Government Allows People Access Their Own Money

[ludwig]

It's pretty radical stuff. What's the consensus here on AB - good or bad?

http://www.bbc.com/news/uk-politics-26649162

[ToraToraTora]

Life assurance companies are basically book makers with very heavy duty statistical analysis and mathematical techniques. Essentially they know how long you will live, well not you exactly but people generally. The problem is that every now and then they get burnt by someone living too long, that's ok and expected but what really hurts is fluctuations in interest and thus gilt rates in the medium term. The current problem is that they are still paying for those who managed to retire on 15% annuity rates in the 80s (for example) and stubbornly refuse to die so the whole predictive picture is much more complex.

[Graham-W]

A couple of points.
As savings into pension schemes are free of income tax, If someone decides to withdraw the lot on retirement, this will not be a pension. Will tax have to be paid on the whole of the lump sum?

One of the few benefits I can see is if someone reaches retirement age without paying off their mortgage ( and this seems to be happening more frequently) the retiree can withdraw enough from their pension pot to pay it off. I see this as a good thing.

[pixie373]

Yes, you'd pay more income tax if you withdrew a larger lump sum.

[emmie]

i already responded on another thread about this, if this is the annuity/pension question. I would like mine paid in full now, the reason being its a teeny weeny amount paid out per annum, and costs me more in hassle, than i care to explain.

[mikey4444]

Graham W...at present you can withdraw up to 25% of your pension pot as a tax-free-lump sum. The Chancellor now proposes to allow you to withdraw 100% of your pension pot, but the remaining 75% will be taxed. Its gets complicated if you are a HRT payer.

[ToraToraTora]

yes graham, any withdrawal beyond the allowed lump sum will be added to the income of the person concerned for that finanial year.

There is a lot of obsessing about the mortgage and yes it would be great to pay it off. However other bills will overtake it, for example my counci tax will never go away and it is now more that my first mortgage and over half my current mortgage each month. I predict that by retirement the mortgage will be irrelevant when put next to the bills that will never go away.

[ToraToraTora]

yes mikey makes an interesting point too, lets illustrate a possible scenario:
you retire with £400k pot, you get 100k tax free pay 40% tax on 300k so now you have 280k, then you die with 280k now added to the estate for IHT purposes, ouch! I still prefer to have control of it though.

[Bazile]

Every now and then i get a letter through the post from a company , reminding me how i can release a payment from my pension pot to do this and the other - and how they can help me facilitate the aforementioned ( of course they will want some of my 'folding' in assisting me ).

No doubt there will now be a marked escalation in these type of firms
(remember insurance mis- selling on loans and other ? )

[mikey4444]

As I have already explained in that other thread emmie, this small pension pot that you have, may already benefit from the "trivial pension" rule, and if so, nothing has changed with the Budget.

But this only applies to future pensions. If you already have a small, bi-annual pension payout, it means that you have already "vested" your pension and its not likely that these new rules can be applied retrospectively.
( vesting means that you have converted your pension-savings scheme into an annuity for life )

I hope this is of some help, but please ask again if you need clarification.

[emmie]

its more hassle than it's worth, i wish i had not taken it out, however if the company comes along and says here's your money back, i am not going to say no.

[mikey4444]

TTT..you are right about the mortgage compared to other bills. My own mortgage at present is about £350 a month, but all my other Bills come to another £500+. This is the basic mistake that a lot of people make when thinking about income in retirement. As I have already said, the majority of our regular spending in retirement will still be with us and will never go away. As we will have more leisure time, expenditure may even increase. When the mortgage eventually goes it will of course be nice not to have to find this substantial amount of money each month. But the expenditure that people are left with will not be a bed of roses by any means.

I saw a bumper sticker once in California....."Retirement - twice as much husband but half as much money"

[sandyRoe]

Is this altogether wise? What if the pensioners spend all they have on riotous living and then throw themselves on the charity, and mercy, of the state? We'd have to pick up the bill.

[Bazile]

sandy - that's what i said in the first response

[mikey4444]

sandy...that is exactly what I am afraid of, and so has every Chancellor that I can remember, of any political colour. That is why they didn't step over the Rubicon and do what Osborne has now done. We already have far too many people scrounging off the State as it is.

[sandyRoe]

I should have read the other posts.

[mikey4444]

Just seen this on the BBC News website :::

http://www.bbc.co.uk/news/uk-politics-26649162

Crass doesn't even go halfway to describing this idiot.

[New Judge]

Why so, Mikey?

“Pensions minister Steve Webb said it was people's "choice" whether to buy Italian Lamborghini sports cars.”

That’s precisely the point. It should be people’s choice how they spend their money. So long as no additional burden is placed on the State (and that can easily be ensured) that is all that matters. Some people may relish the idea of having a few months living like a lord and spend the remainder of their days living in penury on the basic State pension. The whole idea that "Nanny" State knows best and that everbody's lives must be rigidly controlled needs to be challenged and addressed.

“A Downing Street spokesman backed Mr Webb, saying it was not up to the government to give advice on how people chose to manage their savings.”

Exactly.

[sunny-dave]

Why would you discriminate against someone who 'blew' their pension pot in a couple of years (or even less).


Let me paint you two scenarios :

A. A feckless twit who makes no provision for their pension - who we already accept we will have to help

B. A prudent chap who saves a fair bit in a pension plan, but then turns feckless at 65 and blows the lot on fast cars and faster women


For the state to cough up to support A but not B is surely illogical?

[humbersloop]

to any ABers who turn feckless at 65 and want to blow the lot on fast cars and faster women, Good Evening from me;)

[tonyav]

Hang on, hippy chick, why feckless at 65. I've been feckless all of my life.