Anyone reduced their pension contribution?

[Mr Badger]

Public sector isn't all it is cracked up to be. No bonuses, no decent wages (unless you are blessed by a Director or Assistant Director position), barely any entitlements for when you are working away from home, travel costs that are a half-hearted gesture towards your actual outlay.

Pension has been good previously, however, salary is low. Remember, grass is always greener, and the Government and other influentials just love to play people against each other when they can as it detracts from their own undertakings.

Yes, people should be wary of falling for government divide and rule tactics and Daily Mail headlines about how public sector workers/benefit claimants or whatever are living a life of luxury at our expense. None of us win in a race to the bottom!

Having said that, I do know some guys that have recently taken early retirement from local government jobs on very generous pension terms. Now they are out they freely admit that the areas where they worked were inefficient and lacking in a real work ethic or customer focus. One of them probably doesn't realise that despite being retired he still comes across as a complete jobsworth

 

[anything I don't mind]

I am being auto enrolled in to private ponzi scheme next month. I contacted the state pension authority to find out more information about the auto enrolment.

I asked why is the private pension now auto enrolled when before it was voluntary she said because people were not signing up for them. I said that's because they didn't want them. She said the law is generally for employers that do not offer their employees pensions and will now be forced to.

In typical state fashion i am auto-enrolled and then if i opt out which involves jumping through a bunch of hoops, i will then be refunded the amount of money that was taken from my salary, but only if i opt out during the first month. Any opt out after that and there are no refunds.

The private pension industry must be loving this new law, think about having a business and then teh state turns around and forces everyone with a job has to use your business. The private pension industry in the uk is now going to be so happy that it has so much of other peoples money to invest and make more money with, i bet they could not have wished for a better outcome.

So now we have forced insurance and forced pension i am just wondering what the next government mandated service is going to be.

Instead of jumping through a million hoops to opt out i am thinking of just reducing it to the least amount that i am allowed to, that may be easier than jumping through the hoops.

I found this calculator:

https://www.moneyadviceservice.org.uk/en/tools/pension-calculator

It says basically if i add £50 per month (plus £50 employer contribution) in to the ponzi scheme and retire at age 65, ill get back like £165 a month inflation adjusted, which works out great for the pension guys, as ill probably die within a few years and they get to keep the rest of the money, Basically i worked out that at that rate, i won't be getting more money than i put in until 11 years after i retire. So ill be 76 before the pension becomes a net gain.

Maybe i don't understand pensions.

 

[Firestar_3x]

That makes for some scary reading! I'm contributing ~ £500 / month (inc. employer contributions) at the moment and the calculator reports I'll be looking at a pension of around £15k / year - that is very small, especially reflecting for inflation over the next 40 years

You will get a new state pension of £144 a week ontop of that.

 

[Luke_Bowman]

As already said by everyone else, I'd up your pension since your employer matches it.

It's better to pay more into your pension and less into your mortgage in the long term

 

[anything I don't mind]

While on the topic, if any one who knows pensions well could you please confirm if i am looking at this correctly?

based on the calculator i posted. It says if i pay £100 per month and my employer £100. Over the next 35 years, age 30 retire age 65.

£100 per month for 35 years = £42000
add the employer contribution + £42000 = £84000

£84000 total pension pot. The calculator says it will pay out £329 per month.

84k divide by 329 per month = 21 years.

Which means at the rate of 329 per month it would take 21 years or 65 + 21 = 86.

questions:
1) is this correct ?
2) what happens after the 21 years do they continue to pay out or does it stop?
3) why would anyone use pensions and not a savings account as you have full access to the money at any time?
4) Am i looking at it all wrong?

 

[Firestar_3x]

What about interest on the pension pot i.e. growth at say 4 or 5% compounded over 35 years?

 

[yogibear88]

While on the topic, if any one who knows pensions well could you please confirm if i am looking at this correctly?

based on the calculator i posted. It says if i pay £100 per month and my employer £100. Over the next 35 years, age 30 retire age 65.

£100 per month for 35 years = £42000
add the employer contribution + £42000 = £84000

£84000 total pension pot. The calculator says it will pay out £329 per month.

84k divide by 329 per month = 21 years.

Which means at the rate of 329 per month it would take 21 years or 65 + 21 = 86.

questions:
1) is this correct ?
2) what happens after the 21 years do they continue to pay out or does it stop?
3) why would anyone use pensions and not a savings account as you have full access to the money at any time?
4) Am i looking at it all wrong?

1) This is correct based on current rules, however these are changing shortly.
2) If you were to purchase an annuity you can include a spouse/beneficiary benefit which will continue to pay income at generally a 50% rate, you can also include the option of a guarantee of 5 or 10 years which will ensure that the income is paid for this time. If you die within this time your estate/named beneficiary will receive 100% of your income.
3) Tax relief on contributions, tax free growth, better opportunity for growth than savings account especially with current interest rates.
4) I would urge you to take some time out to read up on pensions to get a better picture. They are not as bad as you think they are!

