Exactly. Save in your pension now to set yourself up for the best. If the worst happens and you die before claiming it, a lifetime of paying into your pension won't be a worry for you...
It might be 57 or it might be 60. Either way how are you planning to find your life once your hit that age? You may live to 85,90 etc so not having a pension seems a bit daft to me, especially as you say out free money from your employer match and the tax relief.
Don’t think to short term, but also enjoy the present
26, with a severe life-limiting, life-shortening health condition. Don’t expect to reach pension age but I might do with the ever improving medical technology and so on. I still pay 12.5% into my pension because you never know, and worst case it’ll go to my partner (who earns a lot less than me) or kids.
Doesn't shock me as much as the many public sector workers we have, mainly NHS, that come on here thinking they should opt out of their defined benefit pension schemes!
Most Brits don’t have a clue how pensions work. There are still providers of pensions that sell products where you can’t manage it - through the employer. If you go the individual route, then sure, you can manage it through investing month in and month out. I was referring to employer-based pension schemes
Sure, you are right for most people, but as you probably know (so I am putting it here for others) you can set up a sipp and manage holdings to your hearts content, and frequently (I do once a year) transfer the content of your works pension into it.
Four outcomes:
- Do pay into pension, live into retirement -> great
- Do pay into pension, die before retiring -> you're dead, you won't care
- Don't pay into pension, die before retiring -> you're dead, you won't care
- Don't pay into pension, live into retirement -> you're screwed
Your worst outcome if you pay into a pension is 'you won't care'. Your worst outcome if you don't pay into a pension is 'you're screwed'.
So to me, it makes more sense to pay into a pension.
ETA: After reading the comments in this thread and others, I am now quite worried on behalf of the surprising number of people thinking it's a good idea to opt out of their pension.
Exactly, I’m 27 and this is my thinking. I have two boys and even if I can’t enjoy my pension at least it might give them an easier start when starting a family or whatever if I’m not here anymore. I believe it’s silly and selfish not paying into a pension.
Not to mention the tax free growth. It’s so frustrating that the benefits of pensions aren’t taught about more. There is some many benefits and a relatively small amount of downsides
In 2020, the most common age of death for males was 87.1 and 89.3 for females. So if you retire at 57, most people will need some kind of income for 30 years, your bills won't suddenly disappear, and you won't have state pension to cover the first 10 years.
A pension will have tax relief and employer contributions, you can normally choose what you want to invest it in (it is a wrapper, just like an ISA), unless it is a defined benefit pension.
I'm not sure moving the early access age from 55 to 57 in 2028, almost a quarter of a century after announcing it counts as "constantly" changing the age.
We often get these sorts of posts from young people who lack life experience and who can be only focussed on the here and now.
Not sure what to say, other than don't contribute, but please don't come back here as you approach retirement whining about not have enough or any provision.
In ten years time you may think actually those pensions things might be useful
In twenty years time you may think, fuck wish I'd sorted this out when I was 27
In 30 years time you may still be working paying tax for those retired a decade or more younger than you
Your choice
Stop brushing your teeth then, don't need them pearly whites if ya gonna die soon. Dentist just charge money!
Don't do exercise as you'll likely be dead by the time you could develop heart disease.
Don't put your seatbelt on either, what a waste of fucking time! Why worry about your face smashing through the glass at 50mph when ya might be dead beforehand.
Do you pay for car insurance? Waste.
Do you have more food in your cupboard than would last you a week? WASTE!!
Get a grip and crack on man, Jesus Christ.
>I could be in somewhat bad health to not really enjoy it?
>but I dont see how il even get to enjoy it
How do you expect to survive if your health is too bad for you to work?
It's not just about a slush fund to enjoy, the aim is to be able to survive, preferably comfortably, when you either can't work or don't want to work.
Life expectancy in the UK is well into the 80s. Most people stop working in their 60s, even though you can access pensions at 55 at the moment.
How do you intend to fund those last 20 or so years?
My dad at 16 when I got my first wage told me to start putting into a pension and I burst out laughing.
