Is it worth having a pension?

[-]

Milam1996@reddit

Anyone who doesn’t join their workplace pension is quite honestly an utter moron. It’s literally free money and a shit load of it. Nest is fine just move your fund to the high risk fund so you aren’t wasting your time and potential money the other funds are kinda shit. Make sure you’re also building an emergency fund and then start a S&S ISA.

[-]

bars_and_plates@reddit

I agree for the most part however there are some edge cases.

As a 45 year old, set up, in a stable job, it's really hard to beat having a 2x matched pension contribution that you can withdraw ten years later.

As a 20 year old there are often ways to make a greater than 2x return from your money over 35 years. An example would be that paying for driving lessons will give you the ability to increase your annual earnings, training in a specific discipline (something high paying like law, economics) etc.

I generally think that enough people just don't even think about lifetime earnings that you are correct for 95% though. People just sort of womble through life and do stuff and hope not to be skint.

[-]

Milam1996@reddit

If you’re only doubling your money in 35 years in a pension you’re genuinely thick.

[-]

bars_and_plates@reddit

I'm talking about the instantaneous doubling via the match from your employer.

[-]

UnusualOstrich8568@reddit (OP)

By emergency fund is that my current savings account? I have my savings account I don’t touch and my normal spending account which is around 25% of my wage.

[-]

Milam1996@reddit

An emergency fund is just for that. When your engine blows up. When your boiler breaks. Actual emergencies. Its purpose is so you don’t have to go into debt. It should be 3-6 months of your net income. After that you should be investing your money having it in a savings account is losing you money.

[-]

t8ne@reddit

Not that I agree with not joining a scheme, but when Torsten Bell spoke ~last year about removing the state pension from people who have a private provision created a weird deadzone like the 100k child benefit problem where if you contribute to pension you could be worse off than if you didnt.

That said torsten didnt give any numbers and it’s not yet labour policy as the unions pushed back and would need public sector workers to keep it no matter the size of their personal provision.

[-]

Milam1996@reddit

Some dude saying something who won’t even be anywhere close to power when a 25 year old retires should not be how you retirement plan. Everyone should be planning for retirement as if the state pension doesn’t exist. The maximum amount you can get is 241 quid a week. Idk about you but the idea of spending my retirement on 241 quid a week makes me depressed just for the thought.

[-]

t8ne@reddit

Torsten Bell was appointed as Parliamentary Secretary for the Treasury and Parliamentary Under-Secretary of State for Pension; not sure why you think he’s not close to power, especially around pensions.

And pensions meddling are things that blow up way in the future eg Lamont & Brown breaking final salary pensions

[-]

Milam1996@reddit

I mean near pensions now and near pensions in 40 years is totally different. Removing state pensions for people with private pensions whilst keeping the triple lock might be the single most brain damaged move of all time. People spit ball ideas all the time it doesn’t mean anyone’s even looking at it never mind considering it.

[-]

t8ne@reddit

True, i was just trying to understand why some people don’t like “free” money and all I can think is people who bought into the means testing state pension rhetoric.

I also often find that the venn diagram of people who say something whilst doing the opposite is almost an eclipse.

[-]

Particular_Tune7990@reddit

Yeah 'risk' is a strange word in investment. Low risk = guarantee of not beating inflation so much higher risk to your later wealth in fact. (not even a risk - bonds and cash will deprectiate - basically a guarantee). Only move funds into low risk when you're approaching retirement (last 5-10 years).

[-]

cypherdious@reddit

The only risk to a pension scheme is when the funds are stolen like the Robert Maxwell case. Otherwise its a good nest egg for when you retire.

[-]

mhoulden@reddit

With my company pension, if I put in 4% of my salary the company puts in another 6%. If I put in 5% or more they put in 10%. For a reduction of about £20 a month of my net pay I'd get an extra £200/month in my pension fund. Not a difficult choice.

Pensions usually include some sort of death in service benefit. Any remaining funds are also refunded to your estate. That should cover any funeral costs. I've been an administrator for someone who had no pension and virtually no savings, and it wasn't fun.

