Are people saving enough into their pensions? | IFS Zooms In
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- เผยแพร่เมื่อ 20 ก.ย. 2024
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Since the introduction of auto-enrolment over 10 years ago, more people than ever are saving into a workplace pension than ever before. However, new research from the IFS shows that approximately 30% to 40% of private sector employees (5 to 7 million people) saving in defined contribution pension schemes are on course to have individual incomes that fall short of standard benchmarks in retirement.
What changes should government make to the auto-enrolment policy? How much do people need to save? What about self-employed people?
To answer these questions, Paul is joined by Jonathan Cribb and Carl Emmerson from the IFS.
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One thing is certain. UK governments will punish people who save enough for their retirement. The only thing that will give people the confidence to save more is a guarantee that politicians won't launch tax raids on pensions and savings. Currently the message is that those who defer consumption now will be punished for their sacrifice later.
My concern is a lot of assumptions about pension levels think people will have zero or very limited housing costs at retirement. Given the cost of housing so many more people will be in rented housing at retirement and those rents will be as high as ever. I worry it's going to be tough for a lot of people in 25-30 years
Given recent graduates have £30k to £50K debt before they start work and some pensioners are paying £7k to £9k per month in care home fees a lot of people have "given up" on sensible financial management and have decided to "P*ss it against the wall". Also lots of these pensions companies are charging eyewatering fees for non company pensions.
Indeed. I'm interested to see what comes up in this video, but something that seems to go overlooked so often when people discuss what younger people 'should' be doing is... Reality.
I fucked around a bit (I.e. like most, didn't know what I wanted to do and wasn't happy to go right into a 'career' that I knew I'd hate), and also had the fortune of being university age and graduating around the time of the Financial Crisis.
I then worked via agencies, earning decent enough money (if we ignore agency fees/theft and whatnot) but nothing went into any pension. To get into my current career I had to do a masters/'conversion course'. So, greater graduate tax/saving/paying my way into an industry with a skills shortage. Makes total sense, because why wouldn't government make it difficult for people like me?
I've never been a particularly 'woo, children' person, and the state of the world has reinforced that, so newborns are probably a no. I'm looking another 33 years, should nothing change, until state pension age. I should spend most of that time earning over £100k.
Does it really make sense for me to stick loads into a pension? What can we really know about 3 decades time?
I have been. I’m 36 and have £51k in my SIPP. Although the lack of government transparency around tax reliefs and the cost of living is making me consider reducing my contributions.
Would be very interested in a video on public sector pensions. I work in the NHS and am curious to know the future of it
The biggest concern especially for lower earners is the investments and the fees. Some are shockingly expensive and have very low returns.
I looked at a family members works scheme recently and its 55% equities (overly UK weighed), 40% bonds and 5% cash. If she was 5 years from retirement then I could understand but she is 23.
While I understand they can't tailor it to every employee they could group ages to invest it more appropriately for them.
I also think there should be industry standard videos explaining about pensions to new employees as a part of their enrollment so people understand pensions and what their money will be invested in and how the fees line up with other providers.
Then change where the money is put, I know of no scheme that does not allow tou to change it.
Yes, I agree that many default options are awful.
The first thing I did was to change from the defaults. My pot has now grown exponentially. Now having a larger pot than staff that worked far longer than I have there
But where are these pension contributions going to be invested? Investing in the FTSE has been a bad idea for the past thirty years.
Two points:
Employers need to be made to contribute more. 3% is not generous when you are being paid minimum wage.
The employee has no option as to the choice of the scheme provider. This choice can be made for reasons that do not benefit the employees. NEST for example levy eye watering charges of 1.8% on deposits. Employing a top heavy grossly overpaid board. This is not in the employees favour for growth.
The government should be paying 40% tax relief as well. 20% isn't enough for lower earners.
3 percent is 3 percent, whether your earning 10k or 20k
That's how percent works. If you have a problem with low wages, then upskill, get a better job. Be more valuable in the job market
Totally agree it is not done to benefit the person that is compulsorily opted in. But for now at least you can still choose to not support the thieving fat cats and opt out. Your money, your choice where and how you invest it. 💷💷💷💷
@@kinggeoffrey3801If they earn £50k they will get 40%
How on earth does the new government think they are going to encourage more pension (or any other) savings (or bothering to work at all or beyond 55) while reducing returns on their scheme investments via windfall taxes, dividend taxes, CGT, higher inflation, etc? And, importantly, what is the scale of the wealth transfer between private sector DC scheme members and those in public sector DB schemes, the liabilities of which are well over 100% of GDP (almost 200% on some estimates).