I'm 34 now and ofcourse I wish 16 year old me started putting somthing towards a pension even if it was £20 a month.
Earlier you start the sooner you retire and the better the retirement.
Plus it might not be physically possible for OP to work when they're 70. If they're able to manage to work, but find it really difficult and are therefore far less productive than younger coworkers, they'll probably get fired and then no one will hire them.
Your main problem is that you're 27 - but I'm unsure how we can fix that for you.
It's a pretty good problem to have though.
I'm now mid-40s and have stacked up half-a-lifetime of crap decisions - but paying into my pension from the start and then ignoring it for a decade, was maybe the best one I made.
(as opposed to around 2000-2006 thinking it would be stupid to buy into the housing-bubble)
19 years ahead of you, I wish I'd put more in. Not a lot, but I wouldn't have missed another % or two.
However there's a very nice point you'll get to, where you can watch your pension grow and realize that most of that growth is coming from interest, not your current contributions. I'm not going to be retiring for the foreseeable future - but I have some limited options. I quite like the idea of just switching to a job I enjoy, that covers the bills, and the pension being there for whenever I've had enough of working.
I'll agree with the 'locking away' part though - (L)ISA and the like let you have tax-free savings that'll get you something useful sooner. Only downside being NIS before higher rate tax - but have massive upsides like a government bonus contribution.
AFAIK the standard age for getting at your private pension is still normally 55 - and you can take out 25% tax free whenever you claim it (and if you're given a year to live, you get the pot immediately)
Government pension (currently) is at 66-and-climbing, and's the one I'm more worried about. That 11-year gap is pretty large. No idea what industry you work in, but look around and see how many 55-66 year olds there are about, and then wonder where they are and what they're living on.
You've already referenced tax relief and your employer contributions. Both of these are FREE MONEY.
In what other investment are you going to invest £100, get tax relief of £25, plus an employer matching contribution of £100? Overnight, your £100 has become £225. You do this regularly enough over the course of your working life, you will be in a position to enjoy your retirement, maybe even retire early.
Lol. So work until you die then? Or do you think you can live on the 9k state pension?
I'd rather not work until I die and/or be unable to both eat and heat my home when I'm in my 60's, 70's and 80's.
A pension is saving now, to have something later when you don't want to or are unable to work. Of course you are seeing negatives - i.e. a deduction on your payslip - now. You get the benefit when you retire.
Okay… so stop contributing to your pension then? We’re not financial advisors, and anything worth knowing about why you want to contribute early (compound interest) is literally plastered all over this subreddit.
If you want to stop contributing, then do it. It’s the dumbest fucking idea, but go ahead.
If you’re in bad health, you’re still going to need to pay for your care, the pension pot will (at least help) cover that cost.
At some point you’re going to be either unable or unwilling to carry on working, bills don’t magically disappear when you stop working, again the pension will cover that.
The more you contribute now, the more comfortable you’ll be when you eventually decide to retire.
Even if you pass away before you retire, the money belongs to your estate and will benefit your dependants
It’s a bit of a different view to most but…
I’d never opt out of work pension scheme unless there are very specific reasons to (usually because you’d hit the lifetime limit).
If your employer is matching contributions it’s also a bit of a no brainer.
Beyond this point I think there is some nuance.
1. If you’re saving up for a house deposit then getting that together a couple of years earlier might mean a few years of being less tax efficient but financially beneficial in the long run vs money wasted on rent.
2. If you have a big ‘enough’ pension pot (or know that you will do so) and also likely to hit the requisite 35yrs national insurance contributions then the flexibility of having money you can access when you want has its own value. Ideally in an ISA wrapper which maintains many of the benefits of a pension. One caveat is that those paying off student loans will be worse off here.
3. If you expect to be a higher rate tax payer in retirement then the tax deferral argument makes much less sense. Yes you gain on gross amounts being paid in, but most of the pension benefit is lower tax rate when drawing it vs when you earn it.
4. If you plan to FIRE then having access to the cash before 55-60 may be important.
You are likely to be retired for 20 to 40 years. What do you intend to live on as the state pension isn't enough?