 

[anything I don't mind]

Ok sure, so that would make it even worse as the 84k would be even higher and i assume the calculator takes interest in to consideration? So say it increases to £110k with interest.

If we take £110k and divide by £329 per month we get 27 years roughly. So at the rate of £329 per month i would need survive to the age of 92 before i used up the pot.

I guess the main benefit that everyone things make it worth is the employer contribution, but if you don't survive long enough in your pension years you would never see the rest of it.

 

[yogibear88]

You won't but your family will. Especially if you are unfortunate enough to pass away before you retire as your pension pot will be paid to your nominated beneficiary tax free.

 

[anything I don't mind]

Is that the case even if i have not reached retirement. Say i die age 40 and paid 10 years, will that 10 years of pension get paid to a next of kin?

 

[yogibear88]

They get it as a lump sum, they can do anything with it!

So if your pension pot was worth £10,000 in 10 years and then you die they will receive this £10,000 as a lump sum.

 

[anything I don't mind]

I found this http://www.standardlife.co.uk/1/site/uk/contact/faqs/pensions-and-annuities

Answers some questions i had.

It says there that if i do die it will get inheritance taxed and there is a limit as to how much they can pay out.

It is a shame you can not dictate the terms of the pay out in more finer detail.

IT would be nice to instead of being told its £329 per month, to be given the option to decide over how long i would like it paid out. Say i think ill last another 10 years and then ill take the whole amount divided up over that time, it would result in a much higher monthly payment. as £329 per month non inflation adjusted is completely worthless.

 

[booyaka]

yes - pre retirement to pot tends to be paid out as a lump sum to your beneficaries.

Post retirement - totally different based on what options/routes you decide to take at retirement.

 

[platypus]

Unless you're a millionaire you'll end up with exactly the same care and in the same care home whether you end up paying tens of thousands or the state pays...

This is simply not true?

 

[booyaka]

In typical state fashion i am auto-enrolled and then if i opt out which involves jumping through a bunch of hoops, i will then be refunded the amount of money that was taken from my salary, but only if i opt out during the first month. Any opt out after that and there are no refunds.

don't forget that every 3 years your employer is the legal obliged to opt you back in and you have to go through the same process all over again, every 3 years if you opt out.

 

[platypus]

I'm opting out of it me. I don't see the need to save with the government scheme. I need the money now. Can't be waiting another 40 years. In 40 years time i don't know if I'm going to be alive or not.

In Jan i plan to buy my first house. Then i do plan to buy few other properties. I would rather bank on them then a pension.

And if/when the housing bubble ends/bursts?

 

[yogibear88]

I found this http://www.standardlife.co.uk/1/site/uk/contact/faqs/pensions-and-annuities

Answers some questions i had.

It says there that if i do die it will get inheritance taxed and there is a limit as to how much they can pay out.

It is a shame you can not dictate the terms of the pay out in more finer detail.

IT would be nice to instead of being told its £329 per month, to be given the option to decide over how long i would like it paid out. Say i think ill last another 10 years and then ill take the whole amount divided up over that time, it would result in a much higher monthly payment. as £329 per month non inflation adjusted is completely worthless.

In the event of your death before retirement your full fund value will be paid out free of inheritance tax. If you die once you have taken your benefits your estate will be liable to a tax charge if it is taken as a lump sum.

As I have stated previously with the new tax rules you draw as much pension as you wish to from 2015. If you wanted to take the whole pot as a single lump sum you can, but you will be liable to income tax at your marginal rate.

 

[booyaka]

This is simply not true?

pretty much is.

If you pennyless you will get the same care in the same state care home as you would if you had £300k before you went into the same home.

If you’re moving into a care home and have more than £23,250 in savings or assets (or £23,750 in Wales and £25,250 in Scotland), you’ll usually have to pay all of the care-home fees. This threshold includes your property unless your partner or another dependant still lives there.

 

[platypus]

.

It's really not hard to opt out.

The issue that we face is that people don't save enough for retirement. They either don't care, or don't know how too. This puts too much of a burden on the welfare state.

I'm usually against auto enrollment, but I'm not in this case.

 

[anything I don't mind]

Here is the kicker the part that is hidden in the fine print.

When you invest in a pension plan, your money is invested into investment funds. These investment funds are invested in a variety of things for example, the stock market, bonds, property or cash. The type of investment will vary depending on which investment funds you have chosen. As with any investment the value of your fund can go up or down and may be worth less than what you paid in.

There are other potential risks that you need to take into consideration when you decide to invest in a pension. You can't normally access the value of your plan until you've reached the age of 55 and at no point can you cash in your pension.

We strongly recommend that you seek financial advice before choosing a pension.

This means that i could pay in for 40 years and then come to see teh value only to be told, sorry mate the stock market had some problems in 2032 and the property market crash of 2035 and we were wrong on those bonds, so there is half of what you are expecting is actually there. So much for the employer contribution, enron anyone?