Taking out pension at 55

DiggerUK

dunstonh wrote: »

It wont make any difference as tax relief goes up to offset it. However, there is no tax relief on employer contributions. So, again, misinformation on your part.

daveneil,
It is misinformation on dunstonh's part, not mine.
A low rate tax payer will get 20% relief now going in, and a tax hike will impact on them when they draw on the pension later. Not to their advantage either.
There is a high risk of tax increases, in fact it is damned near certain that taxes will rise.

dunstonh

DiggerUK wrote: »

daveneil,
It is misinformation on dunstonh's part, not mine.
A low rate tax payer will get 20% relief now going in, and a tax hike will impact on them when they draw on the pension later. Not to their advantage either.
There is a high risk of tax increases, in fact it is damned near certain that taxes will rise.

There is no tax relief on an employer contribution.

When you commence benefits, the income is chargeable to tax (after personal allowances). However, its better to pay tax on some income that has cost you nothing than pay no tax on no income that has cost you nothing.

Again, Digger is completely missing the point

bendix

DiggerUK wrote: »

daveneil,
The reputation of pensions is based on past provision, until recently most were final salary or defined benefit schemes.
These schemes are almost dead in the private sector, and under attack in the public sector.

The alternative pushed today asking people to lock away monies until they reach 50/55 is high risk. These economic foul ups happen regular as clockwork, there could be little of value in the "pension wrapper" when you come to collect a pension.
What is the value of the employers free money then?

The other great sales pitch from the IFA industry is the income tax advantage. What benefit will that be if income tax rises, as we all suspect it must do.
Robbing Peter to pay Paul is not free money. Never has been.

Again, you conveniently fail to deal with the employer contribution in this case.

If the OP doesn't join the pension scheme, she gets nothing from her employer. If she joins, she gets extra free money.

Are you going to address this point, or not?

I'm prepared to give you a very personal example. I have joined the pension scheme suggested by my employer. By doing so, my employer contributes £13,500 a year to my pension fund. Next year, it will be more as my salary increases. If I decline to join the pension fund, I don't get that money.

You're quite right that that money has to be invested until I'm 55 and that it might go down in value as well as up, but in effect they are giving me money to invest. It is free.

If I want, I can take a punt on emerging market shares. I could go for gold ETFs even just to keep you happy. Or - if I want to be very cautious - I can put it in cash funds wrapped in the pensions wrapper, making it nice and steady eddy secure.

Now - a very direct question. Which part of that £13,500 per year isn't FREE?

purch

....and even if the £ 13,500 is only worth £ 1.35 when you retire, it's still £ 1.35 more than you would have had if you'd not taken the employer contribution.

bendix

A 99.99% decline in value? No chance. That won't happen purch. I'll find a way to put Digger's second favourite investment holding - Premium Bonds - into a pensions wrapper.

Bit of fun blah blah blah.

DiggerUK

bendix wrote: »

Again, you conveniently fail to deal with the employer contribution in this case. If the OP doesn't join the pension scheme, she gets nothing from her employer. If she joins, she gets extra free money.Are you going to address this point, or not?

daveneil,
I have addressed this point. If my answer is not accepted, fine.

The risk to what is in the pension pot, means you may not "get back what has been put in", so the employers "free money" is only ever going to be of use if it is invested wisely. That is a regularly occurring high risk to a pension's value. Or do we accept an end to boom and bust.

Compensation schemes do not cover cases were the "value of the investments has gone down" instead of up. Only defined benefit type schemes are covered. What type of scheme is on offer.

dunstonh

The risk to what is in the pension pot, means you may not "get back what has been put in"

That is wrong. The pension itself doesnt make or lose money. The investments you use do that. If you put cash savings in a pension it wouldnt get less than paid in. It wouldnt make much either but thats where you make the decision on how much risk you personally take.

so the employers "free money" is only ever going to be of use if it is invested wisely.

Its doesnt matter if it does well or it does poorly. It is free money.

That is a regularly occurring high risk to a pension's value. Or do we accept an end to boom and bust.

Whats that got to do with a pension?

Compensation schemes do not cover cases were the "value of the investments has gone down" instead of up.

And they dont cover when its gone up instead of down.

DiggerUK

daveneil,
I pass no comment on dunstonh's post #19.
I leave you to take in what he has put on the record, and trust you to come to a wise conclusion.

We are about the same age. You would be better served with Cash ISA's and NSI savings, and yes, a few sovereigns would not go amiss. But hang back for a price dip.
BFN.

bendix

DiggerUK wrote: »

daveneil,
I have addressed this point. If my answer is not accepted, fine.

The risk to what is in the pension pot, means you may not "get back what has been put in", so the employers "free money" is only ever going to be of use if it is invested wisely. That is a regularly occurring high risk to a pension's value. Or do we accept an end to boom and bust.

Compensation schemes do not cover cases were the "value of the investments has gone down" instead of up. Only defined benefit type schemes are covered. What type of scheme is on offer.

How the money is invested is irrelevant. It is still free. They are giving me £13500 every year to invest. Should I say no to it? If I say no, I don't get a higher salary.

If it's invested wisely, it will go up or remain the same. If it is invested foolishly, it will go down.

Either way, it is still beneficial and free. Where is the downside in accepting it?

You seem to be saying that pensions are bad because investments can go up and down. Of course they can go up and down. All investment classes go up and down in value, including your precious gold.

DiggerUK

bendix wrote: »

"How the money is invested is irrelevant. It is still free money.......................... All investment classes go up and down in value, including your precious gold."

daveneil,
The "free money" becoming worth less is not a problem. Your contribution devaluing, is what you should be concerned about. Once in a pension scheme you can't take it out and move it. You lose total control of your own money.

My "precious gold" could be liquidated in a day, and moved somewhere else if it went down in price. That total control, is an advantage those in a pension scheme don't have.