Pension Choices

[sandyRoe]

When people are free to do what they like with their pension pots is there likely to be an increase in investments in wine, farmland that might get planning permission for development, and other cons?

[Peter Pedant]

Hold it - I am 63 y o pensioner and when I reach 65 I will get an OAP

It is not a benefit you know ! I paid for all this in the last 47 years !

[ altho the eagle eyed amonst you, will have noticed that it is now classed as a taxable benefit ]

[ladybirder]

I noticed PP. And argued about it, And lost! Was informed it was classed as a Non Means Tested Benefit. Flipping cheek.

[ludwig]

Mikey, I wasn't meaning to be aggressive. If I get a bit irate, it's simply as a result of the incredulity I feel (as mentioned earlier), that we're having a debate about whether the government should allow people to what they want with their own money.

[ludwig]

..to DO what they want..

[ludwig]

And now perhaps you'll address my key point. Why are people who spend their pension savings on a ferrari going to be any more of a burden on the taxpayer than they would be if they bought an annuity?

I can't see that not having an extra measly income from an annuity would entitle them to extra benefits, and if it did, ie they were means tested, all the more reason to buy the ferrari, and less incentive to save in the first place.

[Buenchico]

>>>is there likely to be an increase in investments in wine . . . and other cons?

What? Do you mean that these 5000 cases of Château Thames Embankment in my living room might not have been a good investment after all?

I'm shocked!

[Old_Geezer]

May I ask for confirmation of an assumption I've made ?
All these recent pension changes, they only apply to DC not DB pensions ?

[ludwig]

I assume DC geezer, because DB isn't a saved pot of money in the same way that DC is.

[Sipowicz]

Correct Old Geezer.

[Old_Geezer]

Cheers. We get bombarded with pension info/advice yet no qualification that it only applies to the type we don't have. Very confusing. Ironic really that now I have a confirmation here, the morning tv mentions that if one has the, more common in the past, employer DB version type, one could swop the investment to a less favourable fund to get hold of it; but that sounds madness to me.

[sandyRoe]

I should have added that this question was academic as far as I was concerned. For most of my life I never even had the proverbial pot to pee in.

[Peter Pedant]

// it's simply as a result of the incredulity I feel (as mentioned earlier), that we're having a debate about whether the government should allow people to what they want with their own money.//

I noticed the view that the voting public are in fact too feckless to spend their own money and the govt or man from the ministry has to do it for them - "after all the man at the ministry really DOES know best" ( Douglas Jay 1963 )

[mikey4444]

Ludwig...thanks for your post at 09:31 yesterday. We all get a bit carried away sometimes, even me !

The potential problem that I can see for the future is that some people will blow their pension money unwisely. The reason that successive governments have allowed tax relief on their contributions is to encourage people to save for income in retirement, not to buy an expensive car. Its not the governments job to help people make expensive purchases, through the tax system. Pensions were an exception.

If those people then find themselves in financial hardship in the future and many will do so, it is likely that they will have no option but to fall back on extra State aid to supplement their meagre retirement income. Any future government, of any political hue, will find it difficult to ignore 100,000's of poor pensioners, in poverty because they were allowed to waste their pension savings.

I would go further and suggest that if the annuity option isn't compulsory in the future, then tax relief on pension contributions should cease. And we can start by
scaling back the overly generous tax relief given to higher-rate taxpayers.

[sandyRoe]

Is that the Jay who rose by nepotism? ^

[mikey4444]

PP...State pensions have always been subject to income tax, for as long as I can remember. But if the Old Age Pension is your only income, then no tax is liable.

[sandyRoe]

No. I see it was Peter Jay who flew to high ambassadorial rank through family connections. His father in law was PM.

[Svejk]

I believe that if you 'cash in' your pension, you have to pay tax on it, anyway. But I'm not a financial adviser.
Talking of which, I'd be more concerned about rogue firms and advisers legally stealing money off old people than illegal cons.(there'll be a lot more of them)

[ludwig]

// The reason that successive governments have allowed tax relief on their contributions is to encourage people to save for income in retirement, not to buy an expensive car //

The government will take all the tax back when people take their lump sum, don't worry about that.

The only people in a panic about this are the financial institutions that want to keep hold of the money and pay people a pittance a year. That's why they're doing a full on scaremongering campaign about how everyone that does this is going to begging on the streets within a few weeks of cashing in their fund (as if they give a t*ss).

[Old_Geezer]

It's the return from those annuities (after expenses/charges) that should be regulated really, rather than allow folk to splash out. After all that was the agreement, it was to provide a retirement income. But folk should get a decent return, not be put into a position where they are "over a barrel' and has to accept whatever pittance is offered.

Whatever the pension arrangements there is still a virtual 'pot of gold' being invested somewhere; hopefully balanced between higher risk/return and low risk/adequate return, and spreading the risk out between all in the scheme. To wallop tax on a cash extraction immediately/up-front seems a little off. Is it waived if one buys income investments with it ? If not that's just another con.

[dave50]

There really is no difference between those who decide to blow their pension pot on holidays or new cars and those who decide not to save for their pension because they think they cant afford it or are on benefits. One group have received tax relief on their pension savings but the other group have probably received benefits of some kind all their lives. So both have benefited from the tax payer at some stage in their lives. So if both groups reach pension age, relying on the state for help, both groups are equally culpable.