Not sure what the point is of that link? Other than to perhaps depress people? I will be ok, we will run out of anti biotics before I am due to retire and I will die of a silly infection so no need to worry about pensions.
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>> Not sure what the point is of that link? Other than to perhaps depress people?
The point is that if you aren't going to put 15% of your income away now and for the rest of your working life, you should expect an impecunious retirement or hope you can work until you drop.
Not depressing, just a fact. At least you are young enough to do something about it.
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I have various pensions dotted around left over from job to job.
I did look at bringing them all together but cost wise there is no point (some pensions only accumulated a small value).
MY current pension is great, I put one amount in and my employer puts in double what I put in.
so effectively 3x amounts going into my pension each month.
I am not going to worry about it though as I wont live long enough to see it, at least the wife will be happy with it. lol
What is worrying though, friends and relatives near the 40 year old mark with no current pension or ever had a pension.
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When our final salary pension scheme was closed (so that won't pay out what I'd have hoped when it started about 18 years ago!), the company had to come to some agreement for the new scheme. In the end they agreed to pay in up to 10% extra per annum on top of matching my contribution (up to 5%). So I can put in 5% each month and they put in 5% as well and then another 10% on top. So 20% of salary goes in.... don't think I'll be working for them for the next 20+ years though!
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>> friends ... near the 40 year old mark with no current pension or ever had a pension.
Hello.
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>>Not depressing, just a fact. At least you are young enough to do something about it.<<
He wont though, he will just be here moaning about it when he is 75 and how unfair it all is.
Being financially prudent just isnt fashionable anymore, not like it was for my parents generation, perhaps because my dad grew up poor he spent his working life making sure he didnt retire poor whereas my generation havent really known poverty in the same sense so we dont fear it nearly as much although we perhaps should.
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I have known too many people drop dead of heart attacks to bother planning anything really. I worry about it at the time when I am working in a work house :).
The only real plan I have is to try and get some sort of property so at least I have some where to live in my retirement. I had £300 in my savings and got £2 interest from them.
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>>I have known too many people drop dead of heart attacks to bother planning anything really.
And if you're going to drop dead of a heart attack, then you are taking the correct approach.
If, however, you think you might like a gap between when you give up work and when you die, then you are a fool.
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I get very bored easily anyway, there is no way I could sit at home as a pensioner watching daytime TV and walking down to the post office on a Thursday morning! My plan is to invest money in property and sell that for retirement. Just waiting for news on a new job to come through first though.
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>>I have known too many people drop dead of heart attacks to bother planning anything really
>>My plan is to invest money in property and sell that for retirement.
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>> >>I have known too many people drop dead of heart attacks to bother planning anything
>> really
>>
>>
>> >>My plan is to invest money in property and sell that for retirement.
where do you plan to live?
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In the back of a transit van if I have to!
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But that is a lot better use, and more enjoyable than paying into some private pension.
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Isn't it funny that a financial sales company should tell us to buy financial products like pensions! I would hate to live to 105 anyway.
Private pensions are a con, and the tax relief that they enjoy should be spread to all forms of saving to level the playing field. My wife had an Equitable Life pension - you know the one with the 'guarantees' Enough said!
My pension will be income from property, and by the time I reach 57 I will have 4 mortgage-free properties worth in excess of £2,500,000 at today's prices, with more in the pipeline.
The shortage of property which is artificially inflating house prices won't be solved in my life-time, so I should be alright!
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I pushed as much as I could into my pension plan. Don't (yet) regret it for an instant. Been retired for 11 years with no cash problems. Inflation may, of course, ruin everything.
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>> I get very bored easily anyway, there is no way I could sit at home
>> as a pensioner watching daytime TV and walking down to the post office on a
>> Thursday morning!
That's what retiring without a pot to p.... in is like. Plan it well and it can be fantastic.
Mrs B's grandmother is 82. Her life is so busy that we have to book a slot a couple of weeks ahead to visit. Her and her new boyfriend have now discovered the delights of cruising so that has also become a several times a year event
Mrs B's own parent also planned very well and retired at 50 & 48. They have a very comfortable lifestyle and no doubt will live long lives.
