State Pension Age Up Again

[SWP's back]

Phased drawdown definitely seems to be the way to go, unless you absolutely have to get your hands on the whole pot in one go. What I didn't realise until last week is that once you take your 25% tax-free lump sum, you have to make a decision on the rest of your pot - be it going into drawdown or buying an annuity - within 6 months of taking the tax-free lump sum. Not only that, once you take even the smallest amount out tax-free, if you're in a position to invest fresh money into a pension then you're only limited to a maximum of £4000 per year (including tax relief). This is down from £10000 per year previously so the government are closing down certain avenues that opened up with the advent of pension freedoms.

Yes that's true although you can still invest in more liquid investments such as ISA, unit trusts (with a feeder into your ISA) and capital investment bonds.

You can also take 5% from an investment bond every year for 20 years tax free (its not actually free per se, but it is deferred for 20 years as HMRC sees the 5% cumulative annual payments as a return of the original capital).

Pensions have their place as you get your tax back on contributions but you lose most of that benefit as your pay tax when receiving it.

 

[M18CTID]

If you can save between £200-£300 per month as a 35 year old until your 65 so 30 years, will that be better put in a pension to supplement the state pension when I'm old enough to get one or would it be better putting it in ISA's then maybe looking to pay it off your mortgage once it's built up a bit (say every 5 years).

Personally I'm not aiming to fully retire. My aim is to (providing I'm healthy enough) to get down to a 3 day week in my 60's with maybe the wife being able to retire fully if she wanted to when she's in her 60's.

We'll own our home too with no offspring to think about with regards inheritance so that could also help with the plan.

Any comments would be really helpful is I've still no real clue as to what to do with the £200-£300 per month we can save and not touch.

£200-300 per month at your age is a decent wedge to start saving into a pension. Add in the tax relief and that's £250-£375 per month plus you have your NEST pension as well.

I had a mad idea last night about this. If you've got a decent credit history and are disciplined enough, why not get a credit card that has a 0% promotional rate for money transfers into your current account. MBNA are usually a good bet as they tend to offer generous credit limits and long promotional offers - perhaps 36 months or so. If you can snaffle a credit limit of around £10,000, max the fucker out on a money transfer and then pay it into a pension scheme as a lump sum. With the 25% tax relief, you've just given your pension pot an instant boost of £12,500 for the price of £10,000 plus the money transfer fee which is typically 3%-4% so it'll cost you £10,400 tops. Then pay off your credit card with the £300 per month you were planning on putting in your pension, and you'll have paid the whole balance off before the promotional 0% period has expired. Assuming a pension increases by 7% per year, your £12,500 lump sum should grow far more than if you were drip-feeding in that same amount but spread out at £300 per month over 3 years.

 

[denislawsbackheel]

Yes that's true although you can still invest in more liquid investments such as ISA, unit trusts (with a feeder into your ISA) and capital investment bonds.

You can also take 5% from an investment bond every year for 20 years tax free (its not actually free per se, but it is deferred for 20 years as HMRC sees the 5% cumulative annual payments as a return of the original capital).

Pensions have their place as you get your tax back on contributions but you lose most of that benefit as your pay tax when receiving it.

Not necessarily.
My Mrs is a non tax payer.
I put circa £2880 a year every year into a private pension for her.
Govt tops it up with tax relief.
She withdraws the lot annually.
No tax to be paid.
So she has a running annual return of 20% on £2880.
We then repeat.

 

[M18CTID]

Yes that's true although you can still invest in more liquid investments such as ISA, unit trusts (with a feeder into your ISA) and capital investment bonds.

You can also take 5% from an investment bond every year for 20 years tax free (its not actually free per se, but it is deferred for 20 years as HMRC sees the 5% cumulative annual payments as a return of the original capital).

Pensions have their place as you get your tax back on contributions but you lose most of that benefit as your pay tax when receiving it.

