Pension planning

I am in my 50's. I earn quite a small income from my own business, and have a too-small pension fund and a similar amount in savings. To add to the pension fund or savings means my wife and I go without luxuries.

With all the means-tested benefits the Government hands out, it seems to me that it may be better to have no savings at all than a modest amount. We could be going without in order to save for a pension which would be much the same as we would receive with Government top-ups if we spent our money instead of saving.

I realise of course that Government pension benefits can change over time, but then so can the returns from one's private pension. As an increasing number of voters are likely to be victims of the "pensions crisis", it seems unlikely to me that any future government with a desire to get elected would cut back on pension benefits.

The problem is this. If you are retired, there are many organizations (e.g. Age Concern) who will advise you on what you are entitled to. If you are still working, the only source of advice is from people who have a vested interest in selling pensions and investments. It is impossible to trust such people. Do a bit of searching, and you will see websites from financial advisors where the small amount of the basic state pension is used as something into scare you into investing in your own pension fund. Nowhere do they mention that your income as a pensioner will be topped up by various benefits to help pay council tax, etc. You might be better off with no pension fund at all than a small one, but they aren't going to tell you that, are they?

My wife has never earned enough to pay any tax or N.I. contributions. Will she qualify for any state retirement benefits, or will we be entirely dependent on my own pension income and savings?

Where, if anywhere, can we obtain impartial advice on what is best to do in this situation?

Reply to
Old Git
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Crossposted in full to uk.gov.social-security

You've obviously thought about this, and imo got the right idea.

I'd work back from the state and SERPS/S2P pension provision. Get a pensions forecast (form BR19 online) for both of you. This will tell you what you've got. Do the same for any other pensions you have.

Browse NP46

If you post what other investments you have and what the total monthly pension is, someone from uk.gov.social-security will be able to tell you what benefits you'd get in todays terms.

Is it worth your wife (and you?) making Class 3 NI contributions. ISTR they are a very good investment for people with low/no income.

Links on my webpage

If you wish to reduce your assets for benefit purposes, you might want to consider buying antiques or any asset that you understand and, at least, keeps it's value and is not included in the benefit calculations. Doing it this far out will mean that the benefits people are unlikely to accuse you of deceit.

hth

Daytona

Reply to
Daytona

An option you might want to try is to stick money by regularly (perhaps cutting into luxury money if necessary) and invest it. Perhaps one of you into an ISA linked to stock market and one of you into another type of ISA - so benefitting from not paying tax. Force yourself to build the funds and not dip into them. If you can't resist the temptation to spend & spend, then its not a good option for you. The end result though can be a pension fund the pair of you have plenty of control over - for fees, for risk, for rate of return (in the case of cash ISA). A good book to get is 'The Richest Man in Babylon' by George Classon (or Clason), only a short read but a good personal finance book. Written 70 years ago or so but just as relevant today. That money can come in handy for buying annuity or for simply living off part-capital, part interest in your old age, in addition to state pension. And unlike pension funds, can give far better return for far less fees. But you do need financial discipline not to go raiding the pot whenever you like - something a traditional pension at least tries to prevent.

Also check out

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- a good website for financial stuff, and pick up ideas from other savers & investors. Thats the Motley Fool website. If using a financial advisor, at least be aware of what tricks they can pull to seperate you from money while building their commission. Pretty good advice can be got from a financial advisor if you know what pitfalls to avoid. Never simply think your bank is offering you good advice simply because you are a customer.

Martin <

Reply to
Martin Davies

But he would be daft not to work out the effect such savings would have on means tested benefits.

Reply to
Andy Pandy

Yes. This is very often true - the people with the lowest incomes in retirement end up effectively being taxed at the highest rate when benefit withdrawal rates are taken into account. You may get 22% tax relief on pension contributions, and then end up paying 40%, 85%, or even 100% "tax" on your pension.

Suggest you check the pension credit website, which has a calculator - you can work out the effect that having a small private pension currently has on your pension credit entitlement:

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You can check what you get in housing benefit (if renting) and council tax benefit (whether you own or rent) from a calculator on your local council's website, or if it doesn't have one try the following one (the rules are basically the same nationwide except in some areas where I believe housing rent allowances are used):

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Exactly. Pensioners are the most likely group to vote, and hence tend to get treated the best. Higher tax allowances, higher benefits, higher applicable amounts (the base for means tested benefits).

In addition, this government seems committed to increasing the *means tested* benefits pensioners get (eg the PGC, applicable amounts) in line with earnings, but the *contributory* benefits (basic state pension, SERPS) only in line with inflation.

She can get a basic state pension (not means tested) based on *your* NI contributions (IIRC it's 60% of what you get).

Any means tested benefits you get (eg PGC, council tax benefit etc) would be based on your combined income and savings.

Not easy. Financial advisors have nothing to gain. The last thing the government wants you to do is rely on means tested benefits in you old age. The "correct" advice is to save as much as you can - but this could end up being money down the drain.

Advise yourself - read up and understand the rules and work out what is best for you.