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>>>Mrs B's grandmother is 82. Her life is so busy that we have to book a slot a couple of weeks ahead to visit. Her and her new boyfriend have now discovered the delights of cruising
Good on them...
stblogs.hotrod.com/files/2012/11/2012_SEMA_Cruise_Hot_Rod_Red_1969_Camaro_street.jpg
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>> I have known too many people drop dead of heart attacks
Oh, Rattle...
You're an intelligent chap, degree and everything. Look up the odds.
Yes, you might fall off the perch at 40 with a heart attack, or be run over by one of your beloved trams. But it's far more likely that you will live to be 80.
It's bad enough being old, but other than throwing my clogs in I can't do much about that. I do however prefer not to be old and poor.
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>> Not sure what the point is of that link? Other than to perhaps depress people?
>> I will be ok, we will run out of anti biotics before I am due
>> to retire and I will die of a silly infection so no need to worry
>> about pensions.
>>
I think you will probably die of worry!
;-)
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Compulsory euthanasia at 70 is the answer. You could be allowed to buy extra years as long as you have adequate finances. Might take a while to clear the backlog but once it's done the country will be a lot better off. I offer the idea to Mr Farage for his manifesto as he seem a bit short on ideas :-)
Last edited by: CGNorwich on Wed 17 Apr 13 at 20:05
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>> Compulsory euthanasia at 70 is the answer. You could be allowed to buy extra years
>> as long as you have adequate finances.
BUt you wont have adequate finances if you have to pay through the nose for extra years, its a policy that has not been thought through or passes the practical test.
So yes, It probably will appear in the UKIP manifesto to pad out the words.
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It's "Red Ed" Milliband who has the blank sheet of paper: I'm sure the idea would fit in well with Socialist statism.
Soylent Green, anyone?
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"I'm sure the idea would fit in well with Socialist statism."
No, the euthanasia clinics would be privately run to ensure competitive pricing.
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>> "I'm sure the idea would fit in well with Socialist statism."
>>
>> No, the euthanasia clinics would be privately run to ensure competitive pricing.
>>
:-D
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"BUt you wont have adequate finances if you have to pay through the nose for extra years"
Exactly!
Clever plan heh?
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"How to avoid running out of money when you retire."
Retire with none.
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IMHO, the basic calculation for how much money to save for retirement uses the following two assumptions:
You will need about half your ‘working’ annual income when you retire, assuming your kids have grown up and are financially independent and that you have paid off your mortgage.
You will work from e.g. 25 to 65, then die at 85, so your retirement life is half as long as your working life.
Hence you will need to somehow accumulate 25% of your working pay.
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>> Compulsory euthanasia at 70 is the answer.
Not according to the stuff I read (mostly Terrorflag): apparently we have a labour shortage, and we need the oldsters to work to fill the gap.
Quite how that squares with 2.6 million unemployed defeats me, but I'm sure somebody here will explain it to me.
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I thought that one of the reasons given for letting in so many immigrants is that they were going to provide for our pensions.
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Yes that's what I thought.
Apparently the government needs 2.5 people working (paying tax) to pay for 1 persons pension.
Hence the government cant wait for loads of immigrants from Romania and Bulgaria.
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Well I am on the cusp of retirement and as per other threads here , I have been shoving as much money as possible into the pension to get the benefit of as much tax relief as possible....
Where else can you get an effective 20% added to your money or more if you are a higher rate tax payer.......certainly not in any bulding society .....
It does annoy me that the feckless who do not save for old age expect those who are prudent to pay their pension....
Anyway , I am looking forward to daytime TV and a quiet life...
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>> Anyway , I am looking forward to daytime TV and a quiet life...
I have some really bad news for you.......
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The way to avoid running out of money when you retire is simple: have lots of it before your retire.
Or get people working for you to make you money while you sit back and enjoy life in the UK summer...
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I managed to get out of the world of formal work quite a long time ago but I'm still not sure I'll ever see retirement age and my pension.
I have some sympathy with the 'sod it' approach because in recent years so many of my friends and family have snuffed it, all well short of the magic 65.
