Help - How to Pick the Best Stakeholder Pension

jem16

EdInvestor wrote: »

I suspect you'll find that the vast army of women who are already retired may actually be well aware of what I mean, as well as those over 50.

I always thought that those already retired and claiming the state pension were over 50 which is why I said over 50. Most of the retired women I have spoken to have no idea about why they get the pension they get. They just accept it.

Of course most people know every little about the state pension until they get close to the age where they are going to claim it.

Like everything else in life find out before it's too late to do anything.

As far as the image of pensions is concerned, I'm afraid it's about to get another battering due to the penalties being put on WP pensions. Allowing PR money into SIPPs will probably cause quite a few more people to wake up too, especially when the see what will happen to the personal pensions they were all sold in the late 80s/early 90s, which also have swingeing exit penalties.

And then years from now we'll begin to see all the complaints from those who feel they were missold a SIPP.

EdInvestor

Dithering_Dad wrote: »

She will therefore qualify for full state pension and will have some S2P provision (as she only contracted out for a very short amount of time).

Not sure about this.She may have been contracted out throughout. That's why it's important she gets all the information before any decisions are made about extra retirement provision and the form it might take. PN is a person who really needs to sweat her assets, and it's importnat to try to determine exactly where she might end up re benefits as well as tax, because it directly impacts the wisdom of future property purchase.

Dithering_Dad

EdInvestor wrote: »

Not sure about this.She may have been contracted out throughout. That's why it's important she gets all the information before any decisions are made about extra retirement provision and the form it might take. PN is a person who really needs to sweat her assets, and it's importnat to try to determine exactly where she might end up re benefits as well as tax, because it directly impacts the wisdom of future property purchase.

I wholeheartedly agree with you that PN needs to make the most of her assets. I'd be interested in your views about her property purchase, and whether you would think she'd be better off long-term renting permanently or buying.

I ask because I know PN from the House Price board and I was the person who suggested she obtained the state pension forecast and to pop in here for pensions advice. I've always thought it was the best policy with regard to retirement was to own ones own home (and therefore have security and no rent to pay). Obviously this is not the case for low income families who are in LA accomodation, but it'd be interesting to see scenarios where this is not the case for borderline incomes.

PasturesNew

OK. Pensions forecast from DWP arrived this morning.

I have 32 qualifying years.
I will get:
Basic State Pension £90.70
Additional State Pension £16.07

This works out at £462/month.

However, it says I am single (correct) but it also says I am self-employed (partially correct). I will need to phone them to check what information they have for me as most years I have been self-employed AND employed during any single tax year (except probably 2 whole tax years in my life when I was fully self-employed, including this one so far).

Re property etc, the plan is to wait/save about 4 years and then buy a house for cash and have about £60-100k to invest into savings/pension/ISA/ whatever (depends where interest rates go as 50% of that projection is based on interest gained). The house I buy will be small, newish, cheap to run, which will minimise my outgoings on bills/maintenance.

I feel confident I'll be "loaded" compared to any previous financial position in my life. To be honest my income has usually been less than the basic pension income because that is money you have after your housing is paid.

I'll look into DD's finding in #6 - the list of what's important to him seems to match what's important to me.

Any ideas I could look into from my newly acquired Pensions Forecast?

EdInvestor

PasturesNew wrote: »

Additional State Pension £16.07

This suggests you have been contracted out for most of your working life - if not, your S2P would be about the same as your basic state pension (depending on how much self employment is involved, as s/e are not eligible for S2P.)

So it's essential you chase up your Pru pension.Ask for a current and transfer value and maturity forecasts and also check what fund(s) it's invested in and the charges you are paying.

Then you need to consider if you should contract back in to S2P for the rest of your working life -very probably you should , though you could leave it till 2012 when contracting out will be abolished anyway.

We need to see your likely Pru pension amount in order to check whether you will be over pension credit level.

PasturesNew

EdInvestor wrote: »

This suggests you have been contracted out for most of your working life - if not, your S2P would be about the same as your basic state pension (depending on how much self employment is involved, as s/e are not eligible for S2P.)

I haven't been self-employed much really overall. But I have usually had 1-2 employers and a small bit of self-employment (usually making a loss) in any one tax year for the last 5 years or so.

I was told that signing the form would mean I'd get more money. Yet your statement seems to indicate I'd have had a LOT more if I hadn't signed it.

EdInvestor wrote: »

So it's essential you chase up your Pru pension.Ask for a current and transfer value and maturity forecasts and also check what fund(s) it's invested in and the charges you are paying.

OK

EdInvestor wrote: »

Then you need to consider if you should contract back in to S2P for the rest of your working life -very probably you should , though you could leave it till 2012 when contracting out will be abolished anyway.

We need to see your likely Pru pension amount in order to check whether you will be over pension credit level.

I never understood the serps thing and to this day have no idea if I did the right thing or not, or what has happened since I signed that form.

Where Govts have gone wrong is in making things [a] so difficult and so changeable over the years. Your average person has NO idea how it all works and the more you try to find out/understand, the harder it gets.

Thanks.

PasturesNew

Just realised, I never mentioned it. No idea if it makes any difference, but I am female.

EdInvestor

PasturesNew wrote: »

I was told that signing the form would mean I'd get more money. Yet your statement seems to indicate I'd have had a LOT more if I hadn't signed it.

Can't say until we see how much is in the Pru pension and then do a calculation on its likely value at retirement when also adding in additional NI rebates. Several things have changed over the last 20 years since you signed up, for instance annuity rates have come down a lot because interest rates are now low. (An annuity is the technical name for the pension income you buy with the matured pot)

Longevity has also improved a lot, so pensions have to stretch over a longer period. So where 100k of savings would buy 10k of pension 10 or so years ago, now you're looking at more like 6-7k. If it's index linked for inflation (like the state pension) then you can knock that back to about 4k, less for women as they live longer. Also the S2P is being reorganised so it benefits the lower paid at the expense of the higher paid, so you might be well advised to contract back in now so as to catch the better S2P deal for the rest of your working life..

On the other hand, you can take your annuity/income, including 25% tax free cash, from your private pension from the age of 55, whether you have stopped working or not. You don't have to wait until state pension retirement age. This might give you some useful flexibility later.

Pension income is taxable, but subject like other income to the personal allowance level and after the age of 65,the tax allowance goes up to around 10k.So if you are well clear of pension credit level on the pensions you have now, it makes sense to save for an income up to to that level (ie the 5k or so above the state pension) and use a pension to do it (not an ISA), so as to get the 20% upfront tax relief which you won't have to pay back later

Subsidiary question is, should you reactivate the Pru pension and put more money into it, or should you open a new one and transfer the Pru pension into that? That's why we need the info on the Pru pension.