The cost of a Pension

[Philofacts]

A survey by Scottish Widows suggests 20% of us are not saving anything at all.
Most of us are not putting enough away to provide a decent pension.

Scottish Widows suggest that, excluding the state pension, for a £17,000 a year  pension income at 65 (or retirement age):
a 25 year-old needs to save £420 a month, a 35 year-old £690 and a 45 year-old £1,250.
This would then give a pension pot of £425,000 to buy the annuity of £17,000 a year.  (4%  yield)

Given the amounts required, even with tax relief, it is not surprising that one in five don't save at all. 
AND let us not forget Equitable Life debacle as well.

[The Prophet]

No 25 year old is going to tie up £420 a month in a pension! 
Student debt, mortgages etc.  Only those with spare money will put it in a pension.

The Financial services providers need to get realistic about what people CAN afford.
Until the annuity rates are much much better people will just carry on as they are now.
At the end of the day there is no guarantee that all those pension contributions will be safe anyway.

[FirstTimeBuyerGuru]

You're absolutely right, although any good pension will start to move it's investments away from high risk assets, and into safer areas like cash and bonds as 10 years or so is left until retirement. This protects against such horrible losses in your pension contributions.

The major lesson here is that people need to start early. Even a meagre amount put away every month as 25 year old, will have a huge impact later on when it comes to paying for their retirement.

[The Prophet]

I would disagree.
People who can only afford to put a small amount away say up to £150 a month will find that over half of
the projected 7% growth can be taken in fees.  When you also add into the fact that the meagre pension you get in the end
stops you getting means-tested pension top-ups then it really isn't worth it unless you can really put in large sums especially to mitigate income tax
liabilities during high earning years.

It is only the tax relief and the 25% tax-free lump sum payout  that makes pensions worthwhile then only for higher rate tax payers.

[Banjo]

I say one thing:
"It is an Equitable Life Henry"

Anyone still think personal pensions are a good idea?

[FirstTimeBuyerGuru]

It's true that pensions are incentivised for higher rate tax pays really. There are arguments for using a cash ISA too. Whatever the investment vehicle, there are genuine concerns that this generation will live to extremely old ages with inadequate retirement planning. IMO it's an issue of genuine crisis.

[Philofacts]

If you have the spare cash then a Cash ISA is the first place to save.
Then a stocks and shares ISA but these are really now only effective for 40% tax payers.

With both of these you have control of your money and also access to it. 
Once your money is in a pension it is tied up until you reach 55 that is assuming it is still there then!

[DavidBrown]

Two good points are, where are people going to get the money from to save that amount.
Are pensions really worth the time and money.
I think not!

David

[New Home Expert]

They could use the money they spend on computer games, tattoos, cigarettes, drinking, pay TV,  and buying the latest iPhone for a start!

But it is worth the 20% tax relief.
Even more worth it for higher rate taxpayers.
And you get 25% of it out tax free lump sum too.

But maybe not for much longer!

[Yokoyama]

I agree, young people are reckless.
They have zero respect for money and are clueless about the importance of saving money.
They're acting as if they're never going to get old.

[New Home Expert]

Even more so now the government is giving away FREE MONEY with the Lifetime ISA

It is amazing how many stupid young people, especially those earning quite good money, are not taking advantage of this.

[chemistdude]

LISA, ISA, Pensions and Property. Got to have it all.