I've been autoenrolled even though I pay a lot into a sipp through salary sacrifice but can't be bothered to change it, will merge the when I retire soonish
I would add , now the top rate was abolished under the last government put in , and is likely to be put back for most , it was the main reason I retired at 64 fully fit and a loss to my employer was because I was within 10k of the top limit for a varying number of pensions . I now know I should have stayed employed and put money elsewhere and then moved this into my pension when the limit was removed …. You can never have too much money in a pension funds , there will be many ways you can spend this as inflation showed be when it was running at 15 points … now 69 and had to increase my drawdown number to keep pace and will run out in 24 years … and if I live as my father did 96 as did his dad and also his father .. I have a problem to solve now before I get there. I now will have to down size the house I live in at the moment … so two years or so I will do this and release equity to bridge that gap…
Furthermore, logic suggests that means testing benefits - and potentially the State Pension - completely destroys the incentive to work and save.
Great Point. Work to lose your state pension. Errrrrrrr no thanks.
No it does not, mean testing mean they will have a reduction in STATE welfare.
Which is fine because in the private pension market, depending on where it is sat, you can double your pot in as little as 8 years.
Si in the end, you will be on far more private than you ever will by Continuing to receive state pension.
For instance,
I work with a man, he is near retirement age now, a few years to go. His private pension is already in the millions, he would earn double retiring now, than what his current wage is.
He would earn over 80,000 a year retired.
State Pension is like 10k if your lucky.
Lose 10k to earn 80k.
Do the maths. He is still far better off.
And anyone could do that, even low earners could have pots like he does
And if you are saving/ have saved, you need to know it's worth it. That because you have saved instead of partying in Ibiza, you arent going to be penalised bybremovalnofvsrate pension.
Saving WHAT money? Those who need a pension the most, don't have the spare income to spend on one. Those that can, are already doing so. FAR better is to engineer a decent State Pension and let those with higher incomes add to that as they wish. Really, this ought to be OBVIOUS!
Is this because self employed people were allowed to claim the state pension? I remember Mr Hammond not being able to increase the self employed NI contribution to compensate for the extra outgoing
I have a friend who is self-employed, makes £250k as a plumber (or, rather, a plumber who employs lots of other plumbers, so owns a plumbing firm). Doesn't pay anything into a pension. I asked him why, he simply invests in income generating assets instead. Primarily property.
Not everybody who decides not to invest in a pension is somebody who isn't investing for retirement, in his case he'll just have property income rather than an annuity or drawdown. He also has his firm, which if it continues to do well he could flog for a lump sum or pass down a generation whilst retaining a chunky share of it for the dividends.
Not everybody needs a pension, although I'd personally always have one of some sort of diversification.
no shit you get penalized for saving and trying to get a better income when your in the lowest bracket
What's the point in saving when it looks like the younger generations will never get to retire?
This makes zero sense, you can't retire if you don't save you mean, if you choose not to save then you are choosing to not retire.
You honestly think you will be able to retire if you DON'T put any money aside for it?
That's the whole point. You NEED to put money aside, else you will NEVER be able to afford to retire with dignity
Zero point. Look at the people now losing their winter fuel allowance because they saved . . 100% correct.
Zero point. Look at the people now losing their winter fuel allowance because they saved.
Poor people can look firward to being poor in retirement too? Dear Jesus.
why doesnt the govt just make it so that employers MUST offer the employees atleast 1% pay rise per year. many low paid workers on minimum wage never get pay rises
The minimum wage increases every year.
This is a great way to make companies go under, and people will lose jobs.
minimum wage rises every year - correct. but its not fair for someone who has been working at the same company for a year to earn the same (min wage) as a less productive new starter. in Britain we have this no wage growth culture that needs to be tackled.
p.s if a company goes bust for offering a 1% pay rise to its staff then it cant handle any of the regular supply chain shocks and would've gone bust soon anyways.
Because its not the government's job to dictate wages.
It's a free market. The price of labour is always changing, following the supply and demand.
Upset that with government intervention, then you create far worse problems. Such as recessions, depressions, market crashes/ corrections, inflation etc.