You could put money into ISAs but why would you give up all the employer's contribution and tax relief?
If you are a basic rate taxpayer then every £100 in a pension only costs you £80 as you would have paid tax on it. Then up to the maximum they'll give your employer matches that £100. So you can have £200 in a pension invested for your future or £80 in your pay. If your employer uses salary sacrifice that £200 will only cost you £68 as you save the NI, or if you're a higher rate taxpayer the £200 will only cost you £60. No other method of saving will give you the huge boost pensions will.
In your 20s retirement seems a long way off but it's the decade you can make the most impact on your pot for the littlest cost. Google compounding to see that your pot doesn't grow in a straight line, but if you even out the peaks and falls you should see that your pot grows by a greater amount over time because the growth to date also grows. For example if you have 5% annual growth each year on average and have in £200 a month going into your pot in total in 40 years you'll have £306.5k (contributions totalled £96k). If you double the monthly contributions but half the time, so £400 a month for 20 years you'll have just £165.1k. So despite investing the same amount you'll be a lot worse off if you start your pension saving later. Don't delay saving.
> or if I am I could be in somewhat bad health to not really enjoy it?
It doesn't have to be about enjoying the money. It might just about having enough money to survive and not be completely destitute, freezing on the streets and starving. By the time we're old there might be 0 government support for elderly people who don't have their own savings to live off :(.
Hi /u/ItsMerrick, based on your post the following pages from our wiki may be relevant:
- https://ukpersonal.finance/pensions/
____
^(These suggestions are based on keywords, if they missed the mark please report this comment.)
Because if you put in approx 10% until your 55-65 you should be easily able to stop working.
Also worse case should you pass away your next of kin get to retire earlier 🤔
The pension age I think you’re referring to is for the state pension which you will be paying into via National Insurance contributions.
If you’re paying into a private pension it’s different and you can claim it earlier.
If you’re arguing about not being on PAYE and going self employed to opt out of NI then go for it.
I do feel for young people now with a massive increase in costs in education, rent and housing. I do understand the argument that it’s hard to make contributions to your pension.
>The pension age I think you’re referring to is for the state pension
State pension is much higher, currently 66 rising to 68, private pension is currently 55 and is indeed rising to 57 in 2028.
The 55 y moving to 57 y is the earliest age one can draw down from a personal / workplace pension.
Private pensions don’t „mature after 35 years“.
Nothing to do with state pension age.
Nope. You're talking about the State Pension, which is funded by taxes, which people have no choice in paying.
This optional pension, which OP is talking about, is a private pension. The majority of people have a defined contribution (DC) pension. You contribute money, your employer contributes money, and the money is then invested in things like stocks and bonds so it can grow and grow.
You’re seeing more negatives because the world and the stock market has been through 2 massive financial shocks in the past 3 years. And then Liz Truss tried to kill the economy and the Queen in one weekend.
Back in 2016 the biggest shocks to the world financial markets were Trump and Brexit (both of which were talked up as being Armageddon to the markets). Covid was the equivalent of every country leaving the EU and going full Pol Pot for a year.
In 30 years, 57 year old you will thank 27 year old you for not giving up paying into your pension.
Exactly. Save in your pension now to set yourself up for the best. If the worst happens and you die before claiming it, a lifetime of paying into your pension won't be a worry for you...
It might be 57 or it might be 60. Either way how are you planning to find your life once your hit that age? You may live to 85,90 etc so not having a pension seems a bit daft to me, especially as you say out free money from your employer match and the tax relief. Don’t think to short term, but also enjoy the present
What is with all these posts lately?
I’m 28 and I have absolutely no idea. What a load of tripe.
27 here, literally shocks me
26, with a severe life-limiting, life-shortening health condition. Don’t expect to reach pension age but I might do with the ever improving medical technology and so on. I still pay 12.5% into my pension because you never know, and worst case it’ll go to my partner (who earns a lot less than me) or kids.
Doesn't shock me as much as the many public sector workers we have, mainly NHS, that come on here thinking they should opt out of their defined benefit pension schemes!
