Johan Kriek – Canadian but I could be working with me – the way he thinks
It is good to see sensible people looking at guided retirement from workplace pensions. Here is an example
Well I’m grateful for my opinion and from the look of Johan Kriek , I suspect there’s a couple of decades of experience gained (me) and energy retained (Johan).
I have responded in one of the comments his excellent post’s questions. But let me try again.
State pension is where most people start
When we first decided to have a state pension it was decided that we would all be in it and it would benefit all (in terms of income) the same. We know that many people die in their sixties and some live past their nineties. That is unfair from an investment sense. If those with short life expectancy knew that, they would commute their pension and enjoy it all while alive. But as a nation we have decided not to target different benefits to different people so you get the same however healthy you are, however much national insurance you’ve paid in your qualifying years. So long as you’ve paid NI for 10 years you get something and if you’ve paid 35 years (typically) you get a full entitlement.
For most elderly people (today), the extra pension you got was earnings related. Some people got extra state pension (SERPS), some got extra in their company pension and a few saved for themselves because they didn’t have an employer buying them a pension.
The idea of having a pot of money to convert at retirement into a pension really only became normal with the introduction of auto-enrolment and the closure of employer pension schemes. That was from 2012, we are only really 15 years or so into mass saving but now we are starting to ask questions like Johan. I suspect that a magic solution would arrive 12 years after the announcement of pension freedom but it hasn’t.
Well I can’t pretend that CDC offers people guided retirement outcomes, it doesn’t. It just provides earnings related pensions rather like SERPS and Final Salary and then Career Average Pensions.
This may seem a little bit of cop out but all the above pensions – look at the state pension and take that as the model with no guide but a one pension suits all approach.
All the effort of a collective pension is based on giving everyone a fair share and not getting too hung up by their being losers and winners in terms of shape of benefit (as Johan’s guided income has us fretting).
I’m really sorry that my experience may sound like a lack of energy but I can tell those in their early years that as you get older, you generally want things to get simpler and easier. Which makes a pension a lot more attractive than freedom and financial flexibility. You want to get paid a regular amount into your bank account each month and for it to be a fair share. You accept that when you look at the state pension entitlement and you accept your company pension, because it’s done for you.
I have a lot of money in pots and I have no guide as to how to get at it. I would prefer to have it paid as a pension and know just enough to know that an invested pension is more my cup of tea than a guaranteed (but not investment based) annuity.
I am not sure that most people want to take more complicated decisions than the one that I am facing right now, well – I would be taking if I had an opportunity to get paid by a CDC pension! But maybe there will be one for me to use in a couple of years when I don’t want to work any more!
Can you guide me to the best retirement? Well I’d like one that’s as simple as the state pension and pays me a little more than an annuity does , have you got any suggestions?