Cheers Sam. I know you're far more clued up on this kind of thing than a rank amateur like me. Stocks And Shares ISAs are great and you can now save up to £20,000 per year in one. The trouble for me is that I'm not disciplined enough to leave the cash in there to grow and would keep dipping in lol, whereas with a pension I know I can't get my hands on it for another 8 years at least so I'm probably better off sticking with my pension.

 

[SWP's back]

Not necessarily.
My Mrs is a non tax payer.
I put circa £2880 a year every year into a private pension for her.
Govt tops it up with tax relief.
She withdraws the lot annually.
No tax to be paid.
So she has a running annual return of 20% on £2880.
We then repeat.

Yeah, certainly not going to argue with doing that in your situation. It's very tax efficient and money for nothing.

 

[SWP's back]

Cheers Sam. I know you're far more clued up on this kind of thing than a rank amateur like me. Stocks And Shares ISAs are great and you can now save up to £20,000 per year in one. The trouble for me is that I'm not disciplined enough to leave the cash in there to grow and would keep dipping in lol, whereas with a pension I know I can't get my hands on it for another 8 years at least so I'm probably better off sticking with my pension.

Ha. Yeah, I know what you mean and it's the reasons the government doesn't allow access before 55 in most cases (some industry related pensions schemes are exempt - or they were - such as professional athletes etc).

 

[ColinBellsjockstrap]

Well, not really. This is the very same generation that form the majority of the ruling classes. The 55 - 70 year old politicians that benefited from free university educations and decent public sector pensions who are now making decisions about my generations future. Baby boomers, born just after the war when the economy started to pick up. The same generation that benefited from public sector share options when British Gas was sold off, and huge levels of investment growth in the 80's. All right, interest rates were high, but houses were cheap, and the ones who invested in bricks and mortar are now sitting in big houses (2 or 3 empty bedrooms) worth 15 to 20 times what they paid for them.

Yes, I know there are folk of that generation who didn't reap the rewards for whatever reason, but all the pensioners I know aren't short of a few quid. My Gran always had money in her purse, and never struggled to put her heating on.

It's just the way it is, and unless our economy suddenly picks up, my generation will not see anywhere near that level of financial stability in our old age unless we put upwards of 30% of our salaries into a private pension.

Yes, but we had to put up with:-

Two channels on TV in black and white

Jimmy Young and Raymondo

Crossply tyres

No internet

No mobile phone

The only porn was a health and efficiency mag

Being hit on the head with a blackboard duster from 20 yards if you talked in class

For starters........

 

[cibaman]

Also, what's the deal with this retirement age going up and up?

I'm forever hearing that we're living longer and reading articles on how much you need to save up for living 20 years past the retirement age. What's that all about exactly because I know nobody in my family of a working class background and in general, working class jobs that have lived well into their 70's never mind 80's or 90's.

I'll be very surprised if I get past 70 so at 35 now, how many years of blissful retirement will I be enjoying?

The well off might be living longer but I'd wager that the majority of people on average incomes and average lives probably aren't living as long as what's constantly being made out. Life expectancy in Chelsea or Richmond will probably be higher than life expectancy in Middlesbrough or Doncaster

We are living longer. But a significant proportion of those extra years are affected by ill health, affecting the capacity to work. About 15 years ago I read an article that claimed that life expectancy had increased by 15 years in the previous 50 years, but 11 of those extra years were affected by ill health. Since then treatments for conditions such as arthritis have improved, leading to improved health in retirement, but its definitely not the case that increased life expectancy leads to a similar increase in working capability.

 

[bluethrunthru]

He isn't a tory MP is he ?

or former lead singer of INXS

 

[cibaman]

Yes, but we had to put up with:-

Two channels on TV in black and white

Jimmy Young and Raymondo

Crossply tyres

No internet

No mobile phone

The only porn was a health and efficiency mag

Being hit on the head with a blackboard duster from 20 yards if you talked in class

For starters........

Holidays in boarding houses in Blackpool or Morecambe

Low car ownership

No central heating

Pubs serving Greenhall Whitley and shutting at 10.30

No internet but lots of spam......