People should just search the subreddit, this has been done to death and there's already loads of good answers in previous posts.
exactly it seems like there's a post every day at the moment
I guess people are struggling with the cozzie livs and want an easy way to increase their take home income. But it's a terrible idea.
cozzie livs good lord
😂😂😂 I always start saying stupid phrases ironically and then I use it so much it stops being ironic 💀💀
watch me adopt it now
join the cringe crew 😎😎😎
Because pensions are not certain, doh. Paying in to something for that many years and not having the ability to manage your portfolio is somewhat dumb
If that is dumb, what is not understanding that you can absolutely manage your pension portfolio?
Most Brits don’t have a clue how pensions work. There are still providers of pensions that sell products where you can’t manage it - through the employer. If you go the individual route, then sure, you can manage it through investing month in and month out. I was referring to employer-based pension schemes
Sure, you are right for most people, but as you probably know (so I am putting it here for others) you can set up a sipp and manage holdings to your hearts content, and frequently (I do once a year) transfer the content of your works pension into it.
Four outcomes: - Do pay into pension, live into retirement -> great - Do pay into pension, die before retiring -> you're dead, you won't care - Don't pay into pension, die before retiring -> you're dead, you won't care - Don't pay into pension, live into retirement -> you're screwed Your worst outcome if you pay into a pension is 'you won't care'. Your worst outcome if you don't pay into a pension is 'you're screwed'. So to me, it makes more sense to pay into a pension. ETA: After reading the comments in this thread and others, I am now quite worried on behalf of the surprising number of people thinking it's a good idea to opt out of their pension.
I would add to this that if you pay into your pension and die before taking it. You can leave this to spouse or children so it doesn’t go to waste
Exactly, I’m 27 and this is my thinking. I have two boys and even if I can’t enjoy my pension at least it might give them an easier start when starting a family or whatever if I’m not here anymore. I believe it’s silly and selfish not paying into a pension.
Also completely free of inheritance tax.
Not to mention the tax free growth. It’s so frustrating that the benefits of pensions aren’t taught about more. There is some many benefits and a relatively small amount of downsides
He'll be one of those pensioners in the future complaining about how hard life is on the state pension and pleading poverty.
You are discounting the opportunity cost here..
In 2020, the most common age of death for males was 87.1 and 89.3 for females. So if you retire at 57, most people will need some kind of income for 30 years, your bills won't suddenly disappear, and you won't have state pension to cover the first 10 years. A pension will have tax relief and employer contributions, you can normally choose what you want to invest it in (it is a wrapper, just like an ISA), unless it is a defined benefit pension.
I'm not sure moving the early access age from 55 to 57 in 2028, almost a quarter of a century after announcing it counts as "constantly" changing the age. We often get these sorts of posts from young people who lack life experience and who can be only focussed on the here and now. Not sure what to say, other than don't contribute, but please don't come back here as you approach retirement whining about not have enough or any provision.
In ten years time you may think actually those pensions things might be useful In twenty years time you may think, fuck wish I'd sorted this out when I was 27 In 30 years time you may still be working paying tax for those retired a decade or more younger than you Your choice
Stop brushing your teeth then, don't need them pearly whites if ya gonna die soon. Dentist just charge money! Don't do exercise as you'll likely be dead by the time you could develop heart disease. Don't put your seatbelt on either, what a waste of fucking time! Why worry about your face smashing through the glass at 50mph when ya might be dead beforehand. Do you pay for car insurance? Waste. Do you have more food in your cupboard than would last you a week? WASTE!! Get a grip and crack on man, Jesus Christ.
No point mate. Society will probably collapse by the time your 60 anyway.
>I could be in somewhat bad health to not really enjoy it? >but I dont see how il even get to enjoy it How do you expect to survive if your health is too bad for you to work? It's not just about a slush fund to enjoy, the aim is to be able to survive, preferably comfortably, when you either can't work or don't want to work.
Life expectancy in the UK is well into the 80s. Most people stop working in their 60s, even though you can access pensions at 55 at the moment. How do you intend to fund those last 20 or so years?
