Pensions

[killienick]

You forgot to leave your contact details...

 

But you swiped left

[Daydream]

So I got a yearly statement in the door this this week. For private pensions is the rule of thumb basically you'll bet back each month in retirement what you put away in your working life? With 23 to 25 years of work to go they're suggesting I can expect about £6,000 per annum, which is roughly the contributions that went in this year. Seems pretty pish tbh.

[The_Kincardine]

So I got a yearly statement in the door this this week. For private pensions is the rule of thumb basically you'll bet back each month in retirement what you put away in your working life? With 23 to 25 years of work to go they're suggesting I can expect about £6,000 per annum, which is roughly the contributions that went in this year. Seems pretty pish tbh.

This is complex.  The best rate I've seen so far for my 'pension pot' is to take out an annuity when I'm 65 with no guarantee on the length of pay-out. As a smoker it will pay close to 6%.  The downside is that, if I snuff it when I'm 66, then the insurance company will keep the remaining 94%.

 

Ideally I'd like to cash the lot out - but that may land me with a big tax bill.  It's a real minefield.

[DDcups]

Are council pensions good?

[Daydream]

This is complex. The best rate I've seen so far for my 'pension pot' is to take out an annuity when I'm 65 with no guarantee on the length of pay-out. As a smoker it will pay close to 6%. The downside is that, if I snuff it when I'm 66, then the insurance company will keep the remaining 94%.

Ideally I'd like to cash the lot out - but that may land me with a big tax bill. It's a real minefield.

If I was 65 today I'd like to take a yearly drawing from my pot equal to the maximum you can earn without paying tax (10k approx) but I've no idea if you are even allowed to do that. I was speaking to a guy recently who reckons you can take 25% of your pot tax free upon retiring.

Seems ludicrous that I'm saving all this money but have very little insight or confidence in the whole thing.

Also, I thought your family benefited from your pension if you died early.

I need to speak to my pension guy.

[Granny Danger]

If I was 65 today I'd like to take a yearly drawing from my pot equal to the maximum you can earn without paying tax (10k approx) but I've no idea if you are even allowed to do that. I was speaking to a guy recently who reckons you can take 25% of your pot tax free upon retiring.

Seems ludicrous that I'm saving all this money but have very little insight or confidence in the whole thing.

Also, I thought your family benefited from your pension if you died early.

I need to speak to my pension guy.

If it's a SIPP you can take 25% out tax free but it is subject to restrictions. Again if it's a SIPP as the legislation currently stands the balance can be left as part of your inheritance without being subject to inheritance tax but subject to tax on withdrawals.

[Deeboy]

This is what my parents have done/doing. Don't keep money in yer banks or yer going to be screwed over .

And never keep a paper trail or cellular device for more than a month.

#BidnessAccumen.

#SmartCleverStepper.

[Suspect Device]

I've paid into a pension since I was 21. I was told back then (27 years ago) not to rely on the state pension even being around when I retire. It's not quite turned out like that but delaying it until I'm 68 could well mean I'll never see it.

I'm a contractor so my 'employer' pays my pension. It was about 10% of income until my income fell dramatically with the oil price.

My original plan was to retire at 50 but the government changed the minimum age to 55. Even that looks unlikely now. I have a SIPP and both the wife and me have IS As which was all geared up for retirement but with the benefit of being able to dip into the ISAs in case of emergencies. Glad I did it now.

I was aiming for £400k as enough to provide a good standard of living in retirement. Like I said, 55 is unlikely now.

[JamieT1314]

25% tax free from all pension pots. Not only SIPP.

[Suspect Device]

25% tax free from all pension pots. Not only SIPP.

 

 

I wouldn't rely on that though. There have been rumours that it will be stopped sometime. Although I think it wouldn't affect existing money in your pension.

You can never guarantee anything. Pensions are an attractive revenue raiser for the treasury because very few people understand them so don't notice your money getting nicked (like Gordon Brown did).

[Granny Danger]

I wouldn't rely on that though. There have been rumours that it will be stopped sometime. Although I think it wouldn't affect existing money in your pension.

You can never guarantee anything. Pensions are an attractive revenue raiser for the treasury because very few people understand them so don't notice your money getting nicked (like Gordon Brown did).

That does negate JamieT's input though. The fact is the government of the day can change the pension rules at any time.

To know that 25% of all pension withdrawals are tax free at present is surely good news.

[Suspect Device]

That does negate JamieT's input though. The fact is the government of the day can change the pension rules at any time.

To know that 25% of all pension withdrawals are tax free at present is surely good news.

 

 

It's great news but I've got this nagging feeling that in the 7 years between now and when I can take the cash out, something's going to change and mean that I can't.

 

Eternal pessimism comes with the territory of following a football team I guess.

 

Of course, we're due another stock market crash as well between now and my retirement so that might cock up my plans as well.

[Granny Danger]

With regards to pensions I wouldn't worry about a stock market crash; and I say that as a fellow pessimist.

