Financed lifestyles

[bogie]

Du1point8 said:

Im crap with pensions, can you explain this again on where the Due to tax relief of £20k per year comes from?

Everything you need to know about pensions here and a handy calculator

https://www.moneysavingexpert.com/savings/discount...

basically your pension provider claims back 20% tax relief automatically
if you are a higher rate tax payer you claim back another 20 or 25% relief via tax return annually or HMRC can build into your tax code so you take home more each month.
you also dont pay up to 12% NI contribution on money you are putting into pension
between £100-120k there is further tax benefit because this is when you lose your personal tax free allowance of £12500 effectively upping the tax rate to over 65% on that £20k, but you get this back if you put it into pension, by reducing your earnings to £90k

Play around with your own salary & pension contributions here to see effect on take home salary:

https://www.moneysavingexpert.com/tax-calculator/

example below of 25% contribution + default 3% from employer on £120k salary

Edited by bogie on Thursday 1st August 19:11

[DonkeyApple]

NickCQ said:

otolith said:

I rather suspect that the possibility of a large proportion of the population spending 1/3 to 1/2 of their adult life retired was a brief generational anomaly.

Sad but 100% true.

The numbers don’t stack up with life expectancy of 90+. 20 years unproductive in education, 45 years working then 30 years unproductive in retirement? Implies that everyone needs to save c. 50% of their income just to provide for themselves.

The amount of otherwise productive private sector capital that firms have been required to divert to pay defined benefit pensions for those expected to live to 70 that actually lived to 90 is shocking. Then look at the public sector and think how an ever increasing proportion of national income is spent on state pensions, public sector pensions and social care.

It worked in the UK for a while as long as house prices grew from 3x income to 9x, representing an enormous intergenerational transfer of wealth, as does the expansion of the national debt from 40% of GDP in 2006 to 85% today. It’s the kids’ money that we’re borrowing.

The real problem is that employers don’t want over 60s on their books. Even the State bins their employees as rapidly as possible from 55 onwards.

So while most Gen X think that they could be working until they are 75, unless there is an absolutely enormous cultural shift by employers we are merely swapping paying the State pension for unemployment benefits.

[hyphen]

https://www.wsj.com/articles/families-go-deep-in-d...

[otolith]

DonkeyApple said:

The real problem is that employers don’t want over 60s on their books. Even the State bins their employees as rapidly as possible from 55 onwards.

So while most Gen X think that they could be working until they are 75, unless there is an absolutely enormous cultural shift by employers we are merely swapping paying the State pension for unemployment benefits.

With an ageing population, they’ll have to take what they can get. The idea of mass participation in extended retirement is not a historical norm.

[nammynake]

rockin said:

Well, I was reading in the paper the other day that one of the greatest tricks that's been played on the general population in the past 25 years or so is the re-labelling of "debt" as "credit"....

Quite. I wonder what the effect would be if they started to correctly label them as "debt cards” ?

[DonkeyApple]

otolith said:

DonkeyApple said:

The real problem is that employers don’t want over 60s on their books. Even the State bins their employees as rapidly as possible from 55 onwards.

So while most Gen X think that they could be working until they are 75, unless there is an absolutely enormous cultural shift by employers we are merely swapping paying the State pension for unemployment benefits.

With an ageing population, they’ll have to take what they can get. The idea of mass participation in extended retirement is not a historical norm.

But we are already at that point with a top heavy aged demographic. Employers haven’t had to retain them. Why is that set to change for us?

[Welshbeef]

GR_TVR said:

Exactly. I'm always flummoxed when people buy stuff not on a credit card.

Habit
Frequency training ie if mum dad etc always bang it not you it’s bad even if it’s not you’ll think it’s bad.
Lack of understanding
Fear of big interest
Some people cannot budget and use debt card so once it’s gone it’s gone. Use a credit card then the savings have gone and the credit limit too.



Stories on TV how normal people end up with £100+ on credit cards (and not for snowballing the 0% deals into an offset mortgage no spent it and they are fubar)

[DonkeyApple]

Welshbeef said:

GR_TVR said:

Exactly. I'm always flummoxed when people buy stuff not on a credit card.

Habit
Frequency training ie if mum dad etc always bang it not you it’s bad even if it’s not you’ll think it’s bad.
Lack of understanding
Fear of big interest
Some people cannot budget and use debt card so once it’s gone it’s gone. Use a credit card then the savings have gone and the credit limit too.



