www.bbc.co.uk/news/business-55070292
Over time, the value of their pensions could be thousands of pounds less than they might have expected.
In 2010, George Osborne as chancellor switched public sector pension annual uprating from RPI to the, mostly-lower, Consumer Prices Index (CPI) measure of inflation.
IIRC MP's pensions were left on RPI
Tom Selby, from investment firm AJ Bell, said: "From 2030 onwards the message is unequivocal: if you are negatively impacted by this, tough. The government is clear it will not provide any kind of compensation to those who lose out as a result of the downgrade in the value of RPI."
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>> IIRC MP's pensions were left on RPI
Pretty sure they shifted to CPI in 2011 with other public pensions.
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Thanks x 2 for CPI corrections
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>>cut in value of workplace pensions
That is why you should always try to have a Plan B & C - alternative savings pot(s).
I was in a final salary scheme for quite a few years then other schemes - the only people that made money out of the money purchase schemes were the insurers .
My pension savings were little better than a Post Office savings account - little/modest growth and high charges saw to that. The annuity rates collapsed from say £10 to half that 15/20 years ago and I think they have kept on falling.
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Didn't annuity rates start to pick up again 2 or 3 years ago?
What I didn't like about the money purchase scheme was having to choose from 8 or 9 funds where my new money went and where my existing money was saved. I preferred when the pension experts made those decisions, as I was an IT person not a finance one. Having said that I did pretty well out of them though a few decision went the wring way. I've no complaints.
Of course the real benefits of "saving" via a pension are usually the tax break and the employer contribution, though the latter is usually less generous now than "back in the day".
I don't imagine many would have the time, knowledge, interest or desire to manage a savings plan to try to outdo a sensible pension. That's not to say you oughtn't save alongside a pension when you can. I know some who invested in property rather than a pension but they tended to be higher earners and a bit more finance savvy.
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>> That is why you should always try to have a Plan B & C -
>> alternative savings pot(s).
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I don't think most people have a plan A. I remember seeing a stat about 5 years ago, 35% of households have less than £100 in savings.
I can't remember the exact % but it was a lot of people in the UK.
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50% of people that retire today have next to nothing - rented home, very little pensions to add to the State Pension, not only that they have next to no savings and more likely have debts.
Very few things in life can be forecast HOWEVER retiring age is known + the odd year added.
You need to save for decades to live comfortably in retirement but 1/2 the population have very little spare cash when working and therefore savings, pensions etc are next to non-existent.
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>>That is why you should always try to have a Plan B & C - alternative savings pot(s).
My plan B was shares. With my major holding announcing no final dividend this year and no divi at all next year, I'm hanging on plan A until 2030. If I make it to then, I'll probably be so doo-lally I won't be bothered.
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Reality is tough!
Home ownership amongst those over 65 is ~75%. This probably explains the attractiveness of home equity release particularly for those who have little alternative pension provision.
Increased life expectancy and more education makes pension savings tougher. Contrasting changes over (say) the last 20-30 years:
- leave education at 18, work to 65, die 75 = 47 years working for 10 years pension
- leave education at 22, work to 65, die 82 = 43 years working for 17 years pension
Annuity rates are now around 2.5-5.0% depending on inflation proofing, partner pension etc. 20-30 years ago rates of 10% were common. This means that to get a £10k pa pension you now need savings of ~£250k compared with £100k previously.
For those currently retired who may have benefitted from good jobs and final salary pensions (at least in part) - no problems.
Those approaching retirement and wanting a reasonably comfortable existence need to have savings of £500k simply to generate an income of ~£20k (+ state pension).
This is not the sort of sum most can make up in the 5-10 years after the kids have left home and the mortage paid off. You need to start saving much earlier - no later than age 40, preferably earlier.
And for those who never had the income to save material amounts whilst working (some self employed, profligate, or low paid jobs) retirement will be tough. Part time work into their 70s is the likely best route forward if health permits.
Last edited by: Terry on Thu 26 Nov 20 at 12:49
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Millions face cut in value of workplace pensions - Lygonos