[-]

ReflexArch@reddit

Do those same people who say don't invest in your personal pension also complain about the debt of the country and people being a burden of the state?

[-]

DECKTHEBALLZ@reddit

Can you survive on a state pension?

[-]

RainysPlanet@reddit

i dont have one (im 31) i cant afford it going out of my paycheck every month as i live paycheck to paycheck. Also cant guarantee ill even live that long and from what i hear the government is just taking it away from us in tax anyway

[-]

ProfessorYaffle1@reddit

You hear wrong.

When you contribute to a pension, the tax is added back in. When you draw a pension, it is treated like any other income so if your total income is higher than the annual tax free allowance, you pay tax on the income above that basic rate.

Currently, the basic allowance is £12,571, which means you don't pay any tax on your state pension, but will pay income tax on your private pension. Under current rules, that basic rate is 20%, and you on't pay NI once you are retired.

If you are an employee, then your employer is legally required to pay into your pension. You employer MUST pay in at last 3% of your salary and you pay 5%.

So if you were on minimum wage working full time,, you would pay in 5%, or £1,156 a year, your emplpyer would pay in £693.96 a year , and the government would gross up your contribution so would add 20% to your contribution, so would pay £231.20 a year.

So, your payments in of £1,156 results in you having £2,081 in your fund.Then that money is invested and you get the return on it added to your fund.

That £1,156 is £96 a month, or £22 a week

I get that when you are living pay cheque to pay chque it's hard to put aside even a small amount aside, but it is very much worth trying to do so.

No one can guarantee how long they will live. If you were to die before you retired, then your spouse or children , or other beneficiairies, would get the meoney from your pension

[-]

RainysPlanet@reddit

That extra £1000+ a year is the difference between starving to death and being able to put fuel in my car so I can get to work. I opted out because I cannot afford having less money. I have no subscription services, not debt and nothing on finance, I work full time and live alone. I do what I can to survive now not for a future I cannot guarantee

[-]

Tall_Stick5608@reddit

Yes it’s the sensible thing to do, and what you are saying makes complete sense. However someone like myself who has had a serious chronic illness since 15 and 9 surgeries before I hit 37 years old. Had such a fractured work history due to my health I’ve made that decision to not pay anything and enjoy whatever I can while I have the health. Even if I live longer I will probably have some sort of care / food and I don’t have or plan to have any children to pass it onto.

[-]

MediocreMan_@reddit

If you could afford to pay into it however, would you?

[-]

RainysPlanet@reddit

Probably not, I cant even afford to go anywhere id rather save that extra money where i can and go on a cheap holiday, see a bit of the world or even the UK, just to get a chance to live a little now, rather than a future I cant guarantee I'll be around to see.

[-]

Deep_Pepper_5405@reddit

Are they talking about Nest pension spesifically and they would reccomend a different private pension company. Or are they talking about general consept of paying into pension?

[-]

Tall_Stick5608@reddit

I don’t plan to live that long

[-]

Skylon77@reddit

Easy to say when you're ypung.

I remember a mate of mone, when we were about 23, saying "I don't plan to live beyond 60. What's the point?"

We're both 50 this year and he's somehow changed his tune.

[-]

Deep_Pepper_5405@reddit

I had a bit more depressing interpretation of the comment...

[-]

Ok-Blackberry-3534@reddit

The gods laugh at your plans.

[-]

stonesco@reddit

I am aware that I am about is very unpopular and will likely will receive me a lot of downvotes.

They are only a few circumstances where opting in to a pension, is worth it:

You are on a Defined Benefit pension scheme.

or/and

Your employer pays above the minimum 3% contribution. I would say 4%+ excluding tax relief.

Alternatively employer changes their contribution percentage, depending on how much you put in.

or/and

You’re over the age of 35.

Previous governments have raised the Private Pension withdrawal age and I am 100% guaranteed that future governments will do it again because they have no choice. My prediction is that it will be 60+ within the next 15-20 years.