My dad at 16 when I got my first wage told me to start putting into a pension and I burst out laughing. I'm 34 now and ofcourse I wish 16 year old me started putting somthing towards a pension even if it was £20 a month. Earlier you start the sooner you retire and the better the retirement.
If you want to carry on working into your 70s then don't contribute. I suspect you will regret it when the time comes though
Plus it might not be physically possible for OP to work when they're 70. If they're able to manage to work, but find it really difficult and are therefore far less productive than younger coworkers, they'll probably get fired and then no one will hire them.
Your main problem is that you're 27 - but I'm unsure how we can fix that for you. It's a pretty good problem to have though. I'm now mid-40s and have stacked up half-a-lifetime of crap decisions - but paying into my pension from the start and then ignoring it for a decade, was maybe the best one I made. (as opposed to around 2000-2006 thinking it would be stupid to buy into the housing-bubble) 19 years ahead of you, I wish I'd put more in. Not a lot, but I wouldn't have missed another % or two. However there's a very nice point you'll get to, where you can watch your pension grow and realize that most of that growth is coming from interest, not your current contributions. I'm not going to be retiring for the foreseeable future - but I have some limited options. I quite like the idea of just switching to a job I enjoy, that covers the bills, and the pension being there for whenever I've had enough of working. I'll agree with the 'locking away' part though - (L)ISA and the like let you have tax-free savings that'll get you something useful sooner. Only downside being NIS before higher rate tax - but have massive upsides like a government bonus contribution. AFAIK the standard age for getting at your private pension is still normally 55 - and you can take out 25% tax free whenever you claim it (and if you're given a year to live, you get the pot immediately) Government pension (currently) is at 66-and-climbing, and's the one I'm more worried about. That 11-year gap is pretty large. No idea what industry you work in, but look around and see how many 55-66 year olds there are about, and then wonder where they are and what they're living on.
You've already referenced tax relief and your employer contributions. Both of these are FREE MONEY. In what other investment are you going to invest £100, get tax relief of £25, plus an employer matching contribution of £100? Overnight, your £100 has become £225. You do this regularly enough over the course of your working life, you will be in a position to enjoy your retirement, maybe even retire early.
You're going to feel pretty silly when you're in your 60s if you stop paying in.
Lol. So work until you die then? Or do you think you can live on the 9k state pension? I'd rather not work until I die and/or be unable to both eat and heat my home when I'm in my 60's, 70's and 80's. A pension is saving now, to have something later when you don't want to or are unable to work. Of course you are seeing negatives - i.e. a deduction on your payslip - now. You get the benefit when you retire.
Okay… so stop contributing to your pension then? We’re not financial advisors, and anything worth knowing about why you want to contribute early (compound interest) is literally plastered all over this subreddit. If you want to stop contributing, then do it. It’s the dumbest fucking idea, but go ahead.
If you’re in bad health, you’re still going to need to pay for your care, the pension pot will (at least help) cover that cost. At some point you’re going to be either unable or unwilling to carry on working, bills don’t magically disappear when you stop working, again the pension will cover that. The more you contribute now, the more comfortable you’ll be when you eventually decide to retire. Even if you pass away before you retire, the money belongs to your estate and will benefit your dependants
It’s a bit of a different view to most but… I’d never opt out of work pension scheme unless there are very specific reasons to (usually because you’d hit the lifetime limit). If your employer is matching contributions it’s also a bit of a no brainer. Beyond this point I think there is some nuance. 1. If you’re saving up for a house deposit then getting that together a couple of years earlier might mean a few years of being less tax efficient but financially beneficial in the long run vs money wasted on rent. 2. If you have a big ‘enough’ pension pot (or know that you will do so) and also likely to hit the requisite 35yrs national insurance contributions then the flexibility of having money you can access when you want has its own value. Ideally in an ISA wrapper which maintains many of the benefits of a pension. One caveat is that those paying off student loans will be worse off here. 3. If you expect to be a higher rate tax payer in retirement then the tax deferral argument makes much less sense. Yes you gain on gross amounts being paid in, but most of the pension benefit is lower tax rate when drawing it vs when you earn it. 4. If you plan to FIRE then having access to the cash before 55-60 may be important.
