Britain is undersaving for retirement
Discussion
Not sure if this is more Finance or NP&E stuff but given the segue into pensions on the Reeves thread here goes.
Britain is undersaving for retirement warns Pensions Commission
Britain is undersaving for retirement warns Pensions Commission
It's a massive problem and has been for years.
I think a lot of people are getting into their fifties, starting to think about retirement for the first time, looking at what their provision will pay them and are absolutely shocked to their core.
Plus many in the generation below those of us in their fifties who, through no choice of their own, are unable to save anything.
It feels like we are sleepwalking into an utter disaster.
My wife is an accoountant and at least one of her clients has almost nothing, despite drawing a six figure salary for many years. It beggars belief.
I think a lot of people are getting into their fifties, starting to think about retirement for the first time, looking at what their provision will pay them and are absolutely shocked to their core.
Plus many in the generation below those of us in their fifties who, through no choice of their own, are unable to save anything.
It feels like we are sleepwalking into an utter disaster.
My wife is an accoountant and at least one of her clients has almost nothing, despite drawing a six figure salary for many years. It beggars belief.
Talks of removing or means testing state pensions will make things a lot worse. People will think, why bother working hard and saving to improve my life later on? It's already been the case that the better off in this country are either the truly wealthy, or those on benefits wo know how to use, and abuse the system. Many people in between are shafted.
The biggest problem is that for most people, there's no way to save for retirement when simply surviving today burns through most or all of their money.
Average incomes have lagged behind inflation for decades, costs are going up relentlessly and for the average person putting money aside for the future just isn't doable when they need that money today just to get by.
I think quite a lot of people might be relying on the 'boomer transfer' to save them:
"The "Great Wealth Transfer" is an unprecedented global phenomenon where the Baby Boomer generation (born 1946–1964) will pass down an estimated $84 trillion to $124 trillion in assets to younger generations and charities through 2045. In the UK alone, over £5.5 trillion is projected to change hands."
It's going to create a huge gap between those who inherit a fortune and those who don't.
Average incomes have lagged behind inflation for decades, costs are going up relentlessly and for the average person putting money aside for the future just isn't doable when they need that money today just to get by.
I think quite a lot of people might be relying on the 'boomer transfer' to save them:
"The "Great Wealth Transfer" is an unprecedented global phenomenon where the Baby Boomer generation (born 1946–1964) will pass down an estimated $84 trillion to $124 trillion in assets to younger generations and charities through 2045. In the UK alone, over £5.5 trillion is projected to change hands."
It's going to create a huge gap between those who inherit a fortune and those who don't.
Edited by Funk on Saturday 23 May 11:05
I suspect a fair chunk of homeowners in the 30-50 bracket are leaning heavily on inheritance from boomer parents and/or some form of equity release to fund their pension.
In fairness, downsizing our main home forms a part of my pension planning - we will neither need nor want a 5 bed 3.5sq ft house in Zone 2 when we’re in our dotage
In fairness, downsizing our main home forms a part of my pension planning - we will neither need nor want a 5 bed 3.5sq ft house in Zone 2 when we’re in our dotage
butchstewie said:
Not sure if this is more Finance or NP&E stuff but given the segue into pensions on the Reeves thread here goes.
Britain is undersaving for retirement warns Pensions Commission
Some worrying stats in there. For example,Britain is undersaving for retirement warns Pensions Commission
The article said said:
On current trends around 3 in 10 private pension pots are accessed at the earliest possible opportunity with half of all pots taken out in full. Nearly half of these are spent on large expenses like a car, holiday or renovations.
I know family members who are in a similar predicament and think raiding their pension pot early will solve financial over commitments they have made. Or simply do not save at all.It is about education. And teaching the basics around compounding is the key. I have taken both my kids through a compound interest calculator to show what happens....(Boring I know, but not covered in school) and took just 20 minutes to get them to start plumbing numbers into the calculator over a 40 year time frame.......
mike9009 said:
I know family members who are in a similar predicament and think raiding their pension pot early will solve financial over commitments they have made. Or simply do not save at all.
It is about education. And teaching the basics around compounding is the key. I have taken both my kids through a compound interest calculator to show what happens....(Boring I know, but not covered in school) and took just 20 minutes to get them to start plumbing numbers into the calculator over a 40 year time frame.......
Via a newsletter from Monevator but this stood out.It is about education. And teaching the basics around compounding is the key. I have taken both my kids through a compound interest calculator to show what happens....(Boring I know, but not covered in school) and took just 20 minutes to get them to start plumbing numbers into the calculator over a 40 year time frame.......
I've mentioned this before in other threads but the other big one related to this is housing.
Generation rent who can't afford to get on the property ladder and probably can't afford to save as much as they should into a pension
are OK paying £1k / £2k or whatever a month in rent while they have a reasonable job and are working.
But what about when they retire and their income drops and they can no longer afford the £1k / £2k a month.
Some might suggest the state will pick up the tab but there will likely be so many this will not be possible.
Generation rent who can't afford to get on the property ladder and probably can't afford to save as much as they should into a pension
are OK paying £1k / £2k or whatever a month in rent while they have a reasonable job and are working.
But what about when they retire and their income drops and they can no longer afford the £1k / £2k a month.
Some might suggest the state will pick up the tab but there will likely be so many this will not be possible.
How does a Government incentivise people to make adequate provision, when tax relief isn't enough and many don't have surplus funds after day to day living?
