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  • FIRST POST
    • Cardew
    • By Cardew 21st Sep 16, 6:06 PM
    • 25,737Posts
    • 12,336Thanks
    Cardew
    Pensioner's 'perks' under review.
    • #1
    • 21st Sep 16, 6:06 PM
    Pensioner's 'perks' under review. 21st Sep 16 at 6:06 PM
    http://home.bt.com/lifestyle/money/investing-pensions/state-pension-and-other-pensioner-benefits-under-review-11364097761631
Page 2
    • atush
    • By atush 22nd Sep 16, 10:56 AM
    • 15,141 Posts
    • 9,060 Thanks
    atush
    I don't want to get into an argument with you Dunstonh as I appreciate both your knowledge and advice you have given over the years.

    I still think that your statement 'Using savings for income has always been higher risk ' is incorrect; and your post above accurately details the reasons why some investments have been poor. e.g. 'Insurance companies are rarely good at balanced portfolios' 'Growth rate set too high' etc etc.

    Anyway the such discussions detract from the main point of the thread which is the 'threat' to 'pensioner's perks'.
    Originally posted by Cardew
    I am quite happy with the comments made by D, showing where there was woolly thinking by others incl yourself.
    • lazer-zxr
    • By lazer-zxr 22nd Sep 16, 11:27 AM
    • 264 Posts
    • 288 Thanks
    lazer-zxr
    I think that limitations to state pensions could be introduced – but that it should be for higher rate taxpayers only.
    Originally posted by Sapphire
    And what's fair about that????

    I am a higher rate tax payer, contributing towards providing the state pension, and so feel I am entitled to it maybe even more than those that don't contribute so much
    DFWB £40965 of £52549 repaid. LBM feb15
    MFWB On hold due to low int rates
    • MABLE
    • By MABLE 22nd Sep 16, 11:41 AM
    • 2,957 Posts
    • 1,556 Thanks
    MABLE
    I have a bus pass but never use it because as I cycle, walk and drive a car its unfair on the public purse. As for the winter fuel allowance I do accept that because it pays for our coal for the winter. 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. Fortunately I have two final salary pensions as well.
    • Silvertabby
    • By Silvertabby 22nd Sep 16, 12:03 PM
    • 91 Posts
    • 98 Thanks
    Silvertabby
    I have a bus pass but never use it because as I cycle, walk and drive a car its unfair on the public purse. As for the winter fuel allowance I do accept that because it pays for our coal for the winter. 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. Fortunately I have two final salary pensions as well.
    Mable - I agree, but don't forget that not all 'new' pensioners will get the full £155 per week if, like you, they have been contracted out in favour of a final salary pension.
    • Silvertabby
    • By Silvertabby 22nd Sep 16, 12:16 PM
    • 91 Posts
    • 98 Thanks
    Silvertabby
    “ 70 for both men and women. Not only that, but it was means tested, so only the destitute qualified for payment - so as very few really poor people survived to that 'grand old age', the pensions bill must have been miniscule.
    Originally posted by Silvertabby ”
    No it wouldn't, it would have been minuscule. 😄😄😄😄
    Thank you ffacowffipawb - senior moment! However, I still think that my version is more logical - ie, mini for small rather than minus for, well, minus!
    • Cardew
    • By Cardew 22nd Sep 16, 12:20 PM
    • 25,737 Posts
    • 12,336 Thanks
    Cardew
    In the context of the saver we were talking about - someone who has released a large lump sum from their downsizing, .
    Originally posted by Malthusian
    With respect the context wasn't about the downsizing to release capital; it was this statement:

    However having been encouraged all through their working lives to save, save, save, over the last few years the dramatic drop in interest rates has hit those with savings.
    i.e. Current pensioners having saved throughout their working lives

    The downsizing case was merely to illustrate the effect of cuts in interest rates on £100k.

    Cash invested in bank/building society/ISA in UK has always been low risk, indeed risk free now up to a certain level.

    Not so with 'investments' which have carried more risk. Those investments included endowment policies which 30 years ago were very popular and, for the reasons outlined by D, have turned out to be a poor investment.

    Incidentally I am not arguing that, on balance, investments( particularly property)haven't performed far better than cash savings;
    Last edited by Cardew; 22-09-2016 at 12:22 PM.
    • jeepjunkie
    • By jeepjunkie 22nd Sep 16, 12:33 PM
    • 1,239 Posts
    • 1,237 Thanks
    jeepjunkie
    Where to put money, it's always a balance...




