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Private Pensions - Budget

Say someone has no savings - but has say £30,000 in a private pension - and has less than full State pension entitlement - does this mean:
Say this person who is unemployed, rather than buying an annuity, draws out the full £30,000 when they are in their fifties - goes on a nice cruise for 5 weeks - and then gives the remainder of the money to their children.
(The children could of course give them "pocket money" in cash every month)
Will this person - who now has no savings - and has no private pension - have to be totally supported by the state for the rest of their lives: most probably being entitled to Pension Credits and perhaps other means tested benefits?
I am sure that the scenario cannot be true: but I would like to understand why it isn't.
Reply to
Judith
Given how little a £30,000 pension pot is likely to yield, that would probably be the best option.
If they have anything left, they haven't chosen the right cruise.
Colin Bignell
Reply to
Nightjar
The rules for means-tested benefits include a test of whether the claimant has (or has had) other income or capital assets. There is a rule which allows an asset which has been disposed of to be notionally taken into account.
Reply to
JNugent
I suspect that a more common use of a small pension pot will be to pay off (whether in full or in part) a mortgage which is still outstanding at the date of retirement.
Reply to
JNugent

Say someone has no savings - but has say £30,000 in a private pension - and has less than full State pension entitlement - does this mean:
Say this person who is unemployed, rather than buying an annuity, draws out the full £30,000 when they are in their fifties - goes on a nice cruise for 5 weeks - and then gives the remainder of the money to their children.
(The children could of course give them "pocket money" in cash every month)
Will this person - who now has no savings - and has no private pension - have to be totally supported by the state for the rest of their lives: most probably being entitled to Pension Credits and perhaps other means tested benefits?
I am sure that the scenario cannot be true: but I would like to understand why it isn't.
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Unless the actual legislation turns out to be different from the original proposals, that scenario is entirely possible and IMHO entirely likely to happen - often!
I think this change is a cleverly thought out election bribe, that doesn't have to be paid for today.
As an interested party, I agree that the current annuity/draw-down rules are too restricted and costly, but this change is a few steps too far in addressing that and we'll (well you, as I'll no longer be a taxpayer) be paying for it later [1]
tim
[1] just like the stupid, il-thought out, changes in student fees
Reply to
tim.....

For a man aged 55 a typical income from an annuity would be about £1300 pa (without any guarantees or index linking). So the state would still have to support him. Given that the average pension fund is a lot less than this we are all in deep trouble.
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(\__/)  M. 
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Reply to
Mark

I hope that most people will behave sensibility. This apocalyptic scenario has not occurred elsewhere where similar rules exist.
Absolutely. They are trying to buy back the "grey" vote who have switched to UKIP. The changes will also bring in greater tax revenues in the short-term, enabling them to fiddle the borrowing figures before the next election.
TBH I believe these changes are (mostly) positive for the pensioner. Annunity rates are appalling and, making them optional, may encourage a bit more competition in the market. When I retire (if it ever happens) I would like the choice.
I agree with this relating to student fees. AFAIK, owing to more courses charging the full £9000 and the fact that graduate incomes are not rising, the whole student loan system is approaching collapse.
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(\__/)  M. 
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Reply to
Mark

But, as soon as you add in even basic RPI linking, they're halved.
I think you're just proving his point.
That's been a fairly obvious truism for decades to anybody who understands the most basic demographics. It's wildly optimistic to think a £30k pension pot and an annuity will do anything but influence the brand choice (as in can you stretch to the "normal" own brand, or just the pikey-stripy?) when it comes to buying the catfood you'll be living on.
Reply to
Adrian


For a man aged 55 a typical income from an annuity would be about £1300 pa (without any guarantees or index linking). So the state would still have to support him. Given that the average pension fund is a lot less than this we are all in deep trouble.
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Why are we using 55 as a guide.
People may aspire to retire then but only the very rich can afford to. people with 30K pension pots are not going to be cashing them in at 55 (not to pay for retirement, anyhow), they will be working until they are 65 (6/7 or 8).
tim
Reply to
tim.....
Cat food? You mean the stuff in tins and pouches with bits of animals in? IMHO the price of that stuff these days means anyone who can afford to eat it ain't living in poverty :)
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Robin 
reply to address is (meant to be) valid
Reply to
Robin


I hope that most people will behave sensibility. This apocalyptic scenario has not occurred elsewhere where similar rules exist.
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And what counties are these? Do they have the same safety net welfare system
(and I agree with what you say about annuities, i just don't think that we need go this far to achieve the necessary change)
tim,
Reply to
tim.....

Because the OP used the words "when they are in their fifties".
Or 100!
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(\__/)  M. 
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Reply to
Mark
On Wed, 26 Mar 2014 09:50:16 +0000, Nightjar wrote:
And of course £30,000 is the average size of pension pots: so the budget plans are not really going to help the vast majority of people - and will increase the burden on the state.
Reply to
Judith
On Wed, 26 Mar 2014 11:37:04 +0100, "tim....." wrote:

I see that:
Around 45% of university graduates will not earn enough to repay their student loans, the government now believes.
If the figure reaches 48.6% experts calculate that the government will lose more money than it gained by increasing fees in England to £9,000 a year.
formatting link
Reply to
Judith
If the person has spent the money with intention to claim Pension Credit then the DWP can treat the money as if it was still held. It could be classed as deliberate deprivation of capital.
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Robbie
Reply to
Robbie

Australia for one.
Do you have an alternative proposal? I am not saying this is the best way just that it's improvement. (Fancy me agreeing with a government policy - doesn't happen very often ;-)
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(\__/)  M. 
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Reply to
Mark
The association of British Insurers put it at £36,800, but the FCA reckon it is £17,700.
It will help those who have planned their pensions properly and the others were going to be a burden on the state anyway.
Colin Bignell
Reply to
Nightjar

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