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Pensions: The Penny Drops

Wow, Says Steve Bee, the Young ‘Uns Are Starting To Get The Hang of This Pensions Lark


 

steve bee

 

I was talking to a younger acquaintance yesterday about pensions. He’s quite a lot younger than me – he’s just 30, in fact.

For once it wasn’t me who brought the subject up; this young chap actually sought me out and started talking about pensions to me. In fact, what he said was: “You know a bit about pensions don’t you?”

“Yeah, a bit,” I replied. And that led to him handing me a piece of paper and asking me if I knew what it was?

I did. It was a statement from his company pension scheme.

A Glimpse of Clarity

He said that his personnel manager at work had written to him and all the other employees, to explain to them that from next year the pension rules were changing and that they would not need to buy annuities in the future. He wasn’t sure what that meant, but he’d read through all the stuff the personnel manager had written and he thought he understood it – but he just wanted to check with me that he wasn’t misunderstanding what he’d read.

“Can you see this figure here?” he said, and pointed to the current fund value of his pension on his 2013 pension statement. My eyesight’s going a bit as I’m getting older, but I’m not blind, so I confirmed that I could indeed see it. “It’s nearly £35,000!” he said. (It was £34,832.) “I know,” I replied. (I’ve always been good with numbers.)

The Penny Drops

“Does all this change stuff mean that when I’m in my fifties I can get that £35,000 out and spend it on anything I like?”

“Yeah.”

“Wow! So it’s like real money?”

“It always was real money. It was real money when you got the statement last year, nothing’s changed in that respect…”

But he wasn’t listening any more. He’d taken the statement back from me and was on his way out of the door.

As he reached the door he turned around and waved the piece of paper at me and said “Wow!” again as he left the room smiling.

I doubt that we’ll ever talk about pensions again. He’s just 30, and he’s had his penny-dropping moment. Later on he’ll doubtless find out that his employer’s 10% contribution to his pension each year is very generous, and I’m sure he’ll come to value that.

I’m pretty sure he’ll put his pension statements away somewhere safe now too and watch them eagerly as the funds mount up over the coming years.

Like he said, it’s real money…

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