Pensions - whats the problem (1 Viewer)

[GaryPanic]

Just thought i put this up -- UK
The state of pensions is in crisis given that the working population is currently 27mill and the whole population is 70 mill +


The burden on the working population is increasing as we live longer
the average life expectance 20 years ago was around 73 for men and 76 for women this is now increasing to say 76 and 80 respectively this is and extra 3 years for men and 4 for women - however its not just that the accumilation will be even higher -

the State system can now longer survice in its current state (hence the retirment age lift to 66-68) which is only a stop gap solution
in the UK we have over 50% now not reliant on the state pension scheme , but the hickup with this with the collaspe of company pension scheme has left 100,000 potential out of a pension-

the solution --- any ideas

I pause for your thoughts and policital views

 

[boblarson]

Gotta work until you die.

 

[GaryPanic]

worked that bit out - but who's gonna hire an old git

 

[boblarson]

worked that bit out - but who's gonna hire an old git

Oh, details, details

 

[GaryPanic]

Ahh!! but it is all in the details -

THe old mechanics of penion funds work 44 years and get pro rata on your penion ie 44/65 get 66 (ish-- I know its wrong)percent of your final salary or in a really good pension scheme 75%

given that we all swap jobs now - and no job is 100% secure the above now no longer works

now its get 4%-5% on the amount you have saved - so to get a decent pension you need around £500,000 to get £20k per year -

I don't know about you but flipping heck 1/2 mil - thats a lot of money

 

[Pauldohert]

Wait till the kids are old enough to know of the pension problems!!


http://www.access-programmers.co.uk/forums/showthread.php?t=123039

We'll be relegated!

 

[GaryPanic]

a solution needs to be looked at, as any solution will really take about 30-40 years to resolve

so todays 20 year olds need to do something for their own pensions - rather than rely on the state system which will tax the generation of 20-60 years when they (the orginal 20 year olds) retire

 

[emcf]

i'm already guessing that by the time i hit 60 (half way there now!) there will be no state pension. what i try to do is to join occupational pension schemes when i can and save regularly (premium bonds/ISAs). one day (perhaps) a house will be within my grasp and i may be lucky enough to ride another housing boom to help out in retirement.

of course, i could always excel at work and make partner - wouldn't have a worry then....but, i think i like my spare time too much to make partner.

 

[GaryPanic]

emcf - this may note be enough

ISA - great
Premium Bonds ( fab) no lose situation (although you may not win - currently I am on 5% with PB - still waiting on that big win

occupation pensions - bril - although if the goverments recommendations are adopted - still not enough
as they are stating 5% and 5% percent your employer puts in 5% and you put in 5%

a decent percentage would be 10% from the company and you put in 5% - which is kinda the standard in the finance world

if you could afford to top this up by x amount

Emcf we are about the same age - well I am 38
and to retire on anything halfway decent you have got to be looking at a pension pot between £300- £500 k

work out the mechanics of this backwards if you assume a grow rate of 7% .... around £200- £ per month ??

 

[emcf]

PBs for me sitting about 5% as well. i'm looking for a retirement pot of around 400k, once i hit that i will be handing in my notice - which could happen quickly if the premium bonds pay off!

my previous employers had a brilliant scheme - i put in 5% and they put in 12.5%.....i managed to save 17.5% of my wage each month into the pension....shame i hated the job and quit! we had real flexibility re fund choices too and very low charges. new employers pension is ok, but not as good as the previous one i was on.

 

[The_Doc_Man]

I see our UK friends are discussing retirement with the same sense of impending doom that we see in the USA.

I already know that after Hurricane Katrina, I'll have to work past my normal retirement age in order to pay off the reconstruction bills and assure that my wife will have something left after I work myself to death. (Wish I was joking, but the odds are that I'm not.)

There are several pressures on any retirement system.

1. Inflation - which, if I have my economics theory right, is inevitible as long a someone is allowed to take out a loan.

2. Living longer past retirement date - which I hope to do. The actuaries who set up the programs were not good predictors for the real retirement picture based on recent medical improvements.

3. The aging end of the population, while living longer, is not always living healthier. Increasing medical expenses make living longer a double-edged sword.

4. Too many people on the dole who never contributed to thei retirement pool at all, or whose contribution doesn't nearly match what they will get.

I'm sure that if you think about the problem, you will think of other factors that contribute to the pressure on retirees.

I watched my Dad worry himself into a stress heart attack after his "official" retirement. He went back to work for a while before his health forced him to retire for real. I'm trying to not obsess about it, and I have been saving money into what we call 401(k) and IRA plans. (For the UK friends, 401(k) is a paragraph number in the USA tax code that defines the plan.) But there is always the question of whether inflation has negated some or all of my savings plan before I ever get to use it.

I am more or less resigned to the idea that I will be working longer and liking it less. But I do it for my family.

