Pensions – Why are they so bad?

It’s that time of year when  I receive pension statements. I do wonder what the point of a pension is as every year their value may increase (a little) but their payout forecast just drops and drops each year.

This year my paid up personal pension is quoting a ‘massive’ £283 PER YEAR pension when I reach 60 – Wow that is really going to give me enough to live off! ** I did look at re-starting this pension but they want me to get a solicitor to sign off forms to prove my identity!? WTF ?! They know where I live, they have history on me and can check the DD details and ID check me electronically – I still pay contributions to them for something else – so why do I need to provide all this info, just so I can restart monthly payments as a fixed rate ( due to their rules(?) I can only pay in the amount that I was when I stopped it. Which is a pittance anyway).

I stopped it because it was a pension I took out when I first started working and my employer at the time did not have a pension scheme. I then moved job and wanted to join my new employer’s really good company scheme (it was a final salary!) – at that time you couldn’t have two pensions on the go so I had to stop this one. My final-salary pension is now deferred as I have left that employer and I know what that will pay out from 65, they currently guarantee me an annual value. Can I be sure it will still be there when I reach 65 – possibly not if BHS, Hoover, etc… are anything to go by?

The next pension statement was for my personal pension (a stakeholder) which I still contribute to, a small but regular payment. If I retire at 55 (I set the age to this when I opened it to give me flexibility to drawn from that age onwards if I wanted to), I will receive a whole £850 PER YEAR. Not even enough to pay my annual council tax never mind monthly living costs.

The next pension statement received is from my current employer pension scheme. Now, this scheme is a money-purchase – I don’t know anyone who has an active final-salary one now. It’s value is open to fluctuation and heavy interpretation anyway. If I continue to work for my present employer until I reach 65 (which I very much doubt – given the fact that I am looking to leave), I can potentially claim a pension of £3,000 PER YEAR.

I don’t get to claim my state pension until 67 due to the government changes, which could change again between now and then. I also cannot get a figure out of DWP either as due to opt-out years, my state pension value will have a deduction due to SERPs opt-out years, which they will not calculate until I actually reach state pension age. So all I know is that it will be less than £8k per year as I will have opt-out deductions.

That’s why I am so glad I am investing separately to gain some control over my future with savings via ISAs and a SIPP, I can see the value when I want to and do something about it. Well, at least try to do something about it! 🙂

 

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One thought on “Pensions – Why are they so bad?

  1. Still, the £850 + £283 = £1133 less which you will have to find when you come to retire.

    In isolation, those small pension pots seem hardly anything, yet there will be some people who will need to live on that (plus whatever state pension they have) because that is all the pension savings they will have.

    Auto-enrolling is good but it’s only the start – having gotten people enrolled, these people need to be advised that saving a few %, whilst better than nothing, still won’t be enough.

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