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Just weeks into my retirement, while sitting on a beach beside the Giant’s Causeway on Ireland’s north coast, a profound sense of gratitude washed over me. It was for a person whose name I couldn’t recall and a face I’d forgotten.
Forty years prior, in my very first job, I served a customer who turned out to be a pension salesman. To make a long story short, he persuaded an 18-year-old me to open a personal pension, one that wisely increased its contributions annually with inflation.
This initial leap, albeit with an arguably overpriced and high-fee pension, ignited the wonder of compounding over a 40-year period. That momentum ultimately led to me enjoying that serene, empty beach on a workday, watching the Atlantic rollers break against the ancient rocks.
Today, I’m affectionately known by the children of my family and friends as the one who constantly urges them to open a pension and ‘pay their future selves.’ Thankfully, I’ve witnessed quite a few youngsters take that advice, and their success brings me immense satisfaction.”
My comment will be much less technical …. gratitude is a wonderful thing. We can all long for something more, something that someone else has, something just out of our reach. But being grateful for what we have is an amazing way to put your mind at rest.
So glad to hear that you reached this point in life and could reflect on your very fortunate situation.
I’m not sure UK businesses like DB pensions, my wife worked for a large UK bank and was offered a cash settlement of 48 times the yearly value of her pension.
That’s a very high multiple. When I retired I was offered a lump sum option that was 10x the annual value of my DB pension. I would have jumped at an offer of 48x!
My wife consulted with a financial advisor and that’s the very same advice he gave her lol
Mark, we got pretty off track with the comments on your post. I think the phrase “pay your future self” is a great thing to teach our kids and grand-kids.
sorry, I should have explained what a UK personal pension was… I’m bad lol
I was not sure what a personal pension was so tried to look it up and it seems to be something available in the UK. Chris
Think of it as a traditional IRA. You pay in – get a tax deduction but can’t access till a specific age (now 55, soon rising to 57). Taxed on drawdown.
The term “pension” covers the entire industry in the UK from DB (usually with COLA), DC, Private (now often called Self Invested Personal Pensions) and State Pension (SS).
UK has also had auto-enrollment for some time such that employers are obliged to make a pension scheme available and contribute a minimum amount.
Thank you for mentioning that DB pensions are “usually with COLA”. Some Americans seem to think that’s not possible.
Sure, it’s possible, but expensive and unpredictable. Most states and the fed pensions have COLAs, most states are underfunded, but it’s only taxpayer money, taxpayers who rarely have a pension themselves.
NJ had to suspend its COLA back in 2011 because the fund was in such bad shape.
Down votes for stating facts…. It’s not easy being Quinn.
I down voted because Dick keeps insisting that companies can’t do successfully what UK companies have been doing for many decades.
At least I’m willing to explain my down votes.
Kathy, it’s not that it can’t be done here, it’s that pensions, especially those with COLAs are a liability on a company’s books. They make the company worth less and shareholders don’t like that. Companies don’t like what they can’t control; funding pensions and the cost of health insurance are two of those things.
Had I been an employee at Dick’s company, I’d have been his adversary from the union side. I know that his comments are born from first person involvement.
I think it’s that a COLA pension would generate significantly smaller monthly benefits at retirement, with more money going to people who win the longevity lottery. (Because actuaries make it all so)
Or they’d have to lower current salaries to account for it.
The exception, as RDQ points out, has been public pensions because there are political not profit motives to “give away the farm” (it’s really buying union votes).
Probably true Scott, that is certainly true for annuities that increase by 2 or 3% per year.
As for public pensions, at least in the past, many of those people did not receive SS (along with it’s COLA), making their pensions COLA very important.
Unions are among the myriad of special interest groups that shape policy and spending. That’s a whole conversation not well suited for HumbleDollar.
I hear you. Vacation time likely isn’t popular in the US for the same reason. I just find it – let’s say sad – that citizens of other countries have benefits that are denied to Americans. Presumably pensions and vacation time are liabilities on the books of UK companies too.
I agree with your sentiment of sad. I kind of feel that with our resources, the US should be 1st on the list of everything good. When we look at things like longevity, infant mortality, cost of healthcare, even ranked happiness, we have a ways to go.
Mark just posted that his wife’s UK employer just offered to buy out his wife’s DB pension. Perhaps US corporate culture is beginning to infect other countries.
So how come UK companies manage it? Saying that state governments do a poor job doesn’t prove that a good job is impossible. My state government does a lousy job with drivers’ licenses, doesn’t mean it couldn’t be handled better.
Of course it can be done, what won’t happen is people getting larger overall compensation, so it’s just a matter of moving things from one area to another.
So the question is, would workers want to make any of those trades
Sadly Scott, my experience is that workers want the money NOW.
All it takes is money and in some cases taxes. You also have to consider the basic income provided by the pension.
Not to mention the high fees charged by some providers. Costs matter.
How does the UK version of SS compare to our social security?
New state pension is max around $16,000 at current exchange rates for 25/26.
There are some other quirks like pension credits for those with no other income or savings though.
Anyone relying on it alone is going to live a pretty subsistence standard of living.
We have a payroll tax called national insurance, a minimum of 10years contributions are required to get any state pension and the maximum is 35 years for the full state pension of approximately 16,500 us dollars
But the important thing to note is that compared to US , NI is not hypothecated. There is no “fund” to pay state pension. It’s just another tax that can be targeted differently.
What you pay in is definitely not linked to what you get out particularly given there are various circumstances of getting years credited with minimal or no contributions.