OpinionAug 14 2017

Pensions? Why bother?

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Why bother with a pension?

I've been asked this question by friends and family nearly every week since I first started working as a financial journalist back in 1999.

In fact, even before then, I was helping to put myself through university by working in a local authority pensions department. 

I've always been an advocate of the workplace pension - where else can you get a minimum of 100 per cent return on your investment? I put in £1, my employer puts in £1. Actually, I put in 6 per cent of my salary before tax, my employer currently puts in 12 per cent. That's pretty generous.

Ever since I started work, I've paid as much as the scheme rules allow into a pension pot. Granted, I started off on a salary of £16,000 and 20 years on I'm only just about doubling that salary, but even so, I've accumulated about £60,000 in various pots. 

I'm now feverishly squirreling as much as possible into my equity Isa to shore up my need for more cats in retirement.

But I am starting to wonder myself whether it is worth it. I got my pension statement through from the defined contribution pension I paid into from 1 April 2010 (an inauspicious date) to December 2015. 

It claimed I had £45,000 or so, with an expected £60,000 something when I reach scheme retirement age. 

According to the projections, this would mean I could enjoy the wondrous taxable income of £1,200 a year.

More accurately, £1,284 a year.

One thousand, two hundred and eighty four pounds a year. Before tax. 

Let me put this into perspective. That's less than £100 a month. And that's before I get old enough to have free TV licences and winter fuel allowances (if these even exist when I retire).

I showed this to my mother, who used to work for the Guardian Royal Exchange, then Prudential, then Hartshead pensions. She retired on £16,000 and thanks to a generous GAR, she actually enjoys a higher annual income from her workplace pension than I am expected to do.

Diligence is not being rewarded. What happens to my £1,280 if there's another 'lost decade' like there was in 2008? How can I recover from any market risk? 

Even assuming that all my collective pots get me about £80,000 when I retire, we're looking at maybe £2,400 a year. 

Evidently I can't afford to divorce my husband, so that's not an option, even if I wanted to, which I don't. It's only been four dewy-eyed years, after all.

We still have a mortgage but even if we do succeed in paying that off in the next 10 years, what's a few thousand going to get us for our prudence in saving? I'll have to start using the foodbank that my husband and I run.

Many years ago I was interviewed by someone at the Mail and I argued the toss with him about pensions. I staunchly defended pensions; he advocated Isas. Needless to say I didn't back down, nor did I get the job.

Some 15 years on, I'm now feverishly squirreling as much as possible into my equity Isa to shore up my need for more cats in retirement, cos my pension ain't gonna pay for Felix Meaty Sensations with Sprinkles.

While I would never turn away free money from the employer, I am starting to see that people relying on their workplace pension are going to be bitterly disappointed when they reach retirement.

More than that, I really pity the millennials, for whom property ownership is a pipe dream and who have to face the penny-pinching employers are now imposing on staff through pay freezes or low wage inflation.

If I, with the benefits of being a wise old Generation X-er, have saved all my life and still face a bleak retirement, then what on earth will subsequent generations do?

Perhaps we will all do what my great-grandfather did, and "die with his boots on". It seems the most likely option for the brave new world of defined contribution pension savers. 

simoney.kyriakou@ft.com