Living On Pensions

I must ask my American friend here in the village, to explain some of these terms as our British system seems to be somewhat different. I took early retirement in my mid 50's with an immediate works pension (IBM). That and some investments has kept us going and now my wife's works pension, another small works pension and my state pension are coming on-line shortly. That should give us a comfortable, if somewhat modest, lifestyle.

Generally, if we contribute to a works pension, we pay less "National Insurance (N.I.)" and so (currently) get less State pension, but a higher occupational pension. Most large companies offered a 'final salary' scheme where your pension was a proportion of your final salary for each year of service. This is fairly rare now. Medical care was covered by your national insurance and is still free at 'point of delivery' - ie. if you're ill, no matter what, treatment is free. The downside is that you have to wait ages for treatment for minor complaints, so some private health insurance is useful.

Our state pension is changing to a more simple (?) system based on number of years N.I. contribution. You wil need 35 years to get a full pension, but it's nowhere enough to live on.
 
When I retired at 55 I did so on what was called a level income option. My SS at age 65 along with my pension for 30 years service were added together and until I reached 65 that is what I received per month. At age 65 they discontinued the SS portion. There was no payback at all. I also receive a benefit for life to help buy health insurance. I am very pleased with how retirees are treated at General Dynamics.
 
Capt Lightning said:
I must ask my American friend here in the village, to explain some of these terms as our British system seems to be somewhat different. I took early retirement in my mid 50's with an immediate works pension (IBM).

Hello, fellow "Ex-IBM'er"...I'm one too. I bailed out at about age 59, when the company was making noises about Downsizing, and changing the Defined Pension rules. They gave me 6 months pay to retire early, and the IRA kicked in shortly thereafter. Now, the IBM pension, the IRA, and SS combine to fund a decent retirement. The latest annual statement from IBM indicates that they are holding pretty steady at about 75 Billion in their U.S. Defined Pension fund, so unless the bottom falls out Globally, that source should remain viable for as long as we live. I'm sure the IBM plans vary somewhat from nation to nation, but on balance, that company is about as good as it gets...IMO.
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Don M, most UK defined benefits pensions pay into a pension protection scheme whereby if the scheme goes bust, members will still get up to 90% of their pension. The IBM (UK) scheme is in a reasonable state, but is not considered to be particularly generous. Still, when we get all our pensions, (about age 101 at the rate the UK is going) we should have about the average UK household income - but without the burden of mortgage, debts, National Insurance etc... (note that except for England, medicines & eye tests are free for all ages in the UK).

I get my state pension in September, and we're off for a holiday in Europe to celebrate.
 
Here, we have something call the Pension Benefits Guaranty Corporation....a Government program that is supposed to continue the retiree payments to people whose company goes belly up. However, like most other government programs, it is substantially underfunded, and exists largely via "smoke and mirrors". It's getting to the point where if a person doesn't plan for their own retirements fairly early in their working careers, they are going to be sadly disappointed when their time arrives. Company pensions are quickly becoming a thing of the past, and if a person doesn't participate in a good 401K plan while they are working, they may one day find themselves living a pretty meager existence. Even the Social Security program is going to be coming under increasing pressure, as people live longer, and there are fewer workers paying in.
 
It sounds like your 401K is similar to our occupational pension schemes, and as you observe, these are becoming increasingly rare. It was possible to make 'Additional voluntary contributions (AVCs)' to the works pension or independently as 'Free standing AVCs (FSAVC)' which provided a seperate pension. These are nearly all being replaced by 'Workplace pensions' which are run by various companies. The plan is that the employee would accumulate a 'pension pot' and then use this to buy an annuity. The amount varied widely from provider to provider and depended on such things as index-linking and providing a spouse's income in the event of death. Generally, they were nowhere near as good as the works (401K) pensions.

This has changed now, and retirees can access all or some of their 'Pension pot' - subject to tax regulations. Currently the average UK salary is around £26k ($40k) but the average pension pot is only around £40k ($60k), so that won't buy much of a pension - in fact you need nearly 10 times that to have a comfortable income . Basic state pension (for 30 years contributions) is around £115 ($175) per week, paid 4 weekly - awkward for those of us used to getting their salary cheque monthly. Many people who didn't contribute to a works pension, paid more towards National Insurance, and will get possibly twice that amount .

That too changes next year with a higher basic pension (for 35 years contributions), but no uplift for additional NI contributions.

The bottom line is that we are increasingly responsible for looking after ourselves financially in our later years.
 
Capt Lightning said:
I must ask my American friend here in the village, to explain some of these terms as our British system seems to be somewhat different. I took early retirement in my mid 50's with an immediate works pension (IBM). That and some investments has kept us going and now my wife's works pension, another small works pension and my state pension are coming on-line shortly. That should give us a comfortable, if somewhat modest, lifestyle.

Generally, if we contribute to a works pension, we pay less "National Insurance (N.I.)" and so (currently) get less State pension, but a higher occupational pension. Most large companies offered a 'final salary' scheme where your pension was a proportion of your final salary for each year of service. This is fairly rare now. Medical care was covered by your national insurance and is still free at 'point of delivery' - ie. if you're ill, no matter what, treatment is free. The downside is that you have to wait ages for treatment for minor complaints, so some private health insurance is useful.

Our state pension is changing to a more simple (?) system based on number of years N.I. contribution. You will need 35 years to get a full pension, but it's nowhere enough to live on.
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It's confusing here in the UK since social security here means welfare. In the US you pay a tax which is for social security retirement benefits. But you pay this tax as a percent of income. So when you retire benefits are based on what you paid in. I believe the maximum based on your contributions is $3,000 a month.
 
The bottom line is that we are increasingly responsible for looking after ourselves financially in our later years.[/QUOTE]

Exactly! As more and more company pensions become history, and governments are coming under increasing stress to supply retiree programs, Individual Responsibility is going to have to become the major part of the Equation. People are going to have to resolve to put a portion of their paychecks aside...early on...if they expect to live decently in their elder years. A Mandatory Individual Savings plan...IRA/401K, etc...may have to become the Mandate in the not too distant future. People cannot afford to wait until they are 50 years old, before they start thinking about retirement.
 
Don M. said:
Exactly! As more and more company pensions become history, and governments are coming under increasing stress to supply retiree programs, Individual Responsibility is going to have to become the major part of the Equation. People are going to have to resolve to put a portion of their paychecks aside...early on...if they expect to live decently in their elder years. A Mandatory Individual Savings plan...IRA/401K, etc...may have to become the Mandate in the not too distant future. People cannot afford to wait until they are 50 years old, before they start thinking about retirement.
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We're fortunate in that our main pension is my husband's teacher's pension out of England. He paid in extra all his working life and it was worth it.
 
It's pretty hard for young people to think about their retirements...when they are trying to raise kids, and make mortgage payments, etc., But as time passes, it is going to become increasingly important for people to set aside a portion of their paychecks...From Day One...if they don't want to live off beans and hot dogs when they retire. Government Entitlement Programs are increasingly stressed, and companies are abandoning traditional pension plans, so that does not bode well for future generations if people fail to start planning Now. My kids and grandkids probably get a bit tired of my telling them to cut back on the new cars and "entertainment", but hopefully they are taking some of it to heart and thinking about the future. Old Age creeps up on us a lot faster then most of us realize.
 
I retired upper blue collar April 1 of this year at age 65 and my net income now (after B, F and D supplements) with monthly SS, company pension and VA disability checks has doubled plus a few hundred more than my monthly net was while working after all deductions.......I feel very, very blessed and fortunate.
 
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