New Home Owners And Snagging Forum
Investments => Cash ISAs and saving accounts => Topic started by: The Prophet on October 23, 2012, 09:34:23 am
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Under the new auto-enrolment pension. employees put in a minimum of 1% of their salaries with their employer topping it up to 2% and the government adding further with tax relief.
In time, the total will rise to 8%, with employers contributing 3% of employees salary.
According to the Money Advice Service pension calculator, a 24 year-old, earning £20,000 a year, would get just £937 a month if he retired at 68 at today's money if he also decided not to take 25% of his pension pot as a lump sum.
He would have paid in £1000 a year with his employer paying a further £600 and tax relief making a total of £1800 a year.
Over 44 years the pot would have cost £79,200.
However, based on current annuity rates around 5%, the pot would need to be £208,222.
Given provider's charges of around 1% of the fund value each year, the gains would need to be spectacular to achieve a pension of 56% of gross salary now.
Bearing in mind that the state pension will, in all probability be phased out or the retirement age increased to 80 by the time our 24 year-old retires, this fund will just replace any means-tested benefits he could have received.
At least it is not compulsory at the moment so everyone can opt-out.
Also consider that the government is hell-bent on devaluing our currency and increasing inflation to "reduce the national debt"
All pension pots will need to grow faster than they ever have before to maintain their value at retirement.
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Everyone should also remember the Equitable Life scandal and all those who were fiddled out of their company pension scheme when their firm went bust too.
All paid in and got little out, through no fault of their own!