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How inequality stretches into retirement:
Of those able to pay into a defined contribution pension over half do not think they are saving enough; that will be an underestimate as people often underestimate how much they need to put in a pension for a 'comfortable' retirement.
And why don'e they pay more in? because they can't afford to!!!
Its no use lecturing people that they need to save more for their retirement, first you need to ensure they're paid more!!!
#pensions #inequality
h/t FT
@ChrisMayLA6 it doesn't help that it's all finger-in-the-air guesswork.
I have no idea if I'm saving enough. I don't think it's even possible to work out, given how unpredictable any investment is. So I may as well prioritise the now and the near-future of the next few months - there are tangible benefits to doing that.
Yes, I think that's not an uncommon response... with such an uncertain future in so many ways, why wouldn't people in constrained financial circumstances prioritise today.... as I said, first raise wage levels!
@ChrisMayLA6 @JetlagJen While wages (really, distribution of wages, inequality, because the economic production is CERTAINLY there) are the obvious biggest problem, data pretty well shows even people with generous wages, eg. fifteen times minimum wage, mostly spend for today too. There's a strong cultural push to ignore the uncomfortable notion that we might not always be able to work, because then capitalism doesn't value you at all. Same root as downplaying long covid.
@ChrisMayLA6 I have dystopic visions of a #future where #governments insist on the “assisted dying” option for the good of society for those who haven’t managed to set enough side for their pensions. The situation in the UK and elsewhere may be the first step. #dystopia #assisteddying #society
Crikey, the sky is dark over you, Alex
@ChrisMayLA6 Yes, I hope it’s just my cynicism and nothing else. Maybe I’ve watched too many dystopian films! Have to admit I found the Blade Runner city to be particularly scary!
perhaps you've 'seen things you people wouldn't believe'.....
@ChrisMayLA6 Ha! Possibly! Fabulous film. Absolute classic but rather dark! (In every sense!)
@KimSJ Yes, that was one disturbing film which was a bit too probable! #shudder @ChrisMayLA6
@alexproe @ChrisMayLA6 I would happily take that option if I was living in absolute poverty, because I know nobody is going to help me & the pain is only going to be felt by me, why would I do that to myself just because society had become cold & indifferent to pain & suffering, what possible benefits could there be. I think society has gone too far down to ever be pulled back, with the media pushing the billionaire narrative & no will to actually strive for the truth, there is no future...
@ChrisMayLA6 I would say that they need to save better and we need to utilize the money better.
A fun thought experiment, is to take the part of your salary that is going toward your retirement. Let's say that each year 2000 GBP goes toward your retirement out of your payroll tax.
Instead of it going into the government pyramid scheme called retirement (which is illegal in the private sector, but not in the public), imagine that it is invested in a no cost index fund in the stock market.
@ChrisMayLA6 Let's assume, over time, that the average annual gain is 8%, and that you work for 45 years (given that we live longer). So between age 25 and age 70, 2000 GBP would be invested for you in the stock market at 8% gain.
Over 45 years the total gain would be about 834852 GBP, which would give you a better retirement for the next 30 years than any equivalent government system in the world.
It would also be ethical, since it would not be build upon forcing future generations to pay
@ChrisMayLA6 for your own old age and comfort.
I'm sure that this would give everyone a much better retirement, and on top of that, no private savings have been used in this example. Any additional private savings would boost this example enormously.
well of course that's pretty much what people paying into Defined Contribution schemes are doing - in the UK these are private schemes - National Insurance is what pays into the national pension scheme, which provides a pension that is barely adequate, but does ensure people don't actually starve in old age.... the problem for many is that while they cannot choose to avoid NI (although the low-paid often are below the payment threshold), they don't have spare cash for the DC schemes
@ChrisMayLA6 Ahh... but first of all, the money (all money) should be invested in no-cost index funds. _Not_ in funds or let public employees play with it.
Second, this is an important flaw in the argument. I assumed that everyone who works full time automatically contributes a part of the salary to NI. But you are saying that the lowest paid fulltimers, do not pay into that system?
In sweden, if you are full time, you pay 31% payroll tax into the national system. No choice. That 31% payment
@ChrisMayLA6 has a ceiling though, so above a certain amount, the rest goes to the politicians.
@ChrisMayLA6 The third point that comes to me, is that the people who do not work will be well taken care of by charity, assuming a more libertarian policy, where peoples money after tax, will increase enormously compared with today.
Yes, the NI system is partly progressive, providing pensions, but more widely than to the actual contributors (although this is tied up with other elements of the benefits system).
@h4890 @ChrisMayLA6 your maths is missing a pretty important point there. yes ~£850k is a great retirement figure today, but to meet it, our hypothetical retiree would have needed to be putting £2k a year into the fund in *1979*, when the UK median salary was ~£5,000 a year. Anyone who could afford to do that is not worrying about their pension today.