Stories on TV how normal people end up with £100+ on credit cards (and not for snowballing the 0% deals into an offset mortgage no spent it and they are fubar)

That’s the thing. It makes perfect sense to buy goods with a credit card and pay it off each month as you get the extra protection etc. But the flip side is that the product relies on the fact that an exceedingly high number of consumers don’t end up clearing the balance each month. The card companies make good money from the processing fees from retailers but the real money is from charging 20% on the uncleared balances and extending credit limits to expand that revenue and increase the massively profitable default side.

Let’s put it this way, many more consumers don’t clear their monthly balances than do. Hence why there is profit from offering incentives such as the protections and rewards. Ie the prudent few are a cost more than covered by the reckless many. Much like the prudent few who use PCP deals to achieve lower costs are more than covered by the many who talk themselves into spending more because its only a few pounds a month more.

It’s why debt is regulated. The truth is that for every individual who can use it to save money there are legion who cannot self regulate.

From a parent’s perspective I think you do worry that your children may be normal and therefore liable to fall on the unsavoury side rather than being abnormal and being a natural self regulator. So it becomes easy to try and drum into them that credit cards are dangerous because they are to very many.

[wisbech]

DonkeyApple said:

The real problem is that employers don’t want over 60s on their books. Even the State bins their employees as rapidly as possible from 55 onwards.

So while most Gen X think that they could be working until they are 75, unless there is an absolutely enormous cultural shift by employers we are merely swapping paying the State pension for unemployment benefits.

The US solution, over 60’s get canned from their ‘career’ jobs and go be greeters/ trolley collectors at Walmart

[otolith]

DonkeyApple said:

otolith said:

DonkeyApple said:

The real problem is that employers don’t want over 60s on their books. Even the State bins their employees as rapidly as possible from 55 onwards.

So while most Gen X think that they could be working until they are 75, unless there is an absolutely enormous cultural shift by employers we are merely swapping paying the State pension for unemployment benefits.

With an ageing population, they’ll have to take what they can get. The idea of mass participation in extended retirement is not a historical norm.

But we are already at that point with a top heavy aged demographic. Employers haven’t had to retain them. Why is that set to change for us?

It is changing. We keep pushing the retirement age back, we’re embarking on something that will restrict EU immigration, and our birth rate is below replacement. By and large the elderly have been willing and able to leave the workforce, many of them very young, and we’ve had a choice of young people willing to prop up the economy and the tax revenues. Substantial numbers of current pensioners are on occupational pensions which simply aren’t sustainable. I think historically that’s going to be seen as a blip.

[GT03ROB]

otolith said:

DonkeyApple said:

otolith said:

DonkeyApple said:

The real problem is that employers don’t want over 60s on their books. Even the State bins their employees as rapidly as possible from 55 onwards.

So while most Gen X think that they could be working until they are 75, unless there is an absolutely enormous cultural shift by employers we are merely swapping paying the State pension for unemployment benefits.

With an ageing population, they’ll have to take what they can get. The idea of mass participation in extended retirement is not a historical norm.

But we are already at that point with a top heavy aged demographic. Employers haven’t had to retain them. Why is that set to change for us?

It is changing. We keep pushing the retirement age back, we’re embarking on something that will restrict EU immigration, and our birth rate is below replacement. By and large the elderly have been willing and able to leave the workforce, many of them very young, and we’ve had a choice of young people willing to prop up the economy and the tax revenues. Substantial numbers of current pensioners are on occupational pensions which simply aren’t sustainable. I think historically that’s going to be seen as a blip.

I think it will change & is changing.

The meeters & greeters is a good example. For some years now I've seen a lot more people working in the Waitrose's / Tesco's of this world who are certainly of advancing years. The flexible zero hour contracts suit both employer & employee. The company I use for my airport transfers uses predominantly retired guys who again enjoy the flexibility of the work.

Where I work we have an ageing population. If we got rid of everybody once they hit 60 the business would be dead in the water. The younger employees are not coming through fast enough due to a number of factors to replace the experience which is leaving. The opportunities to work beyond mid-60s are significant provided you remain fit & healthy,

[Zigster]

hyphen said:

https://www.wsj.com/articles/families-go-deep-in-d...

That’s both fascinating and terrifying. It tallies with my concerns about debt/credit but adds a lot more depth to it.

[hyphen]

Got a letter from AMEX this morning, would have chucked in bin as on full DD but for the thread:

Notifying they are changing interest rates (from fixed to variable tracking BOE Rate) and also how they calculate minimum payments.

- min payment that can be made goes from £5 to £25
-previously min monthly was 2.5% of total balance, now Interest charges + 2% of balance

Their illustrative example says that if you have £4k outstanding @ 22.9%, your min monthly goes up from £100 to £150 (plus any repayment protection insurance).

So a bit more cash to find each month for these debtors.