You have got to weigh up the options for yourself. For me, My main focus for retirement savings is in my ISA + GIA for the flexibility. Even some higher rate / additional rate taxpayers may prefer this option.

I am aware that I will have a lot of commenters saying “Your stupid, you are missing out on free money from your employer and the power of compounding” or “ This is tax inefficient”.

If you feel that a pension is the best retirement investment vehicle for you, go ahead. The reason I say this is because the age you are.

[-]

ProfessorYaffle1@reddit

Listen to your mum.

Nest isn't necessarily the best provider, but the free money from your employer makes it worth doing. At your age, select the hgher risk funds, and if/ when you change jobs you may want to talk to a finacial advisor and move the fund to a different provider

Your employer has to pay in a sum equal to 3% of your salary, so chosing not to join menas you are taking a voluntary 3% paycut, as well as giving up the 20% extra that the govenment gives you on your contributions (i.e. for evey £10 you pay in You pay £10, your employer pays £6 and the tax man adds £2, so you get £18 for your £10 investment.

You employer doesn't have to add any more than the 3% of your salary, but some will match your contrinbutions so if you chose to pay in 8% instead of 5% , you might get your employer matching that extra 3% and paying 6% .

[-]

benjymous@reddit

There's a psychology experiment they do with children - put a sweet on a plate in front of them, and say "I'm going to leave the room for five minutes, if this sweet is still here when I come back you can have ten sweets"

I bet the people you were speaking to would eat that sweet before the person had even left the room.

[-]

peppermint_aero@reddit

Just so you know, that experiment has been thoroughly debunked because it didn't take account of any contextual factors for the kids and it didn't safely predict future behaviours at all.

That said I agree with the main point of your comment which is that it can be difficult to turn down something now in favour of something bigger in the future, but it's usually worth doing.

[-]

doctorgibson@reddit

Yeah. The earlier you start, the earlier you can start to take advantage of compound interest

[-]

peppermint_aero@reddit

This is the key. I know pensions don't sound sexy or cool. But if you put just a little bit away, it will be SO ADVANTAGEOUS later in life. Imagine having the freedom to become work-optional sooner.

[-]

GooseyDuckDuck@reddit

As someone 30 years your senior, and was late to jump on the free money bandwagon - yes it's worth it.

The longer you leave it the harder it will be to build that pot.

Every penny you save in a pension now, along with the free employer contributions will grow and compound over the years. Also, it's pre tax, so every penny is actually worth more, as it comes out before tax.

[-]

One_Water_2323@reddit

Stay in the pension - for years it will look like it’s not doing much, but the long term outcome will beat any other savings plan - although it’s subject to successive governments rule changes.

I am 66 and retired and bless the day I started taking retirement planning seriously at 28. The current state pension is not enough to live on and for your generation will be even worse.

My advice would be to increase your contribution by 1% every time you get a payrise - you’ll be startled at the difference it will make over time.

Pensions are a marathon, not a sprint- pay into it and educate yourself about the subject so you can have a clear plan about where you want to end up. If you don’t have a plan you can’t adapt your plan when life throws difficulties in your path.

You will be so happy you did it - in the unimaginable future when you’re in your sixties.

It will come faster than you can imagine trust me, I’m 66 and 25 feels like yesterday.

I wish you well, you are at a fork in the road right now - choose the right path. Do it for yourself.

[-]

InvestigatorSoft3606@reddit

100% although I’m yet to see the benefits quite yet!

I also didn’t care too much about pensions when I was 25, but now I’m 45 I can kind of see the finishing line in terms of retirement.

Probably still 15 to 20 years away , but I’m more than halfway through my working life.

What I’d urge you to do is have a plan of some kind - what age do you want to stop working?

Personally I want to retire asap - I’m tired and it’s only going to get worse! I recon if you think you will want to retire before state pension age then planning and investing now is going to pay off in the long run.

[-]

lesterbottomley@reddit

I'm getting close (ish) to retirement here.

Considered getting one at your age, didnt, regret it now.

The wise person learns from their mistakes. The wiser person learns from the mistakes of others.

