bigglesworth

Me too.

Fairness and accountability are two words unknown in the HMRC lexicon

bigglesworth

Well, they would say that. wouldn't they?

My own guess is that the lack of a captive market will force them to become more competitive.

bigglesworth

Editha tells me the Economist says public sector retirees will not be allowed to convert. They have between 80 and 90 percent of all pension "assets" (i.e. entitlements) in the UK.

Private sector retirees - average pension pot about £30,000 (average sum for annuity purchase over the ten years from 2000 to 2010 between £20,000 and £25,000 according to the Pensions Policy people)- will mostly not be able to afford to.
Of course there will be a few, but it is likely to be a few hundred at most.

dunroving

When I see figures like those in your second paragraph, I wonder what people are thinking when they save so little into pensions. Over a working life of about 40 years, that corresponds to saving the equivalent of about £60 a month.

A pot of £25,000 will buy you a pension (annuity) of about £29 per week. All right I suppose, but from a pensions program I was watching a couple of weeks back, people who were saving pennies into pensions were expecting to retire on £10,000, £20,000, even £30,000 per year.

I listened to Any Questions on R4 in the car earlier. One questioner asked the panel, "I have been saving into a pension scheme over 40 years of working. When I retire next year, can I be trusted with my pension pot?" I really liked the responses from almost all the panellists that it is YOUR money, so you should be trusted not to blow it all (and in fact most people who save into pensions schemes are responsible people).

Other than the tax issue, I agree wholeheartedly with that sentiment. When I see most of my neighbours seemingly blowing all of their earnings on holidays (I hardly take any), cars (I drive a crappy old hatchback), etc., rather than saving into pensions, there is part of me that says even if I do blow my pension pot, I have a right to.

rebs

I think those figures could be a bit misleading though.. I suspect they are unlikely to be the result of 40 years worth of savings... in at least some of those cases (maybe most) those people might also have a final salary scheme as well...

Auto enrolment may also have caught a few people in the last couple of years who might never have had any kind of pension at all.

I'm 50 and when I started work it was commonplace to have final salary schemes (I have belonged to a couple of different ones over the years) - I don't think I now know a single person at work in the private sector that is in an active scheme.

On other hand, my husband is 43 and has always had a money purchase scheme since the day he started work - his pension pot is now around £250k

As time moves on more and more people will be in similar situations with larger pension pots.

ETA - just thought of another scenario that might skew the stats - people who have changed jobs (maybe several times) and might have more than one 'smaller' pension pots - those pots might be counted separately.

Editha

I'm not so sure. I don't think it will be a flood, but personally, given the choice between buying an annuity and cashing in and investing in buy-to-let, I'd choose the latter.

I'd do that, not just because annuity rates are low, but because my experience over the last 40 years has been that investment in property has always paid off in the long run, whereas everything else has been much more uncertain. But, if it is my experience, it is also that of my generation. So, it will be another factor fuelling house price inflation.

dunroving

I didn't think of all those reasons, you are probably right on at least a few of them.

I feel very lucky to now be in a final salary scheme (not funded by taxes like many public sector pensions - universities have a funded scheme).

I didn't start paying into a pension until just before I was 40, because I was overseas in non-pensionable employment, on a relatively low salary, and then spent 6 more years at university, draining all of my savings.

By ploughing a ridiculously huge proportion of my salary into my retirement schemes ("money purchase" in the US, and now a combination of final salary and money purchase), I hope to retire about 4 years early on a very modest pension.

I attended a seminar recently presented by our pension provider, on the new tax laws for pensions. I was surrounded by crusty profs who had been at the university for 30-40 years. When we were told about the new limits on lifetime pension pots (£1.25 million, I think), there were gasps of horror from many in the audience. I was horrified that (a) they would have so much bloody money in their pension schemes, and (b) they would be whingeing about the situation - that's a problem I would love to have!

bigglesworth

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I wish you were right, but think it unlikely. The figures have been widely discussed over the last several years. Most final salary schemes were phased out 30 odd years ago. They count multiple pots anyway - total retirement savings in the private sector were calculated recently at 37K.

The overwhelming majority are banking on some form of equity release. Sun Life or someone did an exercise on it recently. I cannot remember the average amount they proposed to release it but it was under 50K.

I remember sitting on the M25 in the late 80s hearing people phoning in about what a rip off pensions were/are and they would make their own arrangements. Often just "invest" in their homes. (Forgetting that they would still need somewhere to live).

But we all have other pressures on our pockets. There are the kids shoes, the mortgage, a holiday etc etc. If you read today's Telegraph, there is an article about Maidstone Mums (a new demographic apparently) ALL of whom put present consumption ahead of future needs.

I completely agree with DR that people should be trusted with their own money. But almost by definition those with substantial enough pension pots to do so are increasingly a self selecting body.

I do hope auto enrolment increases not just take up but also contributions in some fashion, but few seem to understand the sizeable amounts necessary. Even my own son and daughter - who have had it banged into their heads on many an occasion- seem to think that they have different and greater costs than we did, which in some way excuses them from making provision. And nearly all their friends are the same.

bigglesworth

Just seen DRs post. I had a similar reaction from a very senior (and very left-wing) professor, who shall necessarily be nameless, but who simply did not understand that he was very, very rich indeed. His total retirement income was close to 150K.
And his wife was a senior civil servant with a very healthy pension also.

At a Housing Conference I attended in the early part of the Millennium, a chap from the IFS asked the audience to indicate how much they thought the top ten percent actually earned. Most (over 90 percent) put it at over 100 thousand, and by the time he got down to 50 thousand mine was the only hand left up. The actual figure at the time was in the high 40s.

Editha

I get a similar set of views from my brother, who is a senior IT manager. He long ago entered the top 10% but still worries about whether he, a childless, mortgageless man, who owns two homes, will have enough to retire on.

A couple of years ago he was complaining to me about how stressful his job was, so I said "Stop doing it then". He could never work another day and still enjoy a high standard of living even if he lived to a hundred.