Reply to
Andy Pandy

In his situation, they could be money down the drain.

His wife would be entitled to a pension based on *his* NI contributions (IIRC

60% of what he gets), if this is higher than the amount she gets based on her own contributions. So unless voluntary contributions takes her above 60%, then they would be money down the drain.

In addition, increasing his entitlement to state pension could result in lower PGC. If he has no other income or savings it could result in an effective 100% "tax" on his state pension!

There are foibles like the rules for retiring abroad etc, which is why it is important to understand the rules fully before making any decision.

Reply to
Andy Pandy

If means tested benefits are claimed, then yes the money over a certain amount can make a difference. Which would you rather have? Extra 20 a week benefit or having 50K savings giving you 6%+ on average? There comes a point where you have a lot more spending capacity, freedom and choice than simply existing on what the state hands out, with a tiny increase each year thats unlikely to cover the increases in your bills.

Of course, someone can go the whole hog and never save, never own a property and claim benefits for their remaining decades. Its surviving - scrimping and saving perhaps to afford this or that, worrying about bills and so on.

Martin <

Reply to
Martin Davies

There's always class 2 NI. Exemption is good while income is low, but can impact on pension if not enough years credited.

Martin <

Reply to
Martin Davies

That's unlikely to be his choice. He needs to work out what the choice is.

Like I said, the government seem to be commited to raising pensioner means tested benefit rates with the increase in earnings. Most pensioners not getting means tested benefits have to make do with inflation increases or less.

Or they could scrimp and save while working to save up for a pension and find that most (or even all of it) is taken off them in reduced benefits. Guy that used to live across the road from us, with a tiny personal pension, certainly wishes he'd pissed it up against the wall while working.

Reply to
Andy Pandy

Fair enough !

Sure but that's just official jiggery pokery between what the government gives as pension and what the government gives as pension credit. I suppose the you earn the state pension, so you could stop working and get less pension and rely on the credits to meet the difference.

Daytona

Reply to
Daytona

That's a superb calculator assuming it's reasonably accurate.

£181wk (couple) and £121wk (single) seem to be the major cutoff points. At base rate of 4.75% this gives a fund size of £198,000 / £132,000 respectively.

I stopped contributing to my pension several years ago, because, like the op I realised that I wasn't going to see any benefit under the current rules. I've basically pissed away £24,000 in pension contributions for no net gain.

All this talk of personal pensions by the government, the pensions companies and the media is utterly irrelevant for the majority of people who will end up the same as if they hadn't contributed.

Daytona

Reply to
Daytona

The one thing that (so far) is not taken into account in claiming benefits is the value of your house.

In 1969 I paid 800 for this terraced house, yes I have done years of work on it. It would probably sell for approx 190,000, crazy I know. Where in God's name would I/you ever get a return like that from a pension fund? Plus of course I have lived here during that time.

I am 61 now, retired through ill health, I will sell it when I am 65 and hopefully move to Spain and buy a place max 90,000 leaving a sum of 100,000 earning 6% annually to fund my old age plus of course my state pension.

Equity release, annuity purchases, more value, if any. It dies with you.

Ok I will snuff it one day - we all do - but my son inherits the flat/house in Spain plus whatever money is left.

If this not a good idea - I am open to persuasion from other view points.

As an after thought I am so suspicious of pension funds, ok there are regulations etc. but what in the end if the provider turns around and says sorry we are broke as per ASW workers in Wales.

Reply to
nobody760

Equity release, annuity purchases, more value, if any. It dies with you.

Should of course say POOR and not MORE.

DOH!

Reply to
nobody760

Its a workable plan - you can pick and choose some of where to live when you move abroad, so can find cheap area/cheap apartment compared to your selling price.

Martin <

Reply to
Martin Davies

Only workable if you're in good health. Lack of reciprocal medical care is what has stopped us doing that.

Reply to
Sucke

Depending on the country, there is usually some medical care. Some charge more than others though. Even a regular set of pills to take can have a draining effect on finances in this country, if paid for. Never mind elsewhere.

Martin <

Reply to
Martin Davies

A regular set of pills only costs a maximum of around £90 per year.

There is no *full* reciprocal health service treatment in any other EU country. Some treatment is available but nowhere near what we have here. Anyone with an existing condition better make sure s/he has a sufficiency of funds before making a move overseas.

Reply to
Sucke

Snip>>>

It very much depends on the pills! Some medication can cost thousands of pounds per year.

This depends on the local circumstances. Govenments have to treat any EU citizen the same as they do their own citizens, though systems vary across Europe. You get a form from the post office to fill out entitling you to treatment (An E111) Some places do give free treatment.

Neb

Reply to
Nebulous

NHS prescription charges can be capped ata maximum of £90pa by purchase of a prepayment certificate.

The E111 form does not apply to residents of that country. It's for those visiting only. As you say the standard of treatment and costs vary throughout the EU. Anyone retiring to another EU country would be well advised to check health care costs before anything else.

Reply to
Sucke

"Sucker" wrote

What if the pills aren't available on the NHS?

Reply to
Tim

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