Money Want a decent pension? Workers need to save 12% of their salary, says industry report - and employers should pay the lion's share

18:35  05 july  2018
18:35  05 july  2018 Source:   dailymail.co.uk

Over-50s to get savings and pensions help

  Over-50s to get savings and pensions help People in the UK aged 50 or over will start to receive "wake up" packs every five years under proposals published today by the Financial Conduct Authority (FCA). The chief City regulator wants the packs to include a one-page headline document, setting out the options for people as they consider whether to access their retirement savings under the pension freedoms put in place by George Osborne, the former chancellor, three years ago.The packs will also include appropriate risk warnings aimed at preventing people from blowing their savings.

The government has set minimum amounts that employers and workers have to contribute to their pension . It says that after charges a 30-year-old earning £20,600 would retire at age 68 with a final pension pot of £76,300 assuing 8% of the salary was paid into Nest.

Millions of pension savers are in the dark about whether they are on track for a comfortable retirement financially, a report warns. The report also said minimum contribution levels for automatic enrolment should be boosted from 8 per cent of band earnings to 12 per cent of total salary between 2025 and

Workers should save at least 12 per cent of their salary into pensions and employers should be made to stump up half of that, according to a new report.

A big ramping up of retirement saving is needed because once final salary pensions become extinct, as just three per cent of savers in stingier modern schemes will be able to afford what is presently considered a comfortable retirement, it claims.

Savers should also be given meaningful retirement targets factored on real-life ambitions, such as being able to afford an annual holiday, a reasonable car, meals in restaurants and bottles of wine, recommends an influential pension industry group.

That will have dented his pride! Distracted lion loses his footing and tumbles into a pond in a German zoo as his friend looks very concerned

  That will have dented his pride! Distracted lion loses his footing and tumbles into a pond in a German zoo as his friend looks very concerned In this hilarious video one of the proud beasts takes a tumble - directly into an artificial lake in its enclosure in a German zoo. His feline friend looks on bemused from the bank before rushing to help. King of the Jungle he may be, but even the noble lion is prone to a gaffe or two. In this hilarious video one of the proud beasts takes a tumble - directly into an artificial lake.Two lions at a German zoo are seen padding around the edge of a body of water inside their enclosure.They are being filmed by visitors on a viewing platform above.

A separate report from Royal London found that people in some parts of the UK might need to work into their 80 s if they wanted to achieve the same standard of living enjoyed by their parents. Someone on the national average wage who starts saving for a pension at 22 and pays in only the statutory

This is especially true of younger people who are tying up the money for longer, but if they save outside a pension , they need to avoid dipping into their savings except in a real emergency." Richer pensioners should lose some benefits, says thinktank.

a group of people sitting at a table: Savings target: Workers should put at least 12% of their salary into pensions - but employers should have to stump up half of that, the report suggests © Provided by Associated Newspapers Limited Savings target: Workers should put at least 12% of their salary into pensions - but employers should have to stump up half of that, the report suggests

The big auto enrolment drive means many more people now have a pension, but the minimum savings rate was just two per cent until April this year.

It has now risen to five per cent and will go up again to eight per cent in April 2019, half of which will be paid by the employee. The rest is made up of employer contributions and tax relief. 

See below for how contributions are divvied up between savers, employers and the Government

But many people wrongly think the minimum is the 'recommended' amount they should save and has been set to ensure everyone will be comfortable in old age, according to the study by the Pensions and Lifetime Savings Association.

Steel giants merger deal 'will safeguard jobs'

  Steel giants merger deal 'will safeguard jobs' A merger deal between Tata Steel and German firm Thyssenkrupp promises to secure jobs and investment in the UK industry, unions have said. The "50-50 joint venture", which will create the second biggest steelmaker in Europe, ends years of uncertainty over the future of plants, including Britain's largest works at Port Talbot in South Wales that employs 4,000 people.Tata says it has made a specific commitment that its ambition is not to have any compulsory redundancies in the UK as a result of the tie-up, which took more than two years to negotiate.

It’ s a perfect storm of problems: the end of the final- salary pension scheme, a failure of subsequent workers to save enough to account for this, and increasing life expectancy. A fall in the number of people who own their homes also means many will pay high rents long after their parents had

Retirement income targets should be introduced to help people save the amount they need , the Pensions and Lifetime Savings Association has said . The report also said minimum contribution levels for automatic enrolment should be boosted from 8% of band earnings to 12 % of total salary

What are final salary and defined contribution pensions?

Generous gold-plated defined benefit - or final salary - pensions provide a guaranteed income after retirement until you die.

Most private sector employers have now replaced them with stingier and riskier defined contribution pensions.

These take contributions from both employer and employee and invest them to provide a pot of money at retirement, but the worker bears all the investment risk.

The report says: 'The vast majority of savers do not understand retirement savings, do not know what sort of income they should aim for in retirement, and do not know how to achieve it.

'The state pension, private pension savings and property assets are the most significant sources of wealth that most people possess,' it goes on to add. 

'Future generations of retirees are, however, much less likely to have sufficient assets to generate an adequate retirement income.'

