in trying to reduce the protection gap, and huge burden on the state.  Encourage people to protect themselves and the taxpayer/state wouldn't have to pick up the tab when things go wrong.

[leefer]

Leefer, how is the system unfair? Surely having that bit extra is better than no extra at all.

Fair point Sam.......but the amount you are putting in far outweighs what you will get back in my opinion
Save the money and enjoy it while you are young enough to appreciate it.
Dosn't mean you have to spend all your savings.....keep a bit by to top up any pension you maybe entitled to.

With the past...i have nothing to do with,nor with the future.
I live now........nice quote that by Ralph Waldo Emerson

[janaage]

Fair point Sam.......but the amount you are putting in far outweighs what you will get back in my opinion
Save the money and enjoy it while you are young enough to appreciate it.
Dosn't mean you have to spend all your savings.....keep a bit by to top up any pension you maybe entitled to.

With the past...i have nothing to do with,nor with the future.
I live now........nice quote that by Ralph Waldo Emerson

So when you spent your money whilst your young enough to enjoy it, who picks up the tab when you're old and in need of help?

Don't see why taxpayers should have to bail out those people that haven't made enough provision for their old age.

(in the spirit of debate Leefer)

FWIW I believe by the time the majority of posters on here receive a state pension (if there still is one by then) it'll more than likely be means tested, and probably have a retirement age of 75. Get it back to what it used to be, almost a well done for getting this far, 65 is far to young an age for state pension, and the decision in raising that age was well over due.

Which means people need to make their own provision for their old age, by whatever method they choose.

[yeo]

Having lead the life style that Ive lead most of my adult life Id imagine i'll die before I retire,so fuck it.

[nevillew]

No-one seems to have mentioned that it's not only your own money you're saving (boosted by tax relief), but that your employer also has to make a contribution. Plus, you can always opt out of it altogether.

My concern would be that as employers now will have to find extra contributions, they might alter their existing schemes to recover some of the extra outlay. I'm sure a lot won't but it's real possibility.

[Flashheart]

There's no safety net out here at all. No pension or savings and you're proper fucked, although out here it's normal for the kids/grand-kids to look after the elderly. Fuck that, I'd rather have a stranger wiping my arse than have my kids do it. I don't want to be sponging off my family financially either.

I'm hoping on setting up my own business in the not too distant future, I think that will be my pension plan. I'd hope to pay other people to keep the place going and making me an income while I am busy at home sucking werthers originals and screaming at he kids to geroff my lawn.

[Ardiles]

Some of those quotes in Samdy's original post are truly frightening.  You cannot blame people for being naturally sceptical of financial products; the industry has a grubby track record, sure enough.  But it is becoming very clear that, decades from now, the state simply is not going to be there for pensioners in the way that it is now.  If you don't put money aside - somehow - you will either need to live in poverty when you're older, or work until you drop.  Judging by some of those comments...there are going to be quite a few people in those camps.  The sad thing is that, for many of them, the penny will only drop when maybe they're in their 50s - by which time it will be too late.

Saving in to a pension remains one of the most tax efficient ways of putting money aside, particularly if you're a higher rate or additional rate tax payer.  I suppose janaage's ISA idea works as well - which would work up to the ~£11k annual ISA limit.

[Samdy Gray]

And for those comments that suggested pensions were just a big scam, they were an equal amount that preferred to have the cash in their pockets today rather than a bit of extra income in retirement. I know times are hard for a lot of people, but on an average salary and at the current 1% contribution level that's only ~£10 per month from net pay.

ISAs are great, but they're accessible. If you've got the self discipline not to spend built up savings then they'd work very well as a retirement fund, after all the income is completely tax free unlike pensions. But people don't and that new computer/holiday/car/house that they want will just come straight out of the pot.