A Revolutionary Pension Idea

I’ve got a need.

I’d like to put some money aside which will give me an income in my retirement.

I’m not, however, fussed about getting hold of the capital. It’s not the cash I want, it’s income for my everyday needs when I’m not working.

I’m also not worried about the kids getting this money. I’ll make separate provision to give them a little sum so they get a start in life, but other than that they’re on their own. It’s good for them to know they’ve got to make their own way in life.

I would like my wife to have an ongoing income when I die. Doesn’t need to be as much as it’s only her, perhaps half of my level, maybe two thirds? But after that, nothing, as a nurse she’s got her own pension (the public sector does this quite well, I understand).

Other than that amount for the kids, I intend to spend (or if I’m lucky, give away) my money. Ideally at the very moment the life support machine is switched off then the last penny will drop out of my bank account.

I’d like my pension to do the same.

Presumably, because I’m not aiming to leave a lump sum behind, I won’t need to save as much. I don’t need a £500k pot at 5% to give me £25k pa, because that leaves £500k when I die, and I don’t want that.

In simple terms, if I pay £1000 pm into a bank account for 20 years from 40-60 I should be able to take out £1000pm for the ensuing 20 years? I don’t need much interest or growth, just enough to cover inflation. If my employer could take this out of pay packet without me noticing, I’d probably just live to my means.

Of course, I might die young and not get my fair share. If there are loads of people in one scheme then some of us are bound to. Presumably this discount can be shared across the members. A lump sum to look after the kids while they are dependant on me would be nice though.

There will be costs to this, I understand that. Whoever organises it needs to be paid for their time. In fact, if someone can get better returns which therefore means I can pay less in for the same amount, I’m happy if they make a bit on the side.

Pretty much like the State pension scheme, actually. I pay an amount of National Insurance, I get a pension in retirement. No cash pot there at all, current pensions entirely funded by current contributions. There’s a thought – with this ageing population, that might be a problem at some point. Hmm, one for another day perhaps.

Trouble with the State scheme is that I can’t choose to overpay, perhaps to retire early. So I need something from the private sector to top it up, something a bit more flexible.

How about it, pension providers. What do you think, Government? This is my choice of pension freedom. Do you have anything for me?

 

Chris is married with two kids. His wife thinks that, at times, he can be a little too sarcastic. He hopes to finish his second novel this year. Here’s the first

 

Share:

3 thoughts on “A Revolutionary Pension Idea

  • You are describing my idea of a CDC Scheme Chris. It’s an arrangement where you receive a pension benefit based on your contribution, investment performance and life expectancy.

    Of course you won’t get exact fair shares, there has to be a certain amount of social insurance to manage things, but you can get close enough to meet your revolutionary principles!

    Which are sound!

    Reply
  • Pingback:

  • Chris

    That pension plan already exists. It is simple and its name is a personal pension plan. You do your bit (save), markets to their bit (expected return) and at retirement you buy a pension annuity. We have done this in the last 30 years in the UK.

    It does not need to be complicated. The outcome will be based as you said on your savings, investment return and your life expectancy. It does offer you some flexibility as well, if for example your objectives change a little i.e. as an example you would like to retire to Spain and have a pension paid in EUR.

    It does not need to be complicated, CDC is another form of with-profits pensions promoted by actuaries, but we know how great the with-profits pension did on their first run. The made the (with-) profits for life offices.

    Reply

Leave a Reply