[ad_1]
Most employees have no idea what their pension will be paid to them. It can come as a shock as they approach retirement age.
Danske Bank conducts regular surveys on the different needs of consumers. Many people worry about their own pension, and in a YouGov survey for the bank, it turns out that as many as 7 out of 10 respondents have no idea what they are being paid.
This means that more than 1 million Norwegians probably don’t know what financial situation they are in when they retire from working life.
Danske Bank consumer economist Cecilie Tvetenstrand isn’t surprised by the high turnout.
– No, unfortunately I am not. Participation has been fairly stable in recent years, but that worries me, it does. The golden age of retirement is over. We live longer and there will be fewer workers financing retirees each year, he tells Nettavisen.
Too late
Tvetenstrand doesn’t think people have taken into account how much influence they can have on their own pension. Changing the share of employers’ legal savings can amount to tens of thousands of crowns in annual pension. In total payments, we are talking about several hundred thousand crowns.
– Many also start saving for retirement too late. They don’t know exactly how important it is that they save themselves in addition to what they will receive from the National Insurance Plan and from the employer, he says.
One in two respondents think that the pension adjusts as it approaches retirement age. It may be too late.
Also read: Nordea verified the difference between men’s and women’s pensions. What they found surprises the financial peak
Shock
– Many people are shocked as they approach retirement age, and sadly it is only when most people understand what the situation will be like. Many people want to continue their work lifestyle when they retire, but for most people, retirement will almost cut their income in half.
– It is the same as receiving a monthly salary as a working person. I dare say that if you have not made any savings in advance, it will not be the case that retirement life is fixed, warns Tvetenstrand.
– Why do you think so few people know what they get when they retire?
– It is probably simply because our pension system is too complicated. Many people find it difficult to figure out where to begin to see what they have and to understand the information.
If you work in the private business sector, norskpensjon.no is a place that collaborates with NAV and pension companies. The website shows both what you get from the National Insurance Plan and what you get from current and former employers.
It’s not mandatory
– Remember that before 2006 it was not mandatory for employers to have a pension plan. If nothing is shown before then, you may have worked somewhere without pension savings. If you work in the public sector, you must apply to KLP, the Government Pension Fund or NAV.no for the same summary
– Those who do not have the overview, do they risk going to a nasty pension?
– Yes, there are many who will receive a lower pension than they think. If they had become familiar with what they have and the opportunities that are offered to them, many would have made adjustments to increase their future pension, responds the consumer economist.
– Combined with the fact that many people start saving too late, it can make retirement life more difficult financially than it should have been.
Also read: How to find out what you get when you retire
It affects the weakest
– And who is the most affected by this?
– They are the lowest earners in active working life and have the weakest pension agreements with the employer. In addition, it is those who work part-time, or have a salary with commission where the commission is not included in the pension base, who lose.
But even those with very high incomes will notice, according to Tvetenstrand, the transition from a high-paying job to a reduced pension. Through the National Insurance Scheme, he does not receive pension income for salaries exceeding approximately NOK 700,000.
The employer saves you nothing for earnings above approximately NOK 1,200,000. Tvetenstrand says that the difference between the salary they have today and the salary they will receive as a pensioner will be proportionally greater for this group.
Impossible
The survey also shows that 1 in 2 do not save for retirement. In fact, the vast majority of them do not have the opportunity to do so.
– It is precisely because they do not have high income in the first place. Some people have a lifestyle that could have adjusted in terms of income, but there are probably many who simply earn too little to be able to afford to save so much.
Tvetenstrand says that professions such as commerce and service are well-known lower-income professions. The most common thing for these occupational groups is that employers only have the legal minimum (OTP – compulsory occupational pension) for their employees.
Also read: Political hesitancy hurts pension savings
Double loss
– We can call this a “double loss”: low wages and low pensions. And for those who choose to work short lifetimes, it is incredibly important to understand the consequences this has, especially for future pensions, advises the consumer economist.
– Those who do not save for their own pension, what can they expect from the payments?
– From the National Insurance Regime, you can count on a maximum of 50 percent of your income. The higher your income, the lower this percentage will be. Also, there is an employer pension payment, says Tvetenstrand, and gives an example:
You earn NOK 500,000 per year, are 35 years old, and have a minimum plan of 2 percent in annual pension payments. Pension savings are made through 50 percent in interest and 50 percent in shares. The expected total annual return is just over 4 percent.
Falling
– Then you can expect to get approx. NOK 262,000 annual pension if you work until age 67. Once you have reached 77 years of age, the annual pension will be reduced to approximately NOK 224,000.
– Why?
– Because the pension you receive from your employer is often paid over 10 years and must be paid until your 77th birthday. If you start receiving a pension before age 67, you will receive a lower annual amount.
Tvetenstrand says that many people think that pensions are taxed much more leniently than earned income. But it is only the contribution to social security that is 3.1 percentage points lower (8.2% vs. 5.1%, editor’s note). The reason for paying slightly less in total taxes is that your pension will be lower than your income has been.
Travel List
– The survey shows that two out of three want to travel when they retire. Can they afford it when they don’t have their own pension savings?
– It depends on how your total economy is. If they have repaid all their home loans and have low housing costs, this frees up a lot. But if you don’t have savings next door, you may need to set some priorities.
– As a pensioner, you have all the time in the world to do whatever you want. It’s a shame the economy is holding you back, says Tvetenstrand.
[ad_2]