    Certainly in the quest for a decent return Solar PV is [orig FIT tariff] light years ahead of cash ISAs etc




    Cheers
    • xylophone
    • By xylophone 22nd Sep 16, 1:01 PM
    • 18,381 Posts
    • 10,294 Thanks
    xylophone
    I have a bus pass but never use it
    Why did you apply for it?
    • Sapphire
    • By Sapphire 22nd Sep 16, 1:10 PM
    • 1,745 Posts
    • 3,035 Thanks
    Sapphire
    Higher rate taxpayers already have their State Pension withdrawn at a rate of 40p for every £1 they receive over the threshold. What do you think the rate should be?
    Originally posted by Malthusian
    I think that the 'benefits' to pensioners should not be tampered with for lower rate taxpayers. Within that group there are people who are very badly off, and who, despite having worked hard all their lives, have never earned high enough incomes to be able to 'invest'. There's also the fact that people are increasingly having to fund their own care in old age, including those who are in the lower income tax brackets. They will decreasingly be able to do this. Relying on the state to provide care is condemning many to a terrible life, given the standard of care that is provided. I know of one pensioner, for example, who is 90 years old and has Alzheimer's, but has been waiting since March to be assessed by the local authority (Lambeth in London). As a society, we should be looking after our own first.

    That's why I think higher rate taxpayers (if anyone) should be considered for reductions in 'benefits', but certainly not lower rate taxpayers, and especially those who have worked hard for their entire lives. Reducing 'benefits' could additionally send signals to private pension providers that they can employ similar tactics, on the pretext that they 'cannot afford it'.
    • dunstonh
    • By dunstonh 22nd Sep 16, 1:49 PM
    • 84,044 Posts
    • 49,061 Thanks
    dunstonh
    Cash invested in bank/building society/ISA in UK has always been low risk, indeed risk free now up to a certain level.
    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.

    Not so with 'investments' which have carried more risk.
    They carry increased investment risk but haveh lower shortfall risk and lower inflation risk.

    Those investments included endowment policies which 30 years ago were very popular and, for the reasons outlined by D, have turned out to be a poor investment.
    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.
    Last edited by dunstonh; 22-09-2016 at 1:53 PM.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • Tammykitty
    • By Tammykitty 22nd Sep 16, 2:10 PM
    • 236 Posts
    • 360 Thanks
    Tammykitty
    Mable - I agree, but don't forget that not all 'new' pensioners will get the full £155 per week if, like you, they have been contracted out in favour of a final salary pension.
    Originally posted by Silvertabby


    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.
    • Thrugelmir
    • By Thrugelmir 22nd Sep 16, 2:34 PM
    • 49,914 Posts
    • 41,596 Thanks
    Thrugelmir
    Person 1 - Retires Mar 16, gets the basic £119
    Person 2 - Retires Apr 16, gets £155

    Originally posted by Tammykitty
    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.
    “A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against ‘a rainy day’.”
    • Cardew
    • By Cardew 22nd Sep 16, 3:04 PM
    • 25,737 Posts
    • 12,336 Thanks
    Cardew
    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.
    Originally posted by dunstonh
    No argument with any of the above.

    In particular the reasons why 'investing' in an endowment policy turned out to be a poor investment.
    • missbiggles1
    • By missbiggles1 22nd Sep 16, 3:14 PM
    • 14,512 Posts
    • 26,219 Thanks
    missbiggles1
    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?
    • Silvertabby
    • By Silvertabby 22nd Sep 16, 4:03 PM
    • 91 Posts
    • 98 Thanks
    Silvertabby
    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?
    Person 1 would get the basic £119 plus SERPS/SP2.
    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.
    Last edited by Silvertabby; 22-09-2016 at 4:04 PM. Reason: add
    • Triumph13
    • By Triumph13 22nd Sep 16, 4:04 PM
    • 670 Posts
    • 602 Thanks
    Triumph13
    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.
    • MABLE
    • By MABLE 22nd Sep 16, 4:44 PM
    • 2,957 Posts
    • 1,556 Thanks
    MABLE
    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.
    • xylophone
    • By xylophone 22nd Sep 16, 5:29 PM
    • 18,381 Posts
    • 10,294 Thanks
    xylophone
    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
    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.
    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?
    • p00hsticks
    • By p00hsticks 22nd Sep 16, 5:51 PM
    • 4,843 Posts
    • 4,234 Thanks
    p00hsticks
    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.
    Originally posted by MABLE
    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 ....
    • nickcc
    • By nickcc 22nd Sep 16, 6:45 PM
    • 1,465 Posts
    • 619 Thanks
    nickcc
    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?
    Originally posted by xylophone
    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 ?
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