The Cost of Pensions

I am in trouble with some of my public sector employed friends after suggesting rather angrily that the current talk of massive strikes in the UK because of pension plan changes proposed by the government are unwise.

I think my exact words included "ignorant" and "selfish" and so might have caused some upset..

But marching blindly on, I've been thinking about this for a little bit, and want to put down my underlying reasons and philosophy on this.

1. Everyone who has worked gets state pension. If you have worked enough years (paying National Insurance), you'll get £140-ish per week, from (for my generation) the age of 68. I hear a lot about poverty. I understand that people who have little can become trapped easily in a place where they cannot afford to get out of. However, I feel that I could live on £140 a week. Not well, not luxuriously, but I could live.

2. Systems should be fair. I understand why the Police, for example, retire early. There is no reason to think someone aged 55 would not find other employment when leaving the forces, however. If people in the private sector either have to make provision for their own retirement or be poor, there is no reason the public sector shouldn't mostly play by the same rules - or vice versa.

3. If I stick £100 a month away for the next 35 years I'll get a pension of roughly £3500 a year. That's a guesstimate. Add that to the £7000 state pension and, well, I'm doing alright!

4. Defined benefits vs defined contributions. Basically, knowing or not knowing how much you're going to get out at the end. I'm not sure how this will currently work but my understanding is that money in risky investments (stocks & shares) should be moved into safer ones as retirement approaches - so, a percentage converted every year, 5-10 years before retirement.

5. It is easy to be wealthy when you retire, if you just put money away, each month. Set up an ISA, a direct debit, and leave it alone. Start now, the sooner the better. I did it when I was 22 or so, but it fell by the wayside when I bought a house, then went travelling, moved to Canada... Don't let it. Find a way to fund your monthly retirement fund no matter where you are and what you're doing.

6. Having (or having the expectation of) something and then having it taken away is hard. But for people 15-25+ years from retirement there is plenty of time to compensate.

7. Striking is likely to annoy more people than do good. Enough private sector people, with worse pension schemes by far, are being squeezed so that they will have little sympathy with their public sector counterparts.

8. Life isn't fair.

9. If public sector workers are going through pension reform they should be given the option of self-directing all of their pension investments, rather than it being part of the large pot - that's only fair.