[-]

Ambitious_Jelly3473@reddit

The only time a pension is not a good idea is if you plan on dying before you receive it and leave no dependents.

So, if your long term planning revolves around offing yourself at 50, then go ahead a remove yourself from the scheme.

If however, you hope to live to a ripe old age, start stacking cash away ASAP. I didn't start a proper pension until I was 32, and I'm way behind some of my peers when it comes to thinking about a happy retirement.

[-]

LittleSadRufus@reddit

For a work pension scheme, I would only contribute an amount which maximises the employer contribution, as this is free money. E.g. if I put 8% of my salary into my pension my employer adds 12%, but that's the limit on what they'll contribute so I'd never do more than 8%.

Further savings are probably better in either in an ISA or - if you want a bigger pension pot, but not access until retirement - a private pension scheme where you have more control over it.

[-]

JackfruitPractical84@reddit

Definitely do not pull out.

[-]

FlippingGerman@reddit

Aye, children are your retirement plan.

[-]

First_Folly@reddit

It is complete insanity to not have a pension. Unless you are disgustingly wealthy it will mean financial security when you can lo longer work or will mean if you want to retire early you can do so.

Having a pension that you contribute to is exceptionally important, because state pension alone will not see you having a good time.

[-]

Few_Dog7603@reddit

I read that as penis… damn 🌞

[-]

Harvsnova3@reddit

Stay in the pension and don't listen to your colleagues. I'm retiring 9 years early in June thanks to my forces and my workplace pensions. The workplace one I've been putting in 10% matched since 2007, the forces one is DB, so rises with inflation. Although people moan about how much the state pension costs, it's really not enough to live on, on it's own. You need your own pension too.

[-]

Gullible_fool_99@reddit

I am just approaching 59 years old. I started a pension when I was 19. I then decided I didn't need it a few months later and cancelled it. I am regretting that now as there is a good chance I will not be able to afford to retire.

Keep your pension going. Even if you contribute only a small amount each month it is worth it.

[-]

eveniwontremember@reddit

If the employer is adding more money then it is worth having a workplace pension. The debate is about how much more you should add when they stop topping it up. Pay off expensive debt, build an emergency fund, before any arcs on the pension.

I didn't have a proper emergency fund until we were 40.

[-]

Apprehensive_Jaguar@reddit

Retired at 57. Guess what my advice would be.

[-]

Accurate-Ad9790@reddit

My company put £100 in my pension every month back in the early 00's currently stands at £44,000

[-]

Morganx27@reddit

I'm a similar age to you, and yeah, it's shit to not have access to some of your money - but work out how much it actually is. You'll soon find that you could definitely live without that money, and future you will thank you.

[-]

-aLonelyImpulse@reddit

Brother, at this rate by the time you reach retirement age the state pension will be 50p and a ration of Government Standard Issue Mild Cheddar Flavour Nutrition Block. Take the work pension.

[-]

HistoryDisastrous493@reddit

The people who said they'd never join are idiots.

Pension is incredibly important, and the sooner you contribute to it the better. Increase your contribution if you can, at least up to what your employer would match

[-]

ProjectZeus@reddit

It's the only thing prevented me from having to work until I'm 67.

I'm fully expecting the state pension to be gone by then.

[-]

Mickleborough@reddit

Definitely save for old age. Unlikely to be able to survive on state pension alone. You make even want to top it for a comfortable retirement.

[-]

Extreme-Dream-2759@reddit

How long do you want to work for?

You have at least 43 years to go until you get the state pension, assuming they don't push it back more.

The earlier you start a pension, the better off you will be when you retire. You can also choose to retire earlier. When you still have the energy to enjoy it.

[-]

subbiedavie@reddit

100% worth doing. Your contributions come out of your gross salary so are not taxed which means you are effectively getting free money.

[-]

172116@reddit

The earlier you start putting away money, the less of your salary you need to put away each year. Furthermore, your employer will be making their own contribution, which you won't get if you don't contribute - you'd be leaving money on the table.

Absolutely do not opt out of your pension.

