Pensions a pipe dream?
 

As a semi retired 50 odd year old,I read with dismay of the continual debacle of the Pension crisis.
Workers earning between £25,000-£30,000 were quizzed on how much pension they could expect if they were compelled to pay 5 -10% of their earnings into a pension scheme over their working lives.
Most said they expected a return of between £10,000-£15,000 per annum.
Yet the true figure is much less a 35 year old paying 5% of a £25,000 salaryand retiring at 65 would receive only £5,000 per year.
These earning figures were classed as average;though I suspect that in and around Hyndburn for most people this would be a dream wage.
To attain the hoped for £10-15 grand we have a choice work till we are 80 or increase pension contributions to more than 20%!
As I said I am semi retired,but already I am beginning to feel the financial pinch,God help us in the future as the working/retired populations continue to imbalance.
Answers on a post card please C/O Gordon Brown.

Re: Pensions a pipe dream?
 

One question that has often puzzled me regarding pensions is this. Presumably pension contributions purchase units or shares in an investment fund. What happens to these units when the pensioner dies?

Re: Pensions a pipe dream?
 

A very basic illustration is

During your working life the contributions are invested in stocks/unit trusts etc. However when you retire these are liquidated and the money is used to buy an annuity from a company. they are basically taking a gamble on how long you will live. Say you have a final salary value of £100K usually your annuity will be ~4% of the value so in this case a pension of £4K/year would be paid. They hope that you die quickly as it gives them the most profit. If you lived for 25 years (disregarding interest etc) then teh deal would break even. If you lived longer then they lose out. With people now living longer I can see the 4% figure moving downwards in years to come so you would need a higher final pension value to get the same pension return.

As I said, this is a basic illustration, there is a lot more to it!

Re: Pensions a pipe dream?
 

I worry about this also. I am 36 with 17 years in an NHS pension. I know that I am lucky, I had the nonce to join the pension scheme when I was 19 when some of my mates didn't join and are now regretting it. I have been offered many pensions from various different companies. All of them are asking for more than I pay monthly to my current pension yet none of them can match the return. In comparison with private pensions the NHS pension is still quite good. My current contract still says that I can retire at 55. On the new contracts I think it is 60. We are now led to believe on my current contract that you can go at 55 but only with the Trust's blessing. I know so many NHS staff who have retired then dropped dead within a couple of years that I am inclined to go at 55 whether they like it or not. I am currently making sure that my mortgage will be paid up by 46 and topping up a cash ISA whenever I can. I know that I am one of the lucky ones. I worry about other members of my family who I know will get next to nothing when they retire.:(

Re: Pensions a pipe dream?
 

Yes,early retirement can cost quite a lot around 4.25% of the sum for every year under 65(or that's how my company pension worked).If I pop my clogs the pension is halved for my wife to tour the world on:D .
Yet I am still glad I made the decision life is too short,especially with my family's statistics of leaving this mortal coil at an early age.
So my general advice is quit while you are ahead,take part time employment and smell the Roses(and sip the Famous Grouse).
Though I know not everyone has the option!

Re: Pensions a pipe dream?
 

I tend to have the same opinion these days. Enjoy what you can whilst you're still here. My Dad worked all his life and died at 63, before he got chance to retire. As someone said earlier, I wonder what happened to all the contributions he made? As far as I am aware no-one else benefitted from them.

Re: Pensions a pipe dream?
 

A lot of the old style pensions died with the contributer,this was how the fund was financed,now we being awkward B****rs live longer(mostly) and so we have caused a shortfall in the cash flow.
That and people like Robert Maxwell(£400,000,000 filched from his company pensioners)
Voluntary euthenasia anyone?

Re: Pensions a pipe dream?
 

>>A lot of the old style pensions died with the contributer,this was how the fund was financed<<

Sounds more like legalised robbery to me. It's no wonder the insurance companies and their shareholders are so damn rich.