So I got a letter today explaining about new government pension schemes - basically you give 1% of your annual salary which is matched by 1% from your employer giving a total of 2% "banked".
In October 2017, this will increase to 3% of your salary and 2% from your employer; in October 2018 it increases to 5% and 3% respectively. You can opt-out of this scheme however.
Now after looking at historical prices and inflation, especially at the "Mars bar Index" (one of my favourite indices hehe), I have come to the conclusion that pensions seem like a rip-off.
Currently the price of Mars bars seem to be doubling every 10-20 years. If inflation carries on as it is, which is undoubtedly being accelerated by QE, I'd make an educated guess that prices as a general rule will soon be typically doubling in under 10 years, halving purchasing power. To be conservative, let's double the time-frame and say that prices will double every 20 years.
If I have to work until retirement age (currently about another 40 years) then, (if this 20 year rule is correct) this effectively loses me 75% of the purchasing power of my pension (50% after 20yrs, another 50% of that in the next 20 years).
When considering my employer's contributions, to make the maths easier, lets stick to the 5%:3% pension ratio that will occur during most of my working life. Then, my 25% remaining purchasing power is increased by 60% from my employer (5/3), resulting in 40% total purchasing power - less than half of the value that I paid in... Now pay rises should cover that, but they seem to be few and far between in private companies these days, and even the pay rises in the public sector
do not cover the increases in the cost of living. UK inflation is recorded at about 2.5%, while the prices of food and energy are closer to 10%/year. This seems like a scam - so if (I bloody hope not) I do have to work for the next 40 years, It makes more sense to opt out of the pension scheme and to invest these small percentages into something that will increase in value, or at least stay the same. Personally I have a small amount of bitcoins (~30) so I would probably choose to invest in silver as a hedge against BTC, as it seems like a good deal atm. Only thing is 20% tax in the UK, and also subject to Capital Gains Tax. Gold UK legal tender is VAT and CGT free, but I think the price is more heavily manipulated, and I believe the industrial value of gold is a lot lower than it's current price, whereas the value of silver is a lot closer.
Any thoughts, or anyone want to fix my maths (which is probably wrong)
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