Private Pensions - Budget

It's still more likely to be a common use of an encashed pot than a world cruise is.

Reply to
JNugent
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As others have said, and as I have said in other threads, £30K is not a useful *pension* pot. It's a "rainy day" or "let's celebrate" quite nice lump sum. Just to put it into perspective, any fund that has not doubled in real terms over the past ~40 years has not been properly invested, and a £15K investment over 40y represents ~£1/day. If you save only £1/day, in current terms, how much can you possibly expect to get back in retirement? It will be better than a kick up the backside, but it's not going to make a significant change to your lifestyle.

If you have "less than full State pension entitlement", then the extra from such a tiny annuity is not going to get you over the poverty line, so you will [currently] be dependent on the "pick it up, it's yours" money anyway. Once the single-tier pension cuts in, your state pension will be unaffected by these considerations.

What would anyone suppose to be the alternative? We could chuck out old people to starve on the streets, but civilised countries don't do that. So if you have no private resources, you are inevitably entirely dependent on state support. Sadly, but equally inevitably, if you do not make adequate provision for your old age while you are working, you will not be able to do so when you are no longer working. [Of course, "provision" is not just a pension pot (or occupational pension), but could also come from downsizing or from BTL property or from collecting antiques, or whatever.]

Your sureness is misplaced.

Reply to
Andy Walker

Personally, I'm surprised it's that low; if correct, it suggests that ex-students are too keen to pay off the debt.

I'm no sort of fan of "tuition fees", but these are now mis-named. For almost all practical purposes, they are now a graduate tax, and the only reason not to call them that is presentational. [A year or so back, I was told that, in terms, by a top advisor to the DfES, or whatever it's called this year.]

Reply to
Andy Walker

I agree the government seemed to end up with the practical disbenefits of a tax and the political disbenefits of loans. That said, one argument for loans over a tax was that a loan can in be recovered from ex-students out of the UK whereas a tax cannot be enforced extra-territorially. In practice that might have had bite if the loans had been left to banks to supply. Eg I could see the likes of Santander chasing EU students and/or blotting their credit history in other States. But with the current system .....

Reply to
Robin

How ? Assuming the graduate emigrates ?

Reply to
Jethro_uk

One obvious alternative would have been to relax further the provisions for draw-down - reduce the ?20,000 guaranteed income threshold etc.

The Budget proposals failed my sniff test. If the Government had wanted to come up with a better[1] system the Budget could have announced immediate consultation on changes for changes to take effect in 2015 - up to and including the radical changes on the table - and legislation for the interim to allow people who are about to take their pension to defer buying an annuity (if they cannot already). Instead they went for classic "rabbit out of hat" theatrical presentation of a complete, final, package which glitters in the spotlights. But of course it starts to look rather less perfect in the cold light of the following days.

[1] Of course it'd be easier to know if there's something "better" if we knew the objectives. Eg how does the government see its changes interacting with payment for care? What about the many people who will have a pension pot but won't qualify for the full universal pension so will still be eligible for means tested benefits? [And given this is a fight to claw back those who have deserted to UKIP, how many of the latter will be immigrants?]
Reply to
Robin

First, many graduates do leave the UK. See eg

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which ties in with HESA figures. Second, students from the EU are entitled to student loans. The NAO reported last year some 18,000 out of 42,000 are in arrears/not replying to questions about their income..

Reply to
Robin

With the amount you could get from a £30000 pot, I think it might actually be more valuable to be able to spend the money.

A £30,000 fund retiring at 65 will not get you more than about £2000 per year, fixed rate (i.e. no inflation rises).

Reply to
Alex Heney

One obvious alternative would have been to relax further the provisions for draw-down - reduce the £20,000 guaranteed income threshold etc.

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I agree with the first but not with the second.

I note that they're reduced it to 12,000 as an interim measure.

12,000 pounds may be sufficient now, but with 15 years of inflation it might not be. I think that's too low.

And I think that there should be (larger) maximum draw down limits for small pots that is an absolute amount not the one that we have now calculated on theoretically keeping enough in the pot to always be able to buy the same "life-time" annuity.

The reality is that someone who retires with nothing more that the state pension and a 50K pot doesn't have enough for a life-time income anyway - pretending that they do is just silly.

You either let them withdraw 2K pa and have to claim benefits now and forever, or let them withdraw a larger amount (5 or 6K or even 10K, say) and let them claim benefits when the pot is exhausted. They may never reach the latter point.

tim

Reply to
tim.....

Personally, I'm surprised it's that low; if correct, it suggests that ex-students are too keen to pay off the debt.

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If we exclude the ones who go out of they way to avoid paying even when they should, most of them seem to aspire to reach the salary level that does pay it back. I haven't actually done the calculation but it's about 50K by the time that you are 35 and remaining there for the next 20 years.

Though most aspire to it, many will not achieve that level and of those that do many will not remain there for 20 years.

As an anecdote, I have a cousin who's quite a few years older than me and as such has now reached retirement age, who having spent 8 years qualifying as a lawyer, spent 3-4 years working, got married (to another lawyer) had children and (quite happily) never worked again. Had she had a loan they would have got about 5% of it back :-(

And, of course, that doesn't include the ones going into "social" careers that will never pay them that salary anyway (nor the ones that never get a "graduate" job!)

tim

Reply to
tim.....

And how do you think the DWP would a) find out and b) show that it was deliberate deprivation of capital?

Reply to
Judith

And how do you think the DWP would a) find out and b) show that it was deliberate deprivation of capital?

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you tick the honesty box

tim

Reply to
tim.....

That's still a hell of a lot better than taking an annuity that will also be taxed at 20 per cent at every instalment. And they will have to live another 30 years to get back their fund value.

Reply to
Big Les Wade

Who? - Me? :-)

Reply to
Judith

Very difficult to know, as many people have multiple small pots from different employers. The pension provider will not be aware of what other pots a customer has.

Reply to
Snow_Flower

Actually, with no other income than basic state pension, they won't get up to anywhere near the personal allowance. If they have a lot of S2P [and its predecessors] they would, but the OP didn't seem to be thinking in that area. But almost anything is currently better than taking an annuity, ...

..., *unless* they started the investment far enough back to have a large guaranteed rate [which can be over 10%]. But with a [total] fund as small as £30K, an annuity is daft anyway.

Reply to
Andy Walker

Indeed. Besides the state pension, I have one occupational pension and two private pensions, one of which I take no income from. It is relatively small (10% of the other) and I treat it as 'mad money' to be invested in a spread of relatively high risk investments, in the hope (based on previous experience) that it may gain significantly in value over the next decade or so.

I am, however, rather surprised that the average is so low. I presume it reflects the number of people who have made no provision for their pensions. I am pleased that I started at age 19.

Colin Bignell

Reply to
Nightjar

Personally I combined some small pots into one since you can get bigger discounts (on charges) on larger sums.

Reply to
Mark

I would think not though the details of the scheme are not yet available AIUI people over age 55 will be allowed to draw down on their pension pots but if they do they will pay tax at their marginal rate on 75% of the draw down. This will create a record of the fact.

Arrangements are already in place to accomodate those who dishonestly hide assets in order to quialfy for benefits.

Reply to
Mel Rowing

You are not taxed at 20% on every instalment if it is a conventional purchased life annuity, i.e. one where there is no specific compulsion to purchase an annuity because of pension plan rules or the by the direction of a will.

Such annuities are calculated on the expected yield from the initial investment and the annuitant's life expectancy to project the probable payment period. Payments are deemed to be part capital and part interest and tax is payable only on the interest content.

Reply to
®i©ardo

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