Savers underestimate the cost of living at retirement, says report, eating into how far their pension will stretch

  Savers underestimate the cost of living at retirement, says report, eating into how far their pension will stretch Britons regularly underestimate the cost of living and how much they need to save for a comfortable existence at retirement, according to a new study. On average, savers expect living expenses to account for 38 per cent of their yearly retirement income, but existing pensioners say they shell out 53 per cent to cover these costs. In addition, the survey of more than 1,000 British investors by fund manager Schroders, suggests that the next wave of pensioners could be for an income shock.

A worker agrees to pay in a certain amount per month into their final salary pension , say 6 per cent of their earnings. In return, their employer will pay them a set chunk of their final salary for every year they have worked there, such as one-sixtieth.

Final salary pensions are now extremely rare because they are not cost effective. In contrast, with a defined contribution scheme, workers pay in a percentage of salary , typically matched or more than matched by employers , and they must rely on investments for their pot to grow.

Workers should therefore be made to pay a bigger proportion of their salary into their pensions, but employers must bear the brunt of the increase, according to the PLSA's proposals.

The chart below shows the minimum that savers, employers and the Government pay into pensions now, what that is already scheduled to increase to next April, and what the PLSA reckons it should rise to by 2030:

a screenshot of a cell phone: Number crunching: Workers currently pay in the most, but employers should bear more of the burden while the Government continues to make up the rest with pension tax relief, according to the PLSA © Provided by Associated Newspapers Limited Number crunching: Workers currently pay in the most, but employers should bear more of the burden while the Government continues to make up the rest with pension tax relief, according to the PLSA

Previous PLSA research indicates that at the contribution rate of eight per cent of salary, 94 per cent of people are likely to achieve the Joseph Rowntree Foundation's minimum income standard - a commonly used measure of basic living requirements - by the time they retire.

The minimum standard figure was £9,998 a year in 2017.

But just half of savers would have enough to meet the usual yardstick for having a comfortable retirement - two thirds of your income before you stop work, otherwise known as the 'target replacement rate' - by the time they stop work.

Jailed Drumm gets to keep €4.4m pension pot 'protected by Irish law'

  Jailed Drumm gets to keep €4.4m pension pot 'protected by Irish law' Creditors of David Drumm have been unable to lay claim to the disgraced former Anglo Irish Bank chief executive's €4.4m pension pot.But a US bankruptcy trustee has concluded the massive pot is protected under Irish law. As a result, it could not be cashed in for the benefit of creditors, who include Anglo's successor IBRC.

How much should you save for decent retirement? Young workers told, put 18 PER CENT of your salary into a pension . 'Adequate' pension income defined as 70% of average earnings in working years.

Resolving the American Pensions Crisis: The Role of Workers and their Employers If the pension crisis in America is to be resolved, it is crucial that the government adopt a similarly evolutionary approach.

And just three per cent of people who only save into defined contribution pots, and have no final salary pensions, would reach this goal, claims the report.

The TRR for someone earning the median - meaning the middle - income of £28,600 in 2017 was £19,162

a screenshot of a cell phone: Who pays what? How pension contributions stack up under auto-enrolment schemes (Source: The Pensions Advisory Service) © Provided by Associated Newspapers Limited Who pays what? How pension contributions stack up under auto-enrolment schemes (Source: The Pensions Advisory Service)

The PLSA also gives a list of reasons why future generations of retirees are likely to struggle financially - the decline of final salary schemes, low contributions into defined contribution pots, lower levels of home ownership, increased longevity, and higher social care and housing costs.

In addition to recommending a higher minimum contribution rate, the PLSA is working on new retirement targets based on real-life financial goals people might have for old age, including holidays, meals out, decent clothes and haircuts.

It plans to release more details early next year, but says there should be three target levels roughly corresponding to 'minimum','modest' and 'comfortable' standards.

The PLSA has looked at similar work by the Association of Superannuation Funds of Australia, which has created pension saving targets linked to the affordability of various goods and services . See below for how this might work:

a screenshot of a cell phone: How does Australia promote retirement targets? Savers are given goals like being able to afford an annual holiday, a reasonable car, meals in restaurants and bottles of wine © Provided by Associated Newspapers Limited How does Australia promote retirement targets? Savers are given goals like being able to afford an annual holiday, a reasonable car, meals in restaurants and bottles of wine

Nigel Peaple, director of policy and research at the PLSA, said: 'Millions of savers are in the dark about whether they're on track for the lifestyle they want in retirement.

'With future generations unlikely to have the same levels of property wealth, or final salary pensions, as current retirees do, it's vital more is done to ensure people can cover the costs of later life.'

The unpaid internship is "going out of style" .
Working for free to launch your career could be a thing of the pastWell, no more - as the Wall Street Journal reports that the unpaid internship is "going out of style". With unemployment levels in the US at a near all-time low, companies are paying for interns that they used to get for free in order to ensure a stream of young talent for entry-level positions.

—   Share news in the SOC. Networks

Topical videos:

This is interesting!