Just last week a once-prominent member of the forerunner of this forum buried his father, an extremely nice chap of the same age as me and, as he was an accountant, a man who had probably spent much of his life planning his retirement income.
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>> I have been shoving as much money as possible into the pension to get the benefit of as >>much tax relief as possible....
ALWAYS make sure you have cash or near cash Capital (Savings, ISAs, Shares etc).
Pensions are fine but do not buy the new car / big house repair bill or whatever comes around the corner (Children needing bailed out/deposit for bigger house etc!)
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Absolutely, best bit of pension advice I have been given recently is to take as much of work pension as possible as lump sum
1 it pays for the big bills as FB says
2 it moves the money into your account & thus your estate if you do go early rather than the plus side of the actuarial calculations
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>> Absolutely, best bit of pension advice I have been given recently is to take as
>> much of work pension as possible as lump sum
>> 1 it pays for the big bills as FB says
>> 2 it moves the money into your account & thus your estate if you do
>> go early rather than the plus side of the actuarial calculations
Yup, take your full 25% and clear your debts.
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"Absolutely, best bit of pension advice I have been given recently is to take as much of work pension as possible as lump sum"
Possibly but do your sums. The amount of cash you will receive is likely to be far less than you would receive as pension although of course it depends on how long you live. Current rates of interest are very low so your cash sum is likely to decrease in value over the years as a result of inflation.
Many company pensions are inflation proofed to a degree (min rises by 5% per annum) which is a far better return than you would get by investing the cash.
You have to decide what is most important to you cash or income. If your need is income it will probably be best to stay with the pension.
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<"Absolutely, best bit of pension advice I have been given recently is to take as much of work pension as possible as lump sum"
Possibly but do your sums.>
Agreed. I took redundancy/early retirement at 53 and so declined to take the 25% lump sum; also, I had no debts/mortgage to clear. My philosophy is to never borrow money other than a mortgage - which I paid off early; I have saved a fortune by not wasting money on interest repayments.
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>> My philosophy is to never borrow money
>> other than a mortgage - which I paid off early; I have saved a fortune
>> by not wasting money on interest repayments.
That's exactly how I was brought up to think ~ if you can't afford to buy something then save up for it until you can. Buying things on the drip (except for a house) and paying interest is a mugs game.
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>> Absolutely, best bit of pension advice I have been given recently is to take as
>> much of work pension as possible as lump sum
>> 1 it pays for the big bills as FB says
>> 2 it moves the money into your account & thus your estate if you do
>> go early rather than the plus side of the actuarial calculations
I probably won't commute any of my final salary benefits, the commutation rate is terrible.
If it's money purchase, yes, it could be more attractive to take the maximum cash as annuity rates are terrible too. I have a small pension com+ing up and I will take 25% tax free, all out of the AVC money purchase part - the £5000 that is left over will have to be used to buy more pension
If anybody is considering taking tax free cash out of a final salary/defined benefit scheme, go over the numbers very carefully and don't forget the pension in payment will usually have annual increases. Unless you are in poor health, or avoiding higher rate tax on the pension income, it's unlikely to be attractive unless you have no cash savings and need a lump sum.
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In my case I pulled out 100k, which reduced my annual pension by 5k. Ignoring pension increases, (inflation is low which means so are pension increases and in my case are capped) I would not be out of pocket till I had drawn my pension for 20 years.
That means I would be 78, and my quality of life reduced - (possibly terminally!) being unable to enjoy and exploit the extra income. So in my case, and in most cases, getting the 25% in cash earlier is a no brainer.
Last edited by: Zero on Thu 18 Apr 13 at 10:36
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Very similar thought process as Zero leading to the same decision here when I retired early and took a bit of a lump. Similarly deciding to take my pension early was easy as it usefully supports a period when I'm still doing loads and if looked at as one pot I don't lose out until 80+.
Last edited by: Fenlander on Thu 18 Apr 13 at 11:51
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In my case I have a final salary pension, now closed but was close to the max percentage anyway, and a defined contribution scheme which will probably provide the cash sum without touching the DB pension significantly.
