Taking out pension at 55

bendix

Of course your precious gold could be liquidated in a day. Of course, there is no guarantee it could be liquidated for more than you paid for it, but let's park that for a while.

Digger's objection to the free money argument is that it isn't immediately useful. So let's ask him this:

Digger, if I offered you £1000 a month from now until you retire - completely free - would you take it? There is only one caveat: you can't touch it until you're 55. At that point you can take a quarter of it to do whatever you want, but the balance you need to make arrangements to get it to generate an income for you.

Oh, by the way, if you die between now and 55, it goes to your estate for the benefit of your family.

And it's free.

Would you accept it?

dzug1

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.

And when those taxes rise, the tax relief on contributions will rise too

Assuming they don't change the rules

And by the time they come to draw on the pension, taxes may have gone down again

dunstonh

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.

Ok, so how does nothing paid into a cash ISA or NS&I beat a free amount from the employer paid into a pension? (employer cant pay into an ISA so the amount is nothing)

EdInvestor

bendix wrote: »

Digger, if I offered you £1000 a month from now until you retire - completely free - would you take it?

It's not usually quite that simple: you have to tie up a significant chunk of your own money to get the free stuff.And once you put it in a pension, you lose control of the capital and of the level of the income it can pay you.Not so if you put it in an ISA.

bendix

EdInvestor wrote: »

It's not usually quite that simple: you have to tie up a significant chunk of your own money to get the free stuff.And once you put it in a pension, you lose control of the capital and of the level of the income it can pay you.Not so if you put it in an ISA.

Sometimes I feel like its groundhog day on this forum. I can't be bothered having the same old discussions with the same old people time and time again.

From this day forth, I'm going to argue any old position, just for the hell of it.

I'm also going to pretend to be an IFA (I believe there are no forum rules against that), so people take notice of me. It will be carnage. I shall revel in leading people into disastrous strategies, such as turning down free money.

jem16

EdInvestor wrote: »

It's not usually quite that simple: you have to tie up a significant chunk of your own money to get the free stuff.

Not always. My son has a non-contributary pension where even if he does nothing at all 6% is paid into his pension. If he does make a contribution of 5% then 11% is paid in from his employer.

Why turn this down?

And once you put it in a pension, you lose control of the capital and of the level of the income it can pay you.Not so if you put it in an ISA.

Following your advice he would only have 5% in an ISA as opposed to 16% in a pension. The investment options are exactly the same so what's the point?

jem16

DiggerUK wrote: »

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.

When I first paid into my pension in 1977 tax rates were 34% for basic rate taxpayers. For every single year that I have paid except this year and last year tax rates have been higher.

Now within 7 years of taking my pension ,tax rates are 20%.

Just as well I didn't follow your advice.

EdInvestor

jem16 wrote: »

Not always. My son has a non-contributary pension where even if he does nothing at all 6% is paid into his pension.

Pretty rare these days following the crisis inn the banking system, nice one if you can get it.It's not my 'advice' to turn down genuinely free money, of course.:rolleyes:

jamesd

DiggerUK wrote: »

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.

So buy gold ETFs with the pension pot. It'll still need to stay in the pension pot until age 55 but it can be moved between investments. The tax relief is the benefit you get for that bit of forward planning for future income needs.

Browntrout_2

Just for a bit of real world perspective if anyone is interested.

I put a £4K into an employee pension over the last year, this got tax relief at source and my employer put in their contributions as well. I have been TUPE'd and the pension now has a transfer value of over £10K.

I am now in process of moving this to my SIPP where I have consolidated other old company pensions and will invest in a mix of global equity and income funds.

If I had not done so I would have had some extra cash on the monthly wages but not sure how I could have grown that into £10K without taking huge risks and quite possibly ended up with £2K or at best £6K.

Get rich slowly and make sure you are around to spend it!



PS - Gold ETF? the only one I'd consider is a Short Bullion ETF, as when that turns it will fall like a lead balloon!