It may be worth you sitting down and having a think more generally about your finances and what your long term goals are.

[-]

Nomis1982@reddit

Also have a think about the utter morons in your life who speak negatively about pensions.

[-]

Ok-Cold3937@reddit

This. Someone said the other day to me ‘What’s the point, I’ll get the state pension - my grandparents do ‘alright’ on the £200 a week they get’ Sigh…

[-]

Nomis1982@reddit

Goodness me.

[-]

VolcanicBear@reddit

You should definitely pay into your pension. It is literally free money. I seriously question the intelligence of anyone who doesn't pay into one of they're not on £200k+

I'm 40 and I'll be somewhat pleasantly surprised if there's a guaranteed state pension when I retire.

[-]

OptionalQuality789@reddit

Yes, anyone who opts out is an idiot.

[-]

mad_saffer@reddit

The more you put into a pension now, the more comfortablely you will be able to retire. I know people who thought having a pension was pointless. They had to work until they were 82. 82!!! I'm only going to be able to retire at 70 and will be paying off my house for a year beyond that. My pension is not enough to cover the mortgage payment. I'm 50. I'm putting 30% of my monthly salary into pension. It's not enough.

[-]

Real-Box-7144@reddit

It absolutely is. Free money, saving on tax and the longer invested the better returns, (usually).

[-]

CtrlShiftAaron@reddit

The earlier you start the better

If I could go back 25 years I’d start investing at the age of 20 into not only my pension but also into index funds because compounding interest could see you as millionaire before you reach retirement age. Or at least well on the way.

I started investing into my pension at 25, so a little late but I grew up in a cult which believed the world would be destroyed before I reached adulthood so.. thanks Dad for wasting my childhood

[-]

811545b2-4ff7-4041@reddit

If you get a workplace pension, you get:

Your employer contributing to it
You get to pay in tax-free money into it
An inability to blow it before you retire

25 year old you will think it's pointless and you could spend the money better now. 45 year old you will slap 25 year old now for turning down free retirement money.

[-]

GreyOldDull@reddit

67 year old you would like a word also!

[-]

Upstairs-Quail5709@reddit

Ask if in 45 years could you live on the state pension? Compare state pension today with food, rates, energy costs. Plus average local rent.

Does your employer contribute a similar amount?

[-]

Geezer-McGeezer@reddit

Abso-fucking-lutely. I am 60 and wish..

I had started one earlier
I maintained the ones I did have
I had put more of my own money in.

Never too late to start !

[-]

Paul2377@reddit

It's up to each person, but I feel it's worth paying into a pension. The earlier you start, the longer your money has to grow. Also - depending on the scheme type - your employer generally matches your contributions - so effectively double money is going into your pension.

If you opt out of the scheme, your employer won't give you the equivalent of any pension contribution, so you'd effectively miss out on that benefit.

I've been contributing to a pension since I was 22 and, while I'm glad, my pension pot isn't as large as I'd hoped by now. But if I hadn't contributed at all I'd have nothing and would be really worried about retirement, because I doubt the state pension will be enough for me to live off, if it's even still available by the time I retire!

[-]

andymarkpeel@reddit

You absolutely need a private pension.

Each company uses a different pension provider. Nest is one of the big ones though.

Stay with Nest until you change jobs. When you change jobs, move your Nest pension to the pension provider that the next role and combine the two (assuming you're not getting any additional pension benefits). It's very straightforward.

The small amounts you pay in now compound over time, meaning by pension age that few hundred quid you pay in now will be worth thousands.

Read up on it with the help of Martin Lewis – https://www.moneysavingexpert.com/pensions/how-pensions-work/

[-]

Consistent-Candle873@reddit

Nah dont have one complete waste......is what Id say if you planned to never get to retirement age (which at this rate who knows when it would be).

I know people in thier 50s/60s with no pension and they honestly have no idea what hheyre going to do, but yeah im 33 with a projected pension of like £160k + whatever the goverment will give me and that worries me.