As you say annuity rates are pretty poor
There are good general rules, think the maximise the lump sum is one, but each individual needs a specific approach in detail
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>>Where else can you get an effective 20% added to your money or more if you are a higher rate tax payer.......certainly not in any bulding society .....
If you expect to be a higher rate taxpayer in retirement it's only an effective 5% (i.e. on the 25% of your pension that you can take out as a tax-free lump sum).
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There is no lump sum with my pension, so at least that's one thing not to have to think about.
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>> If you expect to be a higher rate taxpayer in retirement it's only an effective 5%
>> (i.e. on the 25% of your pension that you can take out as a tax-free lump sum).
What you expect to happen, and where the goal posts get moved to, after you make the decision of how much pension to take can be different.
The reduction in the 40% threshold this year has caught a few out, and there's !-all you can do about it, except wait and see what the future brings.
recent 40% thresholds:
2011-2012 £35,000
2012-2013 £34,370
2013-2014 £32,010
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But the recent change also increased the tax free allowance. In theory dropping the threshold for 40% tax a bit but giving you more tax free should even out.
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recent 40% thresholds:
2011-2012 £35,000
2012-2013 £34,370 reduced by £630
2013-2014 £32,010 reduced by £2360
changes in personal allowance
2011-2012 the personal allowance was £7,475.
2012-2013 the personal allowance was increased by £630 to £8,105.
2013-2014 the personal allowance was increased by £1,315 to £9,420
If the figures I've found are correct, for 2012-2013 things balance, but this year forward HMG take more, if you had an income of £32K
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"Where else can you get an effective 20% added to your money or more if you are a higher rate tax payer.......certainly not in any bulding society ....."
True ........ but the pension companies know this and build it into their massive rake-offs. The problem with a pension is that if you die an early death, your pension goes to the grave with you and your offspring don't see it.
It must be 12 years ago, an acquaintance of around 50 who had lost his wife a few years earlier, had been advised to put his money into a pension fund. Having run a small shop on a council estate and selling fags and booze to the locals, he had made a small fortune which resulted in £500,000 in his pension fund. He was very shocked when he realised that if he died, all that money would disappear. The only way of seeing any of it again was to retire immediately - which he did.
Last edited by: Haywain on Thu 18 Apr 13 at 10:26
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>>he had made a small fortune which resulted in £500,000 in his pension fund. He was very shocked when he realised that if he died, all that money would disappear. The only way of seeing any of it again was to retire immediately - which he did.
Money purchase pension - If policyholder dies before taking their pension and is under 75yrs the capital value of the pension is added to his estate i.e. house, savings, shares + cash value of pension.
If you retire, buy an annuity and die the next day the money stays with the insurer.
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Some may have misunderstood my earlier posts ...my own particular situation is quite good.
I am 64 and I do not have any debt but have considerable savings which are earning very little. I have several pensions which should give me a good income next year at 65 but I may go earlier .
I am in a situation I want to maximise my pension fund as much as possible and the best way of doing that is to get tax relief on pension contributions up to the current HMRC threshold of 50 K per year as I am a 40% taxpayer .
A couple of weeks ago I put in a lump from savings to bring up to £50 k for last tax year and next week another lump will go in to bring up to £50 K for this tax year but I understand from discussions with HMRC that I can also call forward unused payments to up contrbutions to £50 K for the last three years
All this means that I get £50 K per year benefit value in my stakeholder pension fund by putting in £30K - as I say where else can you get up to 40% on your money? You have to take advantage of these tax breaks.
Next year when I take the money out I will take the 25% maximum tax free amount and will still have a good income from the other pensions but will not be paying 40% on my retirement income.
Last edited by: retpocileh on Thu 18 Apr 13 at 12:24
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>> If policyholder dies before taking their pension and is under 75yrs
>> the capital value of the pension is added to his estate
>>
No, it is paid out tax free to his nominated beneficiary.
If he had already started taking his pension, or was over 75, it would be paid out less 55% tax.
Or, if in drawdown, a dependant beneficiary, eg widow, could instead continue to take drawdown.
But the lump-sum death benefit would become part of the widow's estate, unless his letter-of-wishes had asked for it to be paid into trust, not to the beneficiary.
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The question of taking the lump sum and a reduced pension is very dependant on personal circs.
