Pensions

[hilts]

It changed a year or two back to 57

2028 it changes i think, I hope so or im fucked

 

[Citizen of Legoland]

2028 it changes i think, I hope so or im fucked

Ah yes, I should have clarified that!

 

[Kompany Car]

2028 it changes i think, I hope so or im fucked

Yep its fucked me over good and proper. It changes on the 6 April 2028 as I reach 55 on the 19 April 2028. Whilst I dont necessarily need it at 55 its would have been nice to have access should I need it or decide Ive had enough of the corporate bullshit.

 

[Odd socks]

You can take more if you dont take the 25% tax free up front and crystallise it in smaller chunks. Say if you wanted to take out an extra 10k, you would crystallise 40k in a separate account within your pension which holds crystallised funds. 10k would then be tax free. You can do this until your entire fund is either fully crystallised or you reach the limit for tax free withdrawals (just over £268k).

Like I said I'm just about understanding pensions, my pension is a superannuation pension so not having to overthink the pension pot scenario and very lucky I guess that I get enough for my modest needs.

 

[hampshireblue]

Yep its fucked me over good and proper. It changes on the 6 April 2028 as I reach 55 on the 19 April 2028. Whilst I dont necessarily need it at 55 its would have been nice to have access should I need it or decide Ive had enough of the corporate bullshit.

Annoying, but to be fair they did give over 11 years notice of the age increase. I hope you have other savings if you want to retire a bit earlier. Maybe 11 years x £20000 in ISA's? ;-)

 

[Kompany Car]

Like I said I'm just about understanding pensions, my pension is a superannuation pension so not having to overthink the pension pot scenario and very lucky I guess that I get enough for my modest needs.

I probably understand a bit too much about them to say Im not yet at an age where I can get anywhere near accessing my pension. The problem is if you dont think about them and read into all of the tax efficient strategies for your situation, funds, risk management, then by the time you come to take your pension its too late to put some of them in place.

A good understanding of pensions, investments and money in general needs to be up front and centre for everyone. It should be mandatory for people between 16 and 18 as part of whatever training/education they are doing and offered as an online adult education course for those a bit older. Financial illiteracy is one of the things that keeps entire generations of families poor and stops them building some security.

 

[Kompany Car]

Annoying, but to be fair they did give over 11 years notice of the age increase. I hope you have other savings if you want to retire a bit earlier. Maybe 11 years x £20000 in ISA's? ;-)

Oh Im alright as you know, just need to stop her indoors accessing the ISAs to pay for kitchen renovations.

 

[Tommy_Catons_Perm]

Quick question for any experts…

One of my pensions is a final salary one and at 56 I would get 25% tax free amounting to £70,000 but my “transfer value” if I were to transfer it is only £187000.
But if £70k is 25% of the value why would the entire pension transfer value be “only” £187000..?

For comparison my tax free lump sum is 42% of the transfer value. Your tax free lump sum is 37% of the transfer value.

 

[roubaixtuesday]

I probably understand a bit too much about them to say Im not yet at an age where I can get anywhere near accessing my pension. The problem is if you dont think about them and read into all of the tax efficient strategies for your situation, funds, risk management, then by the time you come to take your pension its too late to put some of them in place.

A good understanding of pensions, investments and money in general needs to be up front and centre for everyone. It should be mandatory for people between 16 and 18 as part of whatever training/education they are doing and offered as an online adult education course for those a bit older. Financial illiteracy is one of the things that keeps entire generations of families poor and stops them building some security.

It can be complicated, but follow a couple of very simple rules and you won't be far off:

(1) Save as much as you can afford into a pension scheme from day one in a job.

(2) Make sure you do whatever is necessary in your job scheme to maximise employer contributions, as many will match up to a certain limit. This is free money, even if you're matching it.

All the different risk/ benefit, tax stuff etc makes a difference, but it's second order to these.

 

[roubaixtuesday]

Quick question for any experts…

One of my pensions is a final salary one and at 56 I would get 25% tax free amounting to £70,000 but my “transfer value” if I were to transfer it is only £187000.
But if £70k is 25% of the value why would the entire pension transfer value be “only” £187000..?

There's an easy rule of thumb.

Never, ever, transfer out of a final salary/ defined benefit scheme.

(There are some limited circumstances it might be worthwhile, following is from the FCA)

You have a limited life expectancy and you want your family to be financially secure on your death. If you transfer, you may be able to get more value from a transfer for yourself and your family than if you stay in a DB scheme.
On rare occasions, if you’re in serious financial difficulty, you may benefit from a transfer. But this will generally mean sacrificing long-term security for short-term gain

 

[Odd socks]

I probably understand a bit too much about them to say Im not yet at an age where I can get anywhere near accessing my pension. The problem is if you dont think about them and read into all of the tax efficient strategies for your situation, funds, risk management, then by the time you come to take your pension its too late to put some of them in place.