Almost always caused by when government gets involved.
Was there or wasn't there a black hole inherited by Labour does anyone know
There was, 100 billion Blackhole
£22b. Which is tiny amount compared to things like Track & Trace (£38b).
yep. 100 billion
Why save if your punished for saving at retirement ? Pensioners that did wish they didn't has its cost them their winter fuel allowance for starters & maybe even the state pension down the line . One thing for sure is the 2.6 TRIlLLION Gold plated Civil service pensions are not going to be cut despite apparently having no money .
My “gold plated” local government pension has already had £26,000 taken from it. Government has saved paying me 7.9% of my salary now and save £26,000 in todays money in 2035 & 2036. Doing trust this government not to screw with it further.
You should also know that the local government scheme is very well run and is funded from the people’s contribution, not government money, but labour want to take over the schemes and move it centrally. So they’ll steal the money in the scheme and leave the liabilities.
Not all the public sector schemes are a drain on the tax payer.
Civil service employees will be losing the winter fuel payment too, I'm not sure what you're on about.
Pensioners who miss out on WFA are already losing out on pension credit. Nothing has changed
Save stu. In an ETF 100 dollars a month.
It will go nowhere for many years. Then it will go up like crazy.
@@ster2600 what I am on about is IF there is no money then why are Gold plated Civil servents pensions not the target ? Why should they get 30 k plus & a state pension to boot of tax payers money ?
Too many people have the "government will look after me" mentality
The reality is, when has government ever ran/ operated anything that has work out well.
Most people can not name one thing, yet they still think government will lookvafter them
What on earth do you think people pay trillions in tax for ?
@@stuartregan1627 exactly. it is not worth paying. no value for money, for every pound the gov collects only half will actually be used to do anything with, the rest is funding their own inefficiency, bureaucracy.
So much of what the gov does, would be better to be funded directly by the public from their own pockets.
Case and point, state pension, on average the a worker will be paying about 2000 a year or 160 to 170 a month in National insurance. so that at the end of their work, when they retire, they will get about 12,000 back a year from stat pension.
OR that same 160 to 170, could a month from age 18 could have been put into a private pension instead, that would mean you would have a pension pot of over 1 million come retirement and from that pot having a pension that is several times more than what state pension provides,
With the added bonus of, if you pass, the pension then stays in the family unlike state pension where it is just taken.
which is better value, state or private...
in other words, the money is better in the hands of those that earned it, instead of being taken by wasteful governments that could not possibly know what is best for you. They don't even know who you are. but so many still believe the gov is here to help.
It's clear you work for the Civil service & want thousand of jobs to be created for your cronies. 13 million pensioners need means tested . How many thousands of jobs for your cronies?
@@stuartregan1627 are you actually going to make sense today, or just make crap up ?
without finishing the video the answer is no people are not saving enough for their pensions. My assumption is most people are only contributing the minimum, if they're even contributing at all.
Once the have ramped up the auto enrolment they'll remove the state pension.
People my age are going to be in for a shock.
Yeah only the workshy get pensions.
What about the economic impact of people saving money rather than spending it in the economy, particularly high earners?
Zero.
Because money saved was money earned. Money saved is then, banked/ invested, which means it is either loaned back oyt by banks, or is invested in business that grow and hire more people. Create more products
@@MinkieWinkle This is simply untrue. You can decide when to spend the money you earn, but you can't move the work you did into the future, someone else has to do your work and then you take the proceed off them
Nobody will save anything under a Labour government. Taxed out of saving.
What are you on about 😂😂 anyone with sense is still saving
@@jaju123456 - He's saying that people won't have the spare cash to save, obviously.
Success is not built on success. It's built on failure, It's built on frustration. it's built on fear that you have to overcome. I pray that anyone who reads this will be successful in Life
You're correct!! I make a Lot of money without relying on the government. Investing in stocks and digital currencies is beneficial at this moment.
My advice to everyone is that saving is great but investment is the key to be successful imagine investing $8,000 and received $42,700.
Making money is the plan and with Bitcoin your plans can be accomplish
I really appreciate Mrs Clara Flint influence during this global pandemic Lock down
Same here, I'm blessed only. God knows how much I praise her, £32,000 every week! I now have a good house and can now afford anything and also support my family, and never will I forget to pay my tithes because God has been so faithful to me and my family
starver will steal it anyway.