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MSE News: Pension timebomb warning as Govt unveils saving scheme

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  • dunstonh
    dunstonh Posts: 119,883 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Would private sector charges really be less given the small amounts involved for each person? Could I really provide myself or a small number of employees with a pension more cheaply?

    They would be yes. Group schemes with members actively contributing are far more profitable than individual stakeholder pensions. Many of the insurers already have online systems and methods to take money via the employer and payslip to handle the volume schemes. Why reinvent the wheel? especially if the taxpayer is going to fund it.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • exil
    exil Posts: 1,194 Forumite
    Have you any hard evidence for this statement?
  • dunstonh wrote: »
    There is no tax relief on the Govt scheme. Only on personal pensions and conventional pension schemes. This is why its better for companies to use their own pensions and not the Govt one.

    Completely wrong. There is full tax relief on the first £3,600 of contributions.

    Contributions should be a minimum of 8% this is currently made up of (based on current tax rates).
    Member 4%
    Tax Relief on Members contribution 1% (based on 20% tax)
    Employer contribution 3%

    As an IFA I'm astonished that one you don't know this, and two given you don't know it you're prepared to put a false statement such as this down.
  • Would private sector charges really be less given the small amounts involved for each person? Could I really provide myself or a small number of employees with a pension more cheaply?
    dunstonh wrote: »
    They would be yes. Group schemes with members actively contributing are far more profitable than individual stakeholder pensions. Many of the insurers already have online systems and methods to take money via the employer and payslip to handle the volume schemes. Why reinvent the wheel? especially if the taxpayer is going to fund it.

    Sorry, but again, simply not true. If it were true that the private sector could do ith with lower chargers then exiting providers would be offering competative products. The truth is that the fees for Stakeholders were as low as they could go. The NEST scheme will have lower charges than Stakeholers which existing providers cannot compete with. This is why NEST will have a contributions limit etc. so that it can cater for the little/no profit area but once someone starts earning larger amounts of money they will look to other providers.

    I'm sure as a relative newbie my posts have not been too welcome, but whilst think there are a few gaps in the NEST policy myself think it is wrong for blatent mis-truths to be told by someone respected on the forum.
  • KiNeL
    KiNeL Posts: 37 Forumite
    Part of the Furniture 10 Posts Combo Breaker
    ....and therefore you'd like to live like this in your old age as well, would you?

    I feel sorry for your situation at the moment, but think it is short-sighted not to plan for your retirement as best you can.

    I hope your situation improves soon.
    Short-sighted, what a patronising reply. How can you save if every penny goes towards keeping a roof over your head or is it your contention that, on the basis that something is better than nothing, the odd 50p a week is going to provide comfort in retirement.

    It seems to me that lemontart is planning for his/her retirement but in the current cicumstances there is no money to plan with !
  • KiNeL wrote: »
    Short-sighted, what a patronising reply. How can you save if every penny goes towards keeping a roof over your head or is it your contention that, on the basis that something is better than nothing, the odd 50p a week is going to provide comfort in retirement.

    It seems to me that lemontart is planning for his/her retirement but in the current cicumstances there is no money to plan with !

    I meant he/she is surely not going to be in their present financial situation for ever and therefore should be looking towards a time when he/she can save for retirement.

    A scenario where someone has to do two jobs for ever more just to keep a roof over their heads and feed the family seems a little unrealistic. If this is the case then something is very wrong indeed.
    (AKA HRH_MUngo)
    Member #10 of £2 savers club
    Imagine someone holding forth on biology whose only knowledge of the subject is the Book of British Birds, and you have a rough idea of what it feels like to read Richard Dawkins on theology: Terry Eagleton
  • dunstonh
    dunstonh Posts: 119,883 Forumite
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    edited 11 January 2010 at 10:38AM
    Completely wrong. There is full tax relief on the first £3,600 of contributions.
    Since the earliest proposals there has not been tax relief on the NPSS/Personal Account or whatever name they end up going with. It is a Govt contribution of 1%. It is not tax relief.
    As an IFA I'm astonished that one you don't know this, and two given you don't know it you're prepared to put a false statement such as this down.
    If it is tax relief, please be kind enough to tell us what level of Govt contribution a higher rate tax payer will get on the Govt scheme. And then tell us what level of tax relief they will get on a conventional pension. You will find there is no higher rate relief on the Govt scheme as its a fixed contribution. Unlike a personal or group scheme.