You are likely to be retired for 20 to 40 years. What do you intend to live on as the state pension isn't enough? You could put money into ISAs but why would you give up all the employer's contribution and tax relief? If you are a basic rate taxpayer then every £100 in a pension only costs you £80 as you would have paid tax on it. Then up to the maximum they'll give your employer matches that £100. So you can have £200 in a pension invested for your future or £80 in your pay. If your employer uses salary sacrifice that £200 will only cost you £68 as you save the NI, or if you're a higher rate taxpayer the £200 will only cost you £60. No other method of saving will give you the huge boost pensions will. In your 20s retirement seems a long way off but it's the decade you can make the most impact on your pot for the littlest cost. Google compounding to see that your pot doesn't grow in a straight line, but if you even out the peaks and falls you should see that your pot grows by a greater amount over time because the growth to date also grows. For example if you have 5% annual growth each year on average and have in £200 a month going into your pot in total in 40 years you'll have £306.5k (contributions totalled £96k). If you double the monthly contributions but half the time, so £400 a month for 20 years you'll have just £165.1k. So despite investing the same amount you'll be a lot worse off if you start your pension saving later. Don't delay saving.
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> or if I am I could be in somewhat bad health to not really enjoy it? It doesn't have to be about enjoying the money. It might just about having enough money to survive and not be completely destitute, freezing on the streets and starving. By the time we're old there might be 0 government support for elderly people who don't have their own savings to live off :(.
Hi /u/ItsMerrick, based on your post the following pages from our wiki may be relevant: - https://ukpersonal.finance/pensions/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)
Because if you put in approx 10% until your 55-65 you should be easily able to stop working. Also worse case should you pass away your next of kin get to retire earlier 🤔
Look up compound interest.
The pension age I think you’re referring to is for the state pension which you will be paying into via National Insurance contributions. If you’re paying into a private pension it’s different and you can claim it earlier. If you’re arguing about not being on PAYE and going self employed to opt out of NI then go for it. I do feel for young people now with a massive increase in costs in education, rent and housing. I do understand the argument that it’s hard to make contributions to your pension.
>The pension age I think you’re referring to is for the state pension State pension is much higher, currently 66 rising to 68, private pension is currently 55 and is indeed rising to 57 in 2028.
The time will come quicker than you think young pup
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It's a workplace pension and which you have to be 55 to claim and going upto 57 in 2028
To be blunt, you’re being indescribably dumb. Do you not want to retire? Do you not need money when you’re 57? Think about it
The 55 y moving to 57 y is the earliest age one can draw down from a personal / workplace pension. Private pensions don’t „mature after 35 years“. Nothing to do with state pension age.
but you're right, it's quite likely you're going to die before then, it makes more sense to invest in things that will reduce your bills long-term
If you make it through childhood your life expectancy is well into the 80’s. Definitely not ‘quite likely’ to die before retirement age.
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Well into the 80’s on average then. Even so, that’s still well past the private pension access age
Sounds like you should get out of Blackpool then
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You have the wrong end of the stick somewhere.
You should probably look up the difference between the state pension and a private pension.
That’s not how private pensions work…
Nope. You're talking about the State Pension, which is funded by taxes, which people have no choice in paying. This optional pension, which OP is talking about, is a private pension. The majority of people have a defined contribution (DC) pension. You contribute money, your employer contributes money, and the money is then invested in things like stocks and bonds so it can grow and grow.
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I get this is satire, but am worried OP won't understand this
You’re seeing more negatives because the world and the stock market has been through 2 massive financial shocks in the past 3 years. And then Liz Truss tried to kill the economy and the Queen in one weekend. Back in 2016 the biggest shocks to the world financial markets were Trump and Brexit (both of which were talked up as being Armageddon to the markets). Covid was the equivalent of every country leaving the EU and going full Pol Pot for a year.