A good understanding of pensions, investments and money in general needs to be up front and centre for everyone. It should be mandatory for people between 16 and 18 as part of whatever training/education they are doing and offered as an online adult education course for those a bit older. Financial illiteracy is one of the things that keeps entire generations of families poor and stops them building some security.

Your absolutely right about educating people in advance rather than almost at the point of retirement.
Some of my group of OAP friends still have the same amount in their pots as when they finished, I tease them they are too mean to spend it.

 

[RobMCFC]

Some of my group of OAP friends still have the same amount in their pots as when they finished, I tease them they are too mean to spend it.

That's nuts. Surely when you actually retire, you should have a plan to eat through what you've got at a sensible rate.

 

[Odd socks]

That's nuts. Surely when you actually retire, you should have a plan to eat through what you've got at a sensible rate.

I agree and they all have financial advisor's.
Problem is all of us over the 50 years+ of working have managed on average wages and saved for a holiday and just a few treats along the way, only taking home 2 grand a month in our later years.
Now they are retired then continuing having 2 grand a month feels like a win and they have a mindset that the pot can go to the kids when they are gone.
As Kompany Car said we are not educated for life after work.
I do wonder if the financial advisor benefits by keeping the pot high?, as I said I don't have a financial advisor as I get a final salary pension so not clear how they operate.

 

[Blue Since 76]

I agree and they all have financial advisor's.
Problem is all of us over the 50 years+ of working have managed on average wages and saved for a holiday and just a few treats along the way, only taking home 2 grand a month in our later years.
Now they are retired then continuing having 2 grand a month feels like a win and they have a mindset that the pot can go to the kids when they are gone.
As Kompany Car said we are not educated for life after work.
I do wonder if the financial advisor benefits by keeping the pot high?, as I said I don't have a financial advisor as I get a final salary pension so not clear how they operate.

They do get a percentage of assets under management i e. the more you've got, the more they get, but any decent advisor should be encouraging them to spend it, even if only giving to their kids to avoid potential tax.

That said, they may be, but spending 'savings' when you've lived your whole life by saving can't be easy.

 

[RobMCFC]

That said, they may be, but spending 'savings' when you've lived your whole life by saving can't be easy.

Yet another argument for making sure you spend enough pre-retirement.

 

[Blue Since 76]

Yet another argument for making sure you spend enough pre-retirement.

That means less in retirement though.

The difficulty is not knowing how the markets will perform or how long you'll live. An option is an annuity, but that guarantees you've got none of it left at the end which is less useful if you've got kids/charity you were wanting to leave a legacy to although better than running out of money many years before you run out of years.

Retirement finances are a lot more than a spreadsheet and I've only got as far as the spreadsheet.

 

[hampshireblue]

That's nuts. Surely when you actually retire, you should have a plan to eat through what you've got at a sensible rate.

Great if you know when your last day is.

I have a close friend who's got a substantial "pot". Chatting to him the other day, his pot is up £300k+ over this year alone. He has drawn down £200k this year so he's still £200k+ up on the year. Of course his tax paid is massive too. Overall he's been living on drawdown for 9 years and he's still got 15% more capital than when he started. The figures are high for him but the principle is still the same, that the older you get, if your FA is doing his job, it's relatively easy to live off the yield and dividends without eating into the capital. Also, the more you have the less risk you need to take to generate a decent income.

 

[DenisLawBackHeel74]

Yep its fucked me over good and proper. It changes on the 6 April 2028 as I reach 55 on the 19 April 2028. Whilst I dont necessarily need it at 55 its would have been nice to have access should I need it or decide Ive had enough of the corporate bullshit.

I’m just in. 55 in Oct 2027…..intend to draw down the tax free element and invest it in S&S ISA, my account, my wife’s, over 27, 28, 29….

 

[Corky]

It can be complicated, but follow a couple of very simple rules and you won't be far off:

(1) Save as much as you can afford into a pension scheme from day one in a job.

(2) Make sure you do whatever is necessary in your job scheme to maximise employer contributions, as many will match up to a certain limit. This is free money, even if you're matching it.

All the different risk/ benefit, tax stuff etc makes a difference, but it's second order to these.

Whilst sensible advice, there is also saving for a deposit for a house so there is a trade off.

I think more people are saving a lot more later these days as the average wage gets closer to the 40% tax bracket due to the fiscal drag. Keynes wouldn't be happy.

 

[VOOMER]

Like I said I'm just about understanding pensions, my pension is a superannuation pension so not having to overthink the pension pot scenario and very lucky I guess that I get enough for my modest needs.

Unless you want your loved ones to benefit.