 

[GaryPanic]

Doc
You have stated the problem very clearly-
and yes - there is a good chance that we will live longer and therefore need a bigger pot, and we have the same problem here their is a small percentage who do not put into the pension pot , and they will be the loudest voice when its their time to retire--

Emcf - the 400K mark sounds about right that will give you around £16 -£20K - assuming no morgage - this should be a decent amount as the state pension will ""top this up" by x amount whatever the state pension works out to be. it has also been floated a means test pension - which if you get your 16k you will not see a penny of it - the state second pernions SERPS - you need to look at this in detail as different people have differenet views on whether to stay in or contract out - it does depend upon your age
and I think you are in the danger zone (30-40) and their are 2 different views

I look after my girlfirends pension and I tell her as long as it increases by 15% year on year (or averages out that way then thats pretty good)- espically as she has taken time out to raise our child -

- what would be good is if a website was around and it state where you should be pension wise at a given year ie at 38 you should have x to retire at x - and one that is not sponsored by a pension provider

 

[GaryPanic]

just re-read Doc mans post

Inflation and the link between this and loans
yes - loans and the amount banks loan out is an important critia - but this is a visocous circle - one that is getting lose to collaspe

if you have any loans outstanding I would seek to clear these asap

forget the morgage (this is something that very few of us can escape )
but any debit/credit cards or bank loans clear these as fast as possible - move them to an 0percent interest rate (- pay the 2 percent charge ) and clear them
interest rate are only going to go up maybe by only a quater or even 0.5 but the effects this will have -could be chaos

if you look at your morgage current 5.25% ish a quater percent hike is just shy of 5% in morgage premium but on your credit card this will be * 2 or 3
a half percent hike works out at 9.5% hike in your morgage premium and thats not event at 6% yet

 

[The_Doc_Man]

Yup, a friend of mine who had studied economics for a while (we met on the tennis courts) explained it to me.

The money system is no longer hard-backed by gold bars. It "floats" - which means that exchange rates and other factors can influence value. The "real" value of money is how much it will buy. Inflation is said to have kicked in when it takes more money (in terms of the number of dollars) to buy the same amount. The issue with loans is this: Even if the dollars in the principle of the loan were secured by hard collateral, the interest owed by the borrower is "virtual" money that has to be accounted for in the money supply. Once a bank reports its INTEREST income, that is virtual money made real. And of course, debt kicks into a higher gear when the borrower has to pay back the loan PLUS the interest.

When you study economics theory at that level, you find all sorts of inflationary triggers. Loans, salary demand, price demand, standard of living demands (luxury items) - all push upward, never downward.

The only way to stop inflation (that I know) is to return to a "backed" economy. But that has the negative effect that you run out of money once the backing is exhausted. That stifles growth rate at the national and personal levels. If there is no more money, nobody can work. (Witness the 1929 stock market crash and aftermath, when banks ran out of cash and could not by law hand out credit beyond the level of their secured assets.)

There is one other real way to adjust the money supply, and global warming might just be the thing that does it. Remove the population growth pressure. It's just not a solution I would strongly recommend to anyone.

 

[GaryPanic]

Doc

Again you have hit the nail on the head, a reduction in people will help
however the short terms chaos that will cause will be bedlam.
most finance gurus look at the gold standard (ie the value of gold and other presious metals) - and tis seems to be considered the stadard that we should of stuck to
G

 

[Len Boorman]

There is a simple solution to your pension in the UK.

Become a member of Parliament.

The pension is "gold plated". You do not need pension pot, you make no contributions.

Us tax payers foot the bill.

Simple eh

L

 

[boblarson]

Us tax payers foot the bill.

So U.S. tax payers foot the bill now, I didn't know we added that one on to our spending abroad. (just kidding)

 

[Bodisathva]

So U.S. tax payers foot the bill now

see, now I thought we finally tracked down exactly where all the extra taxes were really going

 

[Pauldohert]

Well - I don't know about this gold standard stuff - gold rises and falls in value and gold supply rises and falls.

An ecomomy "backed" by gold, could easily be "backed" by diamonds if that was deemed of value - or by iron , or anything else deemed of value - hence it may as well not be backed at all - as money is deemed of value???

I know the value of Gold has risen greatly recently and this http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/02/22/cngold22.xml would suggest that investors see it as a standard again.

However I think the real reason is the industrial demand for gold from China and India - and I'm not sure we would want to tie money to that.

 

[Rich]

Well - I don't know about this gold standard stuff - gold rises and falls in value and gold supply rises and falls.

An ecomomy "backed" by gold, could easily be "backed" by diamonds if that was deemed of value - or by iron , or anything else deemed of value - hence it may as well not be backed at all - as money is deemed of value???

I know the value of Gold has risen greatly recently and this http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/02/22/cngold22.xml would suggest that investors see it as a standard again.

However I think the real reason is the industrial demand for gold from China and India - and I'm not sure we would want to tie money to that.

One or two of the very senior members here will remember that the UK came off the gold standard due to the depressions it caused