Pensions Rip-Off

If you think you can do better than annuity's (and you probably can), then change it to a SIPP (self invested personal pension) and go into draw down (ie, you don't buy an annuity). You can keep this up until you're 75 at current rules, and this may be extended.

Don`t worry, by the time you`re old enough to take a pension they`ll have moved the goalposts so you have to work until you`re 75.

Yes, most people die before they reach 75.

Look at it another way - they avoid a pensions crisis completely by making you ineligible to claim one (you`ll be dead), and the pension deficit will magically disappear - 95% of potential claimants will have died before the pension funds have to pay out.

Why is it the only long term method of saving and getting any tax advantage thru' tax relief is by putting into a pension fund that is at the mercy and whim of the stock market or some other SPV where "past performance is no guarantee of future performance". If the government allowed people to put cash into an SPV that still locked up the money until retirement, but provided a tax free interest at least the base rate and allowed tax relief similar to existing pension arrangements, I am sure millions of people would be far more interested in saving for their retirement then they are currently.

Quite why cash is banned I don't know, presumably because of all the possible places to put your money, cash would have been the worst over a long period of time. You can almost emulate cash though by using 5 year gilts or bonds.

You can get a pension that's linked to an index, or am I missing something?

It isn't, in the sense that you can use a cash fund and not have any stockmarket risks at all. The current bad press about pensions is at least in part because the markets have been bad this century. But they haven't always been.

Rob Graham

you can put almost anything in a SIPP, just not cash.

hi Rob,

Could you let me know of some such funds please? How do I go about buying them? Can I get them through comdirect for example?

I suspect that the latest statement takes into account an index such as RPI and shows the anticipated buying power of the fund at retirement rather than what it will be worth in pound for pound monetary terms.

Many companies are now issuing illustrations on this basis.

a bit like how it used to work back in the good old days

You shouldn't be mesmerized by tax relief, the govt gets it back in tax on pension incomes.

In general yes, you shouldn't be over-awed, but it depends on your situation really. If you're a 40% tax payer, then for every 60 you put in, you'll get 100 quid fund. Then when you retire you can take out 25% completly tax free that you would have paid NI and tax on. Then you've got your 4.5k tax free status each year to eat up before you pay tax, plus you don't pay NI on your pension income, that you would have done on the money if you hadn't put in in the pension shelter. All in all it's only worth it if you're considerably into the 40% tax bracket as far as I'm concerened, as I wouldn't dream of putting in more than what would take me below the 40% tax bracket, I'd rather use ISA's. And if you're not putting away that much there's no point, cause you'll be killed by means testing. Basically, the labour government have sucessfully managed to make the pension system only viable for high earners....and they've decided to cap the limit now at

Hey, can we have that in English, please! ;) The problem with pensions in the UK is that they are too ruddy complicated for most people to understand. Most people are not financial gurus and have an enormous battle with the small print, trying to pick out the wheat from the incredible amounts of chaff thrown up by confusion marketing. I think a lot of financial advice is deliberately clouded in ambiguity so as to make the case for even more financial advice.

Everything about UK pensions stinks like the worst pigsty.

MM

Just spoken with the pension company concerned and their excuse is that they have reduced their predictions for how well the funds are going to perform which is very interesting. In July 2002 I transferred out of Equitable Life (f**king bastards) £56883. With the fall in the stock market, by May 2003 this had fallen to £49733 but since then has grown to £63791. So in 2003 with a fund of £49733 the pension at todays prices would be £4540 per year, and in 2005 a fund of £63791, a growth of 28%, the pension would only be £3870. That to me says that there is some almighty f**king crash coming over the next 12 years. Have I got this correct? Just as well I am not paying one single penny more into a pension.

Kevin

I meant to add that I hope that somebody is informing messers Blankett, Brown and Blair that there is a crash coming. Should they really be incouraging people to put money into a pension if in 12 years time the money will be worth less than it is now, surely under the bed would be better.

Kevin

arguably the best time to invest in shares in when the markets going down, cause you get more bang for your buck. if you don't want to invest in shares...DIY. Look into SIPPS and what they have to offer. Try not to confuse the tax benefits of pensions with the risk of investing in shares.

"Jo Reed" wrote

Aren't you hoping to get your Basic State Pension?? That'll eat into your

"Jo Reed" wrote

OK...

"Jo Reed" wrote

But you pay N.I. on your pre-retirement earnings, **whether-or-not** you pay pension contributions out of them! Can't you get your facts straight??

Yes, having looked at the figures again it is at today's prices. Still the growth rate forecast is pathetic. As I see it the growth in th fund cannot better the expected inflation rate, ie it will be paying less in

Kevin

As I said earlier, don't confuse pensions with investments. Pensions are tax wrappers, similair to ISA's but work in a different way. Are you unhappy with the pension (the tax wrapper) or the underlying investment? If it's the underlying investment, then change it.