    So, it is not tax relief but a fixed Govt contribution irrespective of your tax rate.
    If it were true that the private sector could do ith with lower chargers then exiting providers would be offering competative products.
    They are. It is currently possible in the private sector to have as low charges than those being proposed under the Govt scheme.

    For higher rate taxpayers, the loss of higher rate relief will be more damaging that 0.1% amc differences. It is hoped that companies with higher rate taxpayers on the books will use personal schemes and not the Govt scheme. Employees need to put pressure on their employer to make sure the Govt scheme is not used but a private scheme is.
    The truth is that the fees for Stakeholders were as low as they could go.
    WRONG. There are a number of personal pensions available today that are cheaper than stakeholder. Seeing as the Govt scheme will be using a tracker as its main fund (from the very limited choice that will be available) you can get those in the private sector at 0.25%. amc.

    Whilst the charges for the Govt scheme are still under consultation, the suggestion has been that a reduction in yield of around 0.3% will be likely.
    'm sure as a relative newbie my posts have not been too welcome, but whilst think there are a few gaps in the NEST policy myself think it is wrong for blatent mis-truths to be told by someone respected on the forum.
    I am happy to accept your apology for your mistruths.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Sunnysider wrote: »
    Incidentially. It is legislation which requires employers to automatically enrol their employees into a suitable pension scheme. Personal Accounts/NEST is just one option that an employer has to fulfil that duty in the same way that HSBC and Barclays are one means of having a bank account. I thought this a point worth noting as many of the arguments that people have against Personal Accounts/NEST are actually with the legislation itself and not with what is looking like an actually rather good scheme to use to comply with the legislation should you as an employer not have another suitable scheme.


    I think the above is worth repeating as I missed it first time.


    So as I see it there could be three main options assuming the legislation all goes through :
    1. Company goes with NEST. Employee benefits from employer & government contributions. Possibly limited choice of investments. Looks like charges could be small
    2. Company sets up another scheme. Company may not be willing. Employee benefits from employer & government contributions. Possibly wider choice of investments. Charges vary
    3. Employee opts out and goes with SIPP. No employer contributions. Tax relief on input. Massive choice of investments. Charges vary
    From what I have read and learnt so far on this thread at the moment I would go for number 2 (assuming I have understood the various points correctly and that they are based on fact).

    Open for discussion?
  • dunstonh
    dunstonh Posts: 119,883 Forumite
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    You could go with option 2 and still have an external scheme that gives you more choice. You should just make sure you maximise the "free" money from the employer with anything above that going into your own scheme. You are able to transfer out of the govt scheme into your own scheme at a later date if you wish.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • jamesd
    jamesd Posts: 26,103 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 12 January 2010 at 12:13PM
    Sunnysider, some existing private sector options that are inexpensive and perhaps cheaper than will be available in the NEST scheme:

    1. Hargreaves Lansdown SIPP, HSBC FTSE All-share tracker, 0.25% annual charge for the fund, minimum £50 a month contribution, open to anyone who can make pension contributions. They also offer workplace pension schemes.

    2. A workplace money purchase pension I'm in. BGI Aquila Life UK Equity Index Fund (FTSE All-share tracker), 0.10% annual charge, only available to employees in similar company money purchase schemes or institutional investors.

    Dunstonh,

    "6. Employers will have to contribute a minimum of 3 per cent on a band of earnings, although they can contribute more than this. The total minimum contribution for eligible workers must be 8 per cent of the band of earnings. This is made up of employer contributions, worker contributions and tax relief."

    At 8% contributions on total income the £3,600 (in 2005) maximum contribution value is reached at £45,000 earnings.
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