Losing half your state pension not far away.

[Cyclone]

I don't think people take into account the devastating effect the 2008 Financial Crash has had on pensions.

 

Starting from 2007 (so including the financial crash) over 10 years the FTSE100 made an annualised return of 5.7%

 

https://www.fool.co.uk/investing/2018/05/27/can-you-really-make-10-a-year-from-the-ftse-100/

 

The ftse250 made a better return of 9.9%

 

And that's a particularly bad 10 year period to pick specifically because of 2008.

[Jim Hardie]

Slightly off topic wrt pensions.

Going through my mothers bits and bobs after she died in 2000 I came across an insurance policy.

It was an old penny a week policy taken out on my life in 1940 for £30 and as far as I can recall was probably paid until i was 18.

I wrote to the insurance company, (even though I thought £30 was hardly worth bothering with) and received a cheque for just over £3000

I was totally gob smacked.

So you youngsters start saving!!!

 

God bless your mum.

[phil752]

Government legislation may have crept in under the radar of many. When I say legislation I am referring to the real reason behind the compulsory obligation of employers to offer these pensions, and the automatic registration of employees.

 

There will be many that still believe that the old age state pension as we know it is a guarantee from retirement age to end of life. Think again.

 

The introduction of the scheme, and scheme or scheming is quite an appropriate description. At some time not too far away, it is highly likely that employees that have paid in to a workplace pension scheme during their working life will lose up to 50% of their state pension.

 

Of course, the government are not going to tell you this. If they did, employees would not pay in to the scheme. You can refer to it as means testing. A rose by another name or whatever.

 

It should be clear to all by now that the government cannot sustain state pension payments to all. A situation that is going to get worse.

 

Under the Pensions Act 2008, every employer in the UK must enrol their eligible staff into a workplace pension, and pay into it. If you employ at least one person, that means you’re an employer, and by law you have responsibilities that you need to act on.

 

Anyone that pays into one of these workplace pensions scheme is paying twice to receive less.

 

Make a decision that is right for you.

 

I was always under the impression that, these pensions can be cashed in like most private pension schemes.

 

---------- Post added 05-11-2018 at 22:46 ----------

 

This is such a brain dead post it is laughable.

 

It is disgraceful and irresponsible to post such unsupported rubbish. I pay into a workplace pension because it is the financially the prudent thing to do. Want to know why? How about this, I pay 6% of my salary in, my employer contributes an additional 12% tax free. So at minimum I get 18% of my salary into a pension scheme. Pension contributions are deducted from your gross salary, so it isn't taxed. Therefore, contribute an additional 3% to save on the 40% income tax I would have had to pay on that money if I didn't. So a total of 21% of my representative salary goes into a pension pot. I have another 30 years to build my pot and forecasting an inflationary pay rise of 2% annually (I am averaging 3.5% so being conservative) and a pension fund performance of 5% annually (again conservative on the back of 15% at the moment). It is realistically going to give me a pot that can give me an annuity of £3000/month (in today's money) at retirement.

 

So why is this a bad idea?

 

what do you think your pension pot would be worth to give you £3000 per month?

Edited November 5, 2018 by phil752

[Cyclone]

You can use online calculators to see what that would cost today.

 

Quote 2

Remove

Your income (indicativeshow the detail)

£2,425

Monthly

£29,103

Yearly

£326,052

10 yearly

Your choices (blue icons represent changes)

£1,000,000 pension pot

Monthly in arrears

Income starts at age 65

Single income

No protection

Increase by RPI

Health choices

 

That's a million £ pot, all the basic options, taking it at 65 and it only achieves £2.5k

 

That's a terrible rate tbh.

You'd be better off just keeping £1million on the stock market, even at a terrible return of 5% it'll be paying out over 4k/month.

And there are probably much better options than that if you look into it in detail.

 

Even looking at it really simply you could simply draw that down, if you expect to live until you're 90 you'd still have better than 3k/month, and that's assuming no return on it at all, 0%.

The annuity is a massive rip off.

 

Flexi draw-down seems like the better option at the moment

"Based on what you’ve told us, if you use your £1,000,000 pension pot to take an adjustable income, you could get:

£250,000 tax free

and

a monthly income of £3,000 until you’re 98

or try a different monthly income:

 

£

3000

 

Average life expectancy for those aged 55 is mid-to-late 80s.

This is an estimate based on the amount in your pot growing at a rate of about 3% per year — this may vary."

 

It's not clear from that if you HAVE to take the 25% tax free in order to then use the flexi-draw down option.

If you did take 250k you could obviously invest that as well privately, although it would take 10 years to funnel it into ISA's to shield the income from tax.

I expect that could be turned into an income of another £500 a month pretty easily, perhaps double that with a bit more risk/variability.

[bendix]

Starting from 2007 (so including the financial crash) over 10 years the FTSE100 made an annualised return of 5.7%

 

https://www.fool.co.uk/investing/2018/05/27/can-you-really-make-10-a-year-from-the-ftse-100/

 

The ftse250 made a better return of 9.9%

 

And that's a particularly bad 10 year period to pick specifically because of 2008.

 

 

And those returns are over and above inflation.

 

Anna is right in one regard. The financial crash ushered in this new low interest period which has made it necessary to have a much bigger pot to generate a meaningful income.

[Cyclone]

No, I think that those are absolute returns, not modified to remove inflation.

[ez8004]

I'm going to speculate that you're on the University of Sheffield average salary pension scheme (given the 6+12).

In which case the tax relief is sort of irrelevant to you.

 

Perhaps I'm wrong and you're on an incredibly generous money purchase scheme, and with numbers like those it would be crazy to not contribute.

 

Maybe I am wrong though, otherwise why would you be calculating an annuity...

 

---------- Post added 05-11-2018 at 07:32 ----------

 

 

It's not bad, but it can be slightly disingenous to talk about the tax relief at source and not mention that you will pay tax when you withdraw the money as income.

In many cases though it will shift that tax from 40% to 20%, or perhaps from 20% to 0% for some people.

Depends on how much you save and how you take your pension.

 

Good effort, but Sheffield University couldn’t afford my salary. I do have a money purchase scheme and it is generous. The point I was originally making was that the OP being very irresponsible giving bad advice like they did.

[XXTickerXX]

I don't think people take into account the devastating effect the 2008 Financial Crash has had on pensions.

 

Only if you were unlucky to enough to cash out at that time or the next year. Left invested it has made it all back and a lot more.

[Cyclone]

Good effort, but Sheffield University couldn’t afford my salary. I do have a money purchase scheme and it is generous. The point I was originally making was that the OP being very irresponsible giving bad advice like they did.

 

We certainly agree on that point.

It was the specific numbers, 6% and 12% which made me think of the university, since those are the same salary+employer contributions that they make. However it's an average salary scheme, so you don't purchase anything with it when you retire.