pension question with a twist.

seven-day-weekend

dunstonh wrote:

Currently there is the pension credit which replaced the minimum income guarantee for all 60 year olds and above. It works on a household income basis and ensures a household doesnt get below a certain amount. For single people, the amount is £5930 p.a. and for married (or civil partner) it is £9050.

Once your income is above that level you get nothing. If you have savings over £6000 the amount of pension credit you get reduces down on a sliding scale to zero. £500 is classed as £1 p.w. income. So, if you have £10,000 in the bank, it is classed as £20pm or £240 a year.

It is not the state pension which remains at £4381 for a single person basic pension. It is a benefit for low earners.

If you are single, then you are over the £5930 minimum income level and not entitled to any extra unless you have attendance allowance, disability living allowance, housing benefit or council tax benefit.

So the minimum income for a pensioner couple is £9050? And if it is less the State make it up to that?

I thought you were sayin the State Pension was £9k!

I am married and as well as the figures quoted above, we will also have my husband's State Pension and Teacher's Pension - don't think we'd be entitled to any more!

Thanks, I think I have understood correctly.

dunstonh

The point is that if you are struggling on £18k now what do you think it is going to be like on £9050 a year in retirement?

You rent a property so that rent is still going to be there in retirement, unlike a property owner where the mortgage has stopped. You wont be able to fall back on equity release like other low income property owners. You basically have no fall back option.

so whats the point of a private pension that after you've paid full whack for everything leaves you,probably,no better off than someone with no private pension?

What makes you think that you wont be better off with the pension?

You will have 28/80ths in the pension and taking todays income of £18k (it will take your income when 65 but lets look at it in todays terms) and you will have 35% of your final salary plus a lump sum on top. That gives you £6300 a year. Lump sum is going to be around £18,000.

So, married couples basic state pension of £7,007 plus £6,300 a year is £13,307 a year plus £18000 in the bank. Compared with £8921 if you stop and around £5400 lump sum in the bank from the 8 years. (£5400 will reduce the £9050 by £129 a year)

You are clearly a lot better of paying into the pension.

So the minimum income for a pensioner couple is £9050? And if it is less the State make it up to that?

yes.

seven-day-weekend

I do not understand anyone wanting to opt out of a fianl salary pension.

grumpyeggman

ok,points accepted.many thanks for all replys.

chesky369

Grumpy - the State won't look after you (as you hopefully say in your first post) if, as you then say : "if life follows its natural course we will get a sizeable inheritance one day" and you also have additional savings. It'll all be down to you.

Andy_L

seven-day-weekend wrote:

I do not understand anyone wanting to opt out of a fianl salary pension.

Could be worth it if you can get the employer's contributions paid into your own PP & won't be staying with company for long.

EdInvestor

Andy_L wrote:

Could be worth it if you can get the employer's contributions paid into your own PP & won't be staying with company for long.

That would only apply to a money purchase scheme, where you incur the investment risk anyway. Quite different.

Midas

Any chance of building up some equity by purchasing your council house ("right to buy" scheme)? This would aslo save you money on rent in retirement. And yes, I definitely agree you should keep on with the pension - you are very lucky to be in a final salary scheme.

Andy_L

EdInvestor wrote:

That would only apply to a money purchase scheme, where you incur the investment risk anyway. Quite different.

Depends, If you spend 1st 4 years of a working life spent in a low paid job with a final salary scheme before moving on to better things then your 4/80ths is is only going to increase by rpi for the next ~40 years.

Whether that's better than giving the cash equivilant 40 years of stockmarket exposure is debatable and do you trust that employer's fund to be around for the next 40 years?

EdInvestor

Yes, but apart from taking the investment risk on yourself, you're also usually going to end up with a very poor transfer value out of the f/s pension.With current annuity rate trends, and particularly when you add in the bells and whistles usually attached to f/s pensions, it will be very hard albeit impossible to replicate this without taking excessive risks.

It's actually very hard to get anyone to approve transfers out of F/S schemes, unless the company involved is clearly in a potentially troubled state at least and approavel is usually required.

Not sure whether I agree with that or not - but you can see the reason why, given the gross pension misselling scandal in this area 15 years ago. Providers and advisors are just not willing to take the risk.