I'm potentially in similar situation to Haywain taking early departure in my mid fifties.
The pension will be based on five or six years fewer than max service and I intend to find alternative work to top it up at least until Mrs B is 60.
I'd also hope to remain active for as long as I can get a leg over my bikes.
Can afford the mortgage etc even if I go tomorrow and I'd rather retain highest possible income. Although it seems mercenary to take it into account Mrs B and I both have contingent interests in our respective Mother's estates too.
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I'm glad our mortgage went a few years ago. And saving the money for something else like a holiday home abroad... or something. Long time to retire for me though - and I don't want to be doing this sort of work for another 25 years!
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If you are "cash rich" when you retire the lump sum will not provide the same income over your life expectancy at retirement age as the sacrificed pension would have done and financially it makes sense to retain the pension. It doesn't make a lot of sense to sacrifice an index linked income for a cash sum invested at a rate of interest less than inflation
Obviously if you have debts or to pay off or have insufficient cash for your needs then the cash sum makes much more sense and is the way to go.
Pension fund typically calculate the lump sum amount at significantly less than the actuarial cost of the pension sacrificed although this is compensated for at least partly by the fact that the lump sum is tax free.
The other thing you have to take into account if you are in company pension scheme is the state of your pension fund. Most UK funds are underfunded and if they fail in the future, might well wish you had taken the cash!. In fact many see the failure of company pension funds as the next financial disaster on the horizon!ny
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>> The other thing you have to take into account if you are in company pension
>> scheme is the state of your pension fund. Most UK funds are underfunded and if
>> they fail in the future, might well wish you had taken the cash!. In fact
>> many see the failure of company pension funds as the next financial disaster on the
>> horizon!ny
It will happen to some, where the company fails. Nearly all have deficits.
A deficit of course isn't a problem while the employer is still in business - there has to be a recovery plan in place and money in the pot. A company failure isn't a problem if there is no deficit. It's the two together that are the worry.
Even then, once you have passed the scheme normal retirement age and are drawing your pension you should be OK.
From a Grauniad article -
If you have already retired, the fund guarantees 100% of your pension payments, provided you have reached the scheme's normal pension age. The same generally applies to those who retired early on health grounds, and people receiving a pension in relation to someone who has died.
If you are still working, the PPF will pay out 90% of what you were entitled to, up to an overall cap which is recalculated each year and currently stands at £28,742 a year.
Subject of course to the fact that, as far as I know, nobody has said definitively what will happen if the PPF runs out of money...
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Die when the money runs out? :-)
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Marry a wealthy widow(er)
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>> Marry a wealthy widow(er)
The boss might have something to say about that.
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I have never understood why it has been legal for a company pension fund to be invested in the company and tied to the company's well-being. Surely pension funds should be invested in a wide spread of products entirely independent of the company?
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>> Surely pension funds should
>> be invested in a wide spread of products entirely independent of the company?
I agree. I never invested in the company I worked for, on the basis that I didn't want to have my job and my savings in the same basket.
In the case of a pension fund, if the company hits choppy water then you could have a bigger deficit and a poorer covenant at the same time.
You do get curiosities though - Dunn & Co, of hat fame, was owned by its employees pension scheme at one time - presumably the result of a rescue, when the pension fund had a healthy position. I wonder if it ended badly.
Last edited by: Manatee on Fri 19 Apr 13 at 14:32
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>> I have never understood why it has been legal for a company pension fund to
>> be invested in the company and tied to the company's well-being. Surely pension funds should
>> be invested in a wide spread of products entirely independent of the company?
>>
Rules as regards investing in the company are:
"You can only invest in the business of the employer in limited circumstances. For most schemes, you cannot normally invest more than 5 per cent of the scheme's assets in employer-related investments. Any such investment can only be justified by the expected return to the scheme, which must be at least as good as could be produced by another comparable investment."
Certain types of investment are excluded totally
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It seems you can plug a hole a hole in a pension fund with cheese, provided it's yours, and you have quite a lot:
tinyurl.com/d5lr5lj (link to Telegraph)
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How to avoid running out of money when you retire - RattleandSmoke