Also noticed that their cash withdrawal rate is 27.9%! I imagine that is plus a fee to withdraw form ATM too.

Edited by hyphen on Friday 2nd August 09:17

[DonkeyApple]

otolith said:

DonkeyApple said:

otolith said:

DonkeyApple said:

The real problem is that employers don’t want over 60s on their books. Even the State bins their employees as rapidly as possible from 55 onwards.

So while most Gen X think that they could be working until they are 75, unless there is an absolutely enormous cultural shift by employers we are merely swapping paying the State pension for unemployment benefits.

With an ageing population, they’ll have to take what they can get. The idea of mass participation in extended retirement is not a historical norm.

But we are already at that point with a top heavy aged demographic. Employers haven’t had to retain them. Why is that set to change for us?

It is changing. We keep pushing the retirement age back, we’re embarking on something that will restrict EU immigration, and our birth rate is below replacement. By and large the elderly have been willing and able to leave the workforce, many of them very young, and we’ve had a choice of young people willing to prop up the economy and the tax revenues. Substantial numbers of current pensioners are on occupational pensions which simply aren’t sustainable. I think historically that’s going to be seen as a blip.

I agree completely that the era of low taxation, short working life and high non working rewards was a blip and that we are already in the more sustainable era of higher taxation, longer working life and lower non working rewards but what I don’t see any evidence of is a change in employer culture and while employers have over the last two decades been able to upgrade old, worn out, unwanted staff with young, dynamic and cheaper labour from overseas, The Millenial generation is now larger than the Boomer and immigration isn’t very likely to slow when all Brexit means is that the source is changed.

There isn’t a culture to retain old people, there isn’t a desire, there is any political motivation and there isn’t a need.

My view is that all of us should be extremely aware of two key bits of reality as we head towards our sunset years: firstly, that the Boomers, the wealthiest humans who have ever lived, who have had a lifetime to accumulate wealth and whose dotage has coincided with the largest asset inflationary period of all time are struggling to pay their way having not saved enough. If a group for whom all the stars have accidentally aligned have members struggling then it should serve as a warning to other groups who know that the stars are not aligned for them. And second, we know we have to work longer but we know that the work place does not want or have a need of people much over 55 and there isn’t any great reason for this to change.

There is huge focus on the Boomer and Millenial generations but very little mention of the smaller Gen X sandwiched in between. Personally, I get the feeling that Gen X is going to have to be far more self sufficient as a generation in its dotage as it won’t have the political clout of either of its surrounding generations and I think it will become a generation that cleaves distinctly in two at the point of the end of employment into those who put money into their pension and were left with little to no excess money to throw about and those who thought the money that needed to go into their pensions was excess money to throw about. As well as those who plain get unlucky and find themselves getting retired at 55 when they assumed they would be choosing when they retired.

[anonymous-user]

wisbech said:

DonkeyApple said:

The real problem is that employers don’t want over 60s on their books. Even the State bins their employees as rapidly as possible from 55 onwards.

So while most Gen X think that they could be working until they are 75, unless there is an absolutely enormous cultural shift by employers we are merely swapping paying the State pension for unemployment benefits.

The US solution, over 60’s get canned from their ‘career’ jobs and go be greeters/ trolley collectors at Walmart

I think the reality for a lot of people is that they don't actually get to choose when they retire. What actually happens is that they get made redundant at 61 on some random Tuesday and then suddenly can't find another job.

Until recently this was OK for a lot of people as they had bought their house for £5K and paid the mortgage off decades ago, had a great company pension and a decent amount of cash in the bank.

Now I see the majority of people living month to month, two leased cars on the drive and taking on a massive mortgage for their "forever home" when they are 45. They are assuming they will be working until 70 just to pay the mortgage off, forget about managing to save any significant amount of money too.

I am 45 and I personally hate working, the idea that I have to do this for another 25 years is frankly pretty terrifying to me. I have not had any sort of credit (mortgage excluded) for over 15 years, but one thing that has really hit me recently is nothing I want to own is worth getting into debt or in fact working to pay for. I just can't imagine how terrible being forced to get out of bed every morning at 65/70 years old to go and work some minimum wage job in Tesco must be.

I am trying to save as much as I can, not going to FIRE levels but it is amazing how much you can save when you don't impulse buy junk or have expensive cars depreciating outside. I don't feel I am missing out, if anything I feel happier as I don't have lots of stuff to worry about or having to pay off the debt and corresponding interest. One other advantage is it is amazing how little money you actually need to have a decent lifestyle if you don't have any debt. I want to pay my mortgage off as soon as possible and get my outgoings down to a minimum over the next ten years. Ideally I would like to be in a situation where after 55 I can cope if I never have to work again.