But youre basically getting free money from employer

lowering your tax contributions

and you never know what the situation will be in the future

[-]

Particular_Tune7990@reddit

can't really add anything except that at 25 I was also thinking like you and other people were moaning about having to pay the pension contributions from their wages.

I'm now 55 and - DAMN - am I glad I did contribute. 30 years later and my pension is by far my biggest asset and is an absolute goldmine compared to if I hadn't bothered. £22k a year guaranteed income already - assuming I stay as I am now - with further contributions - more like £30k a year. (and there's a lump sum of 3x that on top). Now consider all debts payed off by retirement most likely. And that's on top of state pension.

As others have said - it is extremely foolish to not pay in - but it's very hard to see that when you're in your 20s - I remember thinking the same thing.

[-]

Glittering_Box4815@reddit

To be blunt, people who are against it are idiots.

Unless you want to be working for a basic quality-of-life during your retirement, then you need to do this. You're going to need a minimum (In 2025 numbers) of £13k a year to have a basic quality of life, around £30k to have a good retirement, you're not going to get this by just having a state pension.

Also don't rely on the state pension, it likely will not exists in its current form when you retire.

[-]

MediocreMan_@reddit

No disrespect, but I wouldn’t consider any other financial opinions from your colleagues who said pensions are negative.

Keep paying into it, and just pretend it’s money you never had.

[-]

Kvark33@reddit

RemindMe! 2070-04-30 I want to see how this turns out

[-]

BillyJoeDubuluw@reddit

The earlier you take a pension pot seriously the better. There really are no if’s or but’s with that… If you weren’t born with a silver spoon in your mouth and you don’t want to scrimp and scrape in shit street you need to take your older years seriously.

[-]

jay19903562@reddit

Whilst nest isn't the best provider.

You are basically turning down free money from your employer by opting out of the workplace pension. Your employer is legally required to pay at least 3% or your pensionable pay into the pension, even though it doesn't sound a lot with some compounding it can be worth something.

This isn't financial advice but if it were me Id register for a nest account to manage it as well and make sure the money isn't in default funds but instead if you are young and a long way off retiring that It is invested in equities. There's risk with equities but if you are a long way off retiring you have decades to recover from any market drops.

And if it isn't a forever job you can always transfer it out of nest at a later date into a better scheme.

[-]

Historical_Project86@reddit

Yes it's worth having a pension, the majority of it is "free money" after all. People argue over what form it should take, but by default just do while you figure out if there's some better way of not starving in old age.

[-]

Nomis1982@reddit

Why, THE ACTUAL FUCK, would people speak negatively about a pension? OP, ignore them. Joining the pension scheme is the most sensible thing you will do with your life. It grows, and grows, and grows. Think about yourself at retirement age, and think about how you'll look back and remember this conversation.

[-]

yepyep5678@reddit

Yes, it's the most tax efficient way to save money.

Downside is you can't access it till the government says you can which can change.

Mitigate the above with a lifetime isa which can help bridge the gap between when you want to retire and when you can access the pension.

In summary, yes a pension is worth it. Future you will thank past you for it.

If you can, max out the pension up to the workplace max contributions

[-]

Tim-Sanchez@reddit

It's free money, your company contributes to it as well as you
It's pre-tax, so the amount added to your pension is much more than you earn
It compounds, meaning the earlier you add money to it, the more it grows
Given our demographics, at 25 by the time you reach state pension age it will likely be tiny. For any chance at a comfortable retirement, you need a private pension

I know it's tough to give up money today for more money tomorrow, but you'll regret it massively if you opt out. How does anyone who opts out plan on retiring?

[-]

LordAnchemis@reddit

When speaking to some people they said they’d never join (I haven’t mentioned I have), and spoke quite negatively about it.

Great strategy for planning for old age poverty

[-]

When replying to submission/post please make genuine efforts to answer the question given. Please no jokes, judgements, etc. If a post is marked 'Serious Answers Only' you may receive a ban for violating this rule.
Don't be a dick to each other. If getting heated, just block and move on.
This is a strictly no-politics subreddit!

Please help us by reporting comments that break these rules.

I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.