I've been in pensions administration for 48 years now. Every 6 years or so they decide to f
k around with them. People never know what the rules will be by the time they reach retirement age in 20, 30, 40 years time.
I've been in pensions administration for 48 years now. Every 6 years or so they decide to f
k around with them. People never know what the rules will be by the time they reach retirement age in 20, 30, 40 years time. This topic has been covered many times, even in the NP&E section, not even that long ago. Not that it isn t worth revisiting.
It is a huge problem. As mentioned there are many, millions, who have a very comfortable retirement to look forward to due to the generosity of their employer contributions and/or contractual benefits. There are many, millions, who will benefit from enormous transfers of wealth via inheritance.
There are very many, typically in the lower socio economic groups who will have neither of those paths.
I happen to straddle these two/three broad groups. I have a few friends and family members who have already retired from their public sector roles, in their fifties, and have extraordinarily comfortable lives to look forward to. Many others are counting down the days to their sixtieth birthdays and planning all sorts. Good for them. Similarly I have many others whose professional lives afforded them salaries and employer contributions allowing decent private provision.
My work life has been in SMEs, typically in sectors where pay and conditions are relatively poor. I ve never had a contract allowing for employer contributions above the legal mijimmum. So that s 20 odd years with absolutely none at all.
I m in London. Living costs are very high. It s a very difficult square to circle. I d say most of the staff in my company/industry/sector will have later years nothing whatsoever like my parents generation.
Avocados/gym membership/sky/holidays yadda yadda.
(Fwiw I have none of the above. Maybe the odd avocado from Lidl!)
Wdit - probably should have mention tuitions fee loans/graduate taxes too.
It is a huge problem. As mentioned there are many, millions, who have a very comfortable retirement to look forward to due to the generosity of their employer contributions and/or contractual benefits. There are many, millions, who will benefit from enormous transfers of wealth via inheritance.
There are very many, typically in the lower socio economic groups who will have neither of those paths.
I happen to straddle these two/three broad groups. I have a few friends and family members who have already retired from their public sector roles, in their fifties, and have extraordinarily comfortable lives to look forward to. Many others are counting down the days to their sixtieth birthdays and planning all sorts. Good for them. Similarly I have many others whose professional lives afforded them salaries and employer contributions allowing decent private provision.
My work life has been in SMEs, typically in sectors where pay and conditions are relatively poor. I ve never had a contract allowing for employer contributions above the legal mijimmum. So that s 20 odd years with absolutely none at all.
I m in London. Living costs are very high. It s a very difficult square to circle. I d say most of the staff in my company/industry/sector will have later years nothing whatsoever like my parents generation.
Avocados/gym membership/sky/holidays yadda yadda.
(Fwiw I have none of the above. Maybe the odd avocado from Lidl!)
Wdit - probably should have mention tuitions fee loans/graduate taxes too.
Edited by scenario8 on Saturday 23 May 11:53
ClaphamGT3 said:
In fairness, downsizing our main home forms a part of my pension planning - we will neither need nor want a 5 bed 3.5sq ft house in Zone 2 when we re in our dotage
But how do you downsize effectively if the generation coming up behind you are less able to afford and/or may not need/want a large family house?Genuinely I don’t think it’s as easy as that. I’m more exposed to workers either side of the national average salary than I would imagine most on here are. An extra £20/week or month will make fk all difference to their savings plans. It will simply go on rent/ASOS/whatever.
These will be standard rate tax payers. The relief is so marginal.
I can only see the least worst option being mandatory removal at source.
But there’s no easy answer. Choosing property, family and savings is a very very difficult problem to solve.
k all difference to their savings plans. It will simply go on rent/ASOS/whatever.These will be standard rate tax payers. The relief is so marginal.
I can only see the least worst option being mandatory removal at source.
But there’s no easy answer. Choosing property, family and savings is a very very difficult problem to solve.
ClaphamGT3 said:
I suspect a fair chunk of homeowners in the 30-50 bracket are leaning heavily on inheritance from boomer parents and/or some form of equity release to fund their pension.
In fairness, downsizing our main home forms a part of my pension planning - we will neither need nor want a 5 bed 3.5sq ft house in Zone 2 when we re in our dotage
Looks like I was too late (boomers)In fairness, downsizing our main home forms a part of my pension planning - we will neither need nor want a 5 bed 3.5sq ft house in Zone 2 when we re in our dotage
Downsizing isn’t worthwhile / desirable in many cases because of the exorbitant costs in moving (taxes)
Funk said:
I think quite a lot of people might be relying on the 'boomer transfer' to save them:
Anyone betting the farm on that is potentially creating a disaster for themselves, though it's totally understandable and logical. Business and government isn't going to let that pass them by without helping themselves to plenty more of it than they do now.
And that's before remarriages, falling out, old dears spunking it on fun/ health/ care.
Nothing's in the bag until it is.
grumbledoak said:
Many simply don't have the spare money to invest.
Added to which, governments taxing those investments and threatening means testing make it look quite a risky proposition in itself.
The government doesn't tax investments in pensions. It actually incentivises investing in pensions by refunding the tax already paid..Added to which, governments taxing those investments and threatening means testing make it look quite a risky proposition in itself.
If we means-tested more benefits it would reduce the amount of tax others have to pay so they have more to save in their own pensions.
The triple-lock pension is a prime example of people wanting the Government to give them money whilst complaining about the Government taxing them so it can give them money.
The extreme solution would be to cut benefits and cut taxes and expect people to make provision for themselves, but there's a vocal minority who will resist that from happening.
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