Pensioner's 'perks' under review.
Comments
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Tammykitty wrote: »Person 1 - Retires Mar 16, gets the basic £119
Person 2 - Retires Apr 16, gets £155
I've been contracted in the majority of my working life. I'm not yet retired. My state pension forecast comfortably exceeds both the figures you quote. Far from as black and white as you suggest.0 -
As long as the cash remains in the bank account and the interest along with it then it is low risk. When you start drawing the interest you introduce risks that push it up the scale. You introduce increased inflation risk as you are guaranteeing a loss in real terms on the money. You also have shortfall risk if the interest is insufficient to meet needs.
£100k in 10 years would be worth around £65k (as previously mentioned). Then £42,250 after 20 years and then £27,762 after 30 years.
Lets say the interest was 3%. That is £3000 in year one. However, by year 10, that has the spending power of £1950. After 20 years £1267, after 30 years £823.
What you see time and time again is the saver starts to dip into the savings to make up the loss in real terms purchasing power. So, that £100k starts to go down as the person chips away at it. That starts to accelerate the loss process as they also get less interest. So, they draw more capital and get less interest. So, they draw more capital and get less interest. So, they draw more capital and get less interest. So, they draw more capital and get less interest. Until ultimately they run out of money.
If interest rates fall (as has happened) then the person used to getting £3000 a year may now only get £1500. So, they start to draw capital which reduces the interest..... cycle repeated until money runs out.
That is why cash savings for income provision cannot be considered low risk when you are drawing all of the interest. You cannot call an option low risk that can lead to 100% loss of capital through shortfall risk and inflation risk.
They carry increased investment risk but haveh lower shortfall risk and lower inflation risk.
But they were not poor because of investment returns. They were poor because of target growth rates being set too high. They suffered shortfall risk because of that. They were also inflexible and obsolete for tax reasons by around 1995. At that point, no endowment had ever fallen short as returns had hit the target growth figures (partly through tax benefits that were removed and partly through higher inflation).
You could argue that a cash saver is now suffering similar issues to what the endowment holders were suffering.
No argument with any of the above.
In particular the reasons why 'investing' in an endowment policy turned out to be a poor investment.0 -
Tammykitty wrote: »Indeed
However, excluding the effect of this, for someone with no contracting out.
Person 1 - Retires Mar 16, gets the basic £119
Person 2 - Retires Apr 16, gets £155
Ok - many people may get more than the basic due to AVC's etc, however many will only get £119 or at least get less than £155.
As we're discussing SRP, surely that's down to SERPS/S2P?0 -
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Person 1 would get the basic £119 plus SERPS/SP2.Indeed
However, excluding the effect of this, for someone with no contracting out.
Person 1 - Retires Mar 16, gets the basic £119
Person 2 - Retires Apr 16, gets £155
Ok - many people may get more than the basic due to AVC's etc, however many will only get £119 or at least get less than £155.
Originally posted by Tammykitty ”
As we're discussing SRP, surely that's down to SERPS/S2P?
If they were low earners, and their basic plus SERPS/SP2 is less then £155 per week, then (as long as they don't have any other pensions or savings over a certain limit) they may get pension credit to take them up to the magic £155 per week.0 -
I'll stick my head over the parapet and own up as apparently the only person in Christendom who's actually quite happy with his endowment policy.
I took it out in 1994, it matures in 2019 and its likely to end up yielding more than cash would have after factoring in the insurance element. Yes it will be well down on the forecast amount, but I knew about that years ago and the amount saved in interest payments when the UK moved to a low inflation / low return economy more than outweighs the lost returns. Add in a few shares on demutualisation and the fact that the payout will be nicely timed to give me cashflow between proposed retirement at 53 and access to pension funds at 55 and I'm frankly delighted that I chose endowment over repayment.0 -
BTW should have said with additional amount from the state brings the amount up to £133 per week. Also I was contracted out for most of my working life hence the reason its quite small.0
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As for fairness perhaps when they are looking at making cuts they will take into account the pensioners who qualified for the new flat rate state pension to the ones like me who get the basic £119 a weekBTW should have said with additional amount from the state brings the amount up to £133 per week. Also I was contracted out for most of my working life hence the reason its quite small.
You are receiving exactly what your contributions entitled you to receive.
And as a matter of interest, if you do not use or require a travel pass, why did you apply for it?
I assume that it's not a case of its arriving automatically as soon as you reach qualifying age?0 -
As for fairness perhaps when they are looking at making cuts they will take into account the pensioners who qualified for the new flat rate state pension to the ones like me who get the basic £119 a week.
Many of the latter (especially the women) will have had an earlier state retirement age than those still to come, so are not necessarily disadvantaged overall, especially as by no means all will get £155 to start with under the transitional rules for the new state pension ....0 -
You are receiving exactly what your contributions entitled you to receive.
And as a matter of interest, if you do not use or require a travel pass, why did you apply for it?
I assume that it's not a case of its arriving automatically as soon as you reach qualifying age?
Presumably if you don't use your pass then there is no charge on the taxpayer. Just because you receive one doesn't mean that you are using it and costing the taxpayer money, perhaps you could confirm this is the case ?0 -
Presumably if you don't use your pass then there is no charge on the taxpayer. Just because you receive one doesn't mean that you are using it and costing the taxpayer money, perhaps you could confirm this is the case ?
This from a UK Government website: https://www.gov.uk/government/collections/bus-statisticsLatest bus and concessionary travel statistics
In the year ending March 2015:
•there were an estimated 5.16 billion bus passenger journeys in Great Britain, around two-thirds of all public transport journeys, of these 4.65 billion journeys were in England, of which more than half were in London
•bus passenger journeys in England decreased by 0.6% compared with the previous financial year
•there were around 9.8 million older and disabled concessionary bus passes in England, with an average of 102 bus journeys per pass per year
•bus mileage in England decreased by 0.6% when compared with the previous year. This was largely due to 10% reduction in mileage on local authority supported services outside London
So as the number of journeys per railcard are measured, it would appear that possession of a free railcard, that is not being used, is not a cost to the Exchequer.
From an impeccable source - The Daily Mail - free pensioner's railcards cost the taxpayer £1billion in 2013.0
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