Yes I won't be driving a brand new car, having expensive holidays or spending £150 going out every Saturday, but to be honest I would much rather not have the worry of actually paying for them.

[Croutons]

The one thing you seem to almost always forget about or ignore DA is that many will inherit money.

In many cases thanks to companies making stuff to prolong life at all cost to the tax payer, later than they expected.

Which means not everyone is or needs to be self sufficient through life, as not all old folk either:

A) burn 100% of assets in care,
B) undertake no active tax planning (rife in the SE thanks to property values), or
C) will leave unpayable IHT bills save fire sales (which would still leave a residue).

It's not as black and white as you make out.

[DonkeyApple]

Croutons said:

The one thing you seem to almost always forget about or ignore DA is that many will inherit money.

In many cases thanks to companies making stuff to prolong life at all cost to the tax payer, later than they expected.

Which means not everyone is or needs to be self sufficient through life, as not all old folk either:

A) burn 100% of assets in care,
B) undertake no active tax planning (rife in the SE thanks to property values), or
C) will leave unpayable IHT bills save fire sales (which would still leave a residue).

It's not as black and white as you make out.

True but it’s a pretty weak long term retirement plan to rely on the lottery that is inheritance. It’s not that I forget about it but that I’m not sure it’s all that big a bailout. As you mention there is the lottery of healthcare, the matter of IHT etc. There is also the drain of equity release, the splitting of wealth among multiple siblings etc.

However, the really big one is that all the people who hold the bulk of the inflated assets such as homes will all be dying off in the same short term window and all their assets will be hitting the market. The question we need to be asking ourselves is who below them has the wealth to purchase these assets at the current market values?

We’ve all spent years discussing the potential impact of rising interest rates but possibly the real threat that is looming is a steady increase in the supply of assets to the market but without anyone able to soak up that supply at current values, thus suggesting a significant value reduction needed to find the demand.

I do feel that the lottery of inheritance still needs to be treated as a Brucie Bonus rather than anyone factoring it in as a core part of their retirement plan.

[troika]

DonkeyApple said:

True but it’s a pretty weak long term retirement plan to rely on the lottery that is inheritance. It’s not that I forget about it but that I’m not sure it’s all that big a bailout. As you mention there is the lottery of healthcare, the matter of IHT etc. There is also the drain of equity release, the splitting of wealth among multiple siblings etc.

However, the really big one is that all the people who hold the bulk of the inflated assets such as homes will all be dying off in the same short term window and all their assets will be hitting the market. The question we need to be asking ourselves is who below them has the wealth to purchase these assets at the current market values?

We’ve all spent years discussing the potential impact of rising interest rates but possibly the real threat that is looming is a steady increase in the supply of assets to the market but without anyone able to soak up that supply at current values, thus suggesting a significant value reduction needed to find the demand.

I do feel that the lottery of inheritance still needs to be treated as a Brucie Bonus rather than anyone factoring it in as a core part of their retirement plan.

You are right, of course, however I’m shocked by the number of people I know who are basing their financial planning on having a windfall to clear big mortgages etc.

[Croutons]

DonkeyApple said:

... will all be dying off in the same short term window... The question we need to be asking ourselves is who below them has the wealth to purchase these assets at the current market values?

People die all day, every day. There isn't immediately some sort of "glut" of property on the market resulting. In many cases those houses are inherited. The kids can sell, live in, or rent them out as their circs and choices dictate. Immediate action is not always required. Can't sell? Rent it for a bit then and come back later. It might not be ideal but it happens a lot. It's a dump? Auction it. Plenty of demand, not reliant on the assumption buyers are 20 years old with 50k of student loans and can only borrow 3x a flaky grad wage. There is plenty of money available where property is concerned...

This also assume the expensive property has been retained, not otherwise sold and downsized already, or tax-managed to be retained. Old folk don't often like to talk about this as it reminds them they are finite. But the kids are when cash is at stake, and PoA's can put others in control come what may.

DonkeyApple said:

I do feel that the lottery of inheritance still needs to be treated as a Brucie Bonus rather than anyone factoring it in as a core part of their retirement plan.

Absolutely, but it would be daft to ignore that it will be beneficial to a considerable number of people who may have little or no other assets at a time when employment (or certainly income circs) can change.

[67Dino]

Interesting article on inheritance on BBC a few weeks back. Apparently:

One in seven young adults expect to inherit money before they are 35, although in reality the typical inheritance age is between 55 and 64. The survey, by wealth manager Charles Stanley, suggested that young people expected to receive nearly £130,000. However, the median average amount handed down was only £11,000

https://www.bbc.com/news/business-48213333