Pension investments have to be viewed in the long term and the stock market has proven historically to right itself and grow over any reasonable time period. The secret is to hold your nerves and not get spooked.

[Wilky1878]

I'm starting an apprenticeship mid June and have already signed all the paperwork about pensions and such. Didn't quite understand the paperwork tbh but I'm paying a small percentage just now and it rises upon completion of the apprenticeship I think. I'm also going to open a savings account and just put a small amount away each week.

It might not be most 18 year olds priorities but I'm learning from my folks and their folks mistakes tbh. My grandad is in his late 60s and says he can't afford to retire so is still working at his age. My dad earns a fair amount (over £1k a week with some overtime) but wasted most of it in his younger days so is still in a council house. Fair enough it's full of fancy stuff but he always says his biggest mistake was not getting on the property ladder.

[killienick]

It's great news but I've got this nagging feeling that in the 7 years between now and when I can take the cash out, something's going to change and mean that I can't.

 

Eternal pessimism comes with the territory of following a football team I guess.

 

Of course, we're due another stock market crash as well between now and my retirement so that might cock up my plans as well.

 

The trick is to always have your investments and timescales aligned with your attitude to risk and capacity for loss. i.e. If you absolutely know that you need a specific amount in 1 years time and cannot afford the capital to drop at all then cash is king. However, if your timescales are longer then you risk tolerance will probably be higher.

 

They will probably tackle pension tax relief at some point but it will be hugely unpopular so I'd imagine it will be a gradual decrease rather than an overnight stop of these benefits. The fact that they changed the wording from Tax Free Cash to Pension Commencement Lump Sum and then put in brackets 'currently tax free' would suggest that this position is being considered though.

[The_Kincardine]

If I was 65 today I'd like to take a yearly drawing from my pot equal to the maximum you can earn without paying tax (10k approx) but I've no idea if you are even allowed to do that. I was speaking to a guy recently who reckons you can take 25% of your pot tax free upon retiring.

Seems ludicrous that I'm saving all this money but have very little insight or confidence in the whole thing.

Also, I thought your family benefited from your pension if you died early.

I need to speak to my pension guy.

Congratulations ya auld fucker!  Got yer bus pass yet?

 

Yes, you can take 25% from your 'pot' and yes, your family can benefit from your remaining pension...but that largely depends on what you do with your remaining funds.

 

So, with my 'pot' I can get about 6% - not a bad return.  This assumes I'm a cancerous auld fucker who will stop follow-following before I'm 70.

 

If I want a 'guaranteed payout' the rate drops.  If I want to leave a legacy then the rate drops further.

 

I understand this - but my big issue is that my options are reduced.  If I want to take everything I have paid in then I am fucked.

 

I also understand that we have a state pension and NHS to fund.  This is why >400 gbp comes out of my monthly salary.  What I and my employer pay in to my pension pot should be our fucking business, though.

Edited May 31, 2016 by The_Kincardine

[killienick]

It doesn't have to be a SIPP for 25% Tax Free Cash or for the residual pot to be left as a tax free death benefit for your estate. You can take your 25% in various ways but if you choose to take Tax Free Cash and not take any income then they all essentially fall under something called Drawdown which can be in various guises. If you don't want Drawdown and would like a guaranteed income then you can still take 25% Tax Free Cash before annuitizing.

 

Even if you do take income then your estate can still benefit from a tax free death benefit up until your 75th birthday if you have a certain type of Drawdown. After 75 then the tax on this type of plan would be at the recipient's marginal rate. This all really depends on whether you are in Capped of Flexi-access Drawdown, (you should consider applying Nominees Drawdown if you are in Flexi-Access).

 

To answer Daydream's other question. Whatever income you take after your Tax Free Cash is taxed at your marginal rate, meaning that if you don't earn any money elsewhere at all then yes, you can take up to £11,000 tax free as income. Between £11,000 and £43,000 would be taxed at 20% and so on.

 

The summary above is nowhere near comprehensive enough to explain tax free cash or pension options as you may have a final salary scheme or something called a section 32, (or many other schemes). These can entitle you to enhanced tax free cash at greater rates than 25% and may also offer other guarantees however you would lose these if you chose to move.

 

In short - pensions are complicated.

[Granny Danger]

A bit off topic but I didn't want to start a separate thread.

Anyone on here looked at peer-to-peer lending?

[rhliston]

A bit off topic but I didn't want to start a separate thread.

Anyone on here looked at peer-to-peer lending?

Yes I have invested a small sum of my pension cash in peer to peer lending at Wellesley & Co for a 12 month period getting 3.75% interest for the year given the low interest rates you are getting now makes it very attractive if you are willing to take the risk.

[die hard doonhamer]

A bit off topic but I didn't want to start a separate thread.

Anyone on here looked at peer-to-peer lending?

I've used it as a credit facility, rather than investment, through zopa. The experience of borrowing from them would certainly encourage me to invest with them should my situation allow it.