No, I'm counting on today and moving forward, and also, the assumption was that this amount comes from payroll taxes. So actually, with inflation going forward, the sum saved will become bigger and bigger, since in my example, the sum saved was static. So if anything, I understated the savings.
@ChrisMayLA6 yes. You can't save what you haven't got.
@ChrisMayLA6 My mother is 88 years old and still working bc she has no retirement account and can't afford to stop. Next June her house will be paid off and she will finally retire a month before she turns 89. Studies vary but anywhere from 25-50% of Americans have no retirement savings and a greater percentage of those are women than men.
yes, I understand that; as I'm based in the UK (apologies if the location of my instance mislead you), the debate here is more about how one supplements the very basic pension that *is* available... which is a little different from the USA, I know
@ChrisMayLA6 thanks for the clarification but I think the basic point you make stands for our system here. The basic minimum wage in the US was last raised in 2009. Meanwhile the Cost of Living has increased by 47% since then. (It costs $1.47 to purchase what cost $1.00 in 2009.) How is anyone expected to save for retirement under these circumstances?
yes, we have a parallel issue here, if not quite as stark.... but as you say the point remains, if you're low paid, being told to save more for retirement all rings rather hollow
@ChrisMayLA6 I'm pretty sure I'm not saving enough, but I can't afford to put more in and I'm also pretty sure pensions won't exist anymore by the time I hit retirement age so 
@afewbugs @ChrisMayLA6 my retirement plan is societal collapse...
Yes, its a difficult issue for so many of us.... and I realise I have been very lucky, unlike many of my younger erstwhile colleagues
Or, you know, collective pension fund which ensures an above-poverty level of pension for everyone...
@ChrisMayLA6 I'm 45, no pension & will have cleared my mortgage by 51, that gives me 17 years to save for retirement. That's if I remain in employment until the end & I don't get ill. My backup plan if I don't make it or it goes wrong will be a stiff drink & a revolver, I never want to be poor or reliant on this country for anything, because they treat people like shit & without humanity, I want to pass on everything I can to the next generation, they are going to need it more than I ever will.
That's rather a grim vision, but one that is unlikely to be your's alone.... of course, you might also realise the capital in your home by 'downsizing'?
@ChrisMayLA6 any capital taken from the sale of a property to downsize would (I believe) be taxed at 40% as far as I am aware, why would I do that? Plus I have lived in a flat, terraced house & a detached house, the fact is I sleep better & relax more when I live with space & room between me, the road & my neighbours. Quality of life is the most important thing to me. I am moving to Scotland soon (from Essex) to improve my quality of life & for a larger property...
Err... no there's no CGT on the sale of your primary residence; and so the capital freed up is yours to do what you wish with....
@ChrisMayLA6 that is interesting, I thought capital gains were owed on all windfall payments...
Well, to be frank, I think they should; and this 'allowance' for the primary residence is in the long-run distorting the housing market, but for now, yes, you can sell your primary residence & pocket whatever gain you make tax free...
@ChrisMayLA6 I must admit that I would prefer to pass the whole thing into my niece, she wants to be a biochemist, is at university & concerned that she may never own her own home, so I am her best hope at financial security, which I am happy to provide...
ah well, the inheritance issue is a bit different - there is •does* depend on how much your house is worth....
@ChrisMayLA6 I doubt my total wealth will ever go above £400,000 so only tax to pay on anything over £325,000, but I can always put my house in a trust, which will help...
@ChrisMayLA6 my best contribution to humanity will be looking after her, someone who will actually make a difference, that will be my legacy...
And of course, if you're moving that far Northwards, you may find you end up with some surplus, again unless the house you are moving from is not your primary residence will be tax free....
@ChrisMayLA6 well there is the government NEST scheme which at least gets your employer to contribute. But at present it is not really designed to give your an adequate pension and you can opt out if your need all the money you earn to live.
https://www.nestpensions.org.uk/schemeweb/nest/my-nest-pension.html
yes, I haven't been that convinced the NEST is much more than a marginal issue in the national pension problem
@ChrisMayLA6 maybe marginal at present, but doesn't it offer a possible, regulated framework for doing it better in future?
Maybe.... but I guess the Q. is political will to expand it - what might be interesting would be if Reeves new fiscal rule encompassed it making it a national asset 9as it were)?
@ChrisMayLA6 noting what they (NEST) are already saying about investing in UK infrastructure.
Reeves needs to cast her net wider than creating super funds for LGA pensions.
Better our private pensions get invested in infrastructure via NEST than just putting their money into it via Private Equity.
yes, good point! Although I'm a little queasy about stipulated pensions should be mandated to invest in specific ways - its starts to play a bit fast & lose with fiduciary duties of pensions trustees?