Pension changes 2012 onwards: what impact on you and the economy?

dunstonh

I don't trust pensions. I would prefer to invest my savings where I want to

That reason makes no sense. A pension is just a tax wrapper. Just like ISAs, investment bonds and other tax wrappers. You can put the same investments into most tax wrappers allowing you to invest your savings in the pension (or other tax wrappers) as you wish. If you dont trust pensions then you cant trust ISAs or any other tax wrapper or unwrapped investment. That would make you totally paranoid.

NEST is still not guaranteed to come in. Currently, the Govt is talking with the pension industry as to whether the private sector can deal with it. It has already been put back several times and there is a feeling it could go back further or be completely replaced with a brand new product that combines ISAs and pensions in some way.

Many of the companies that are affected by NEST have been aware of it for nearly 5 years now. Many have factored in the costs already or are of the belief that it wont happen.

CLAPTON

dunstonh wrote: »

That reason makes no sense. A pension is just a tax wrapper. Just like ISAs, investment bonds and other tax wrappers. You can put the same investments into most tax wrappers allowing you to invest your savings in the pension (or other tax wrappers) as you wish. If you dont trust pensions then you cant trust ISAs or any other tax wrapper or unwrapped investment. That would make you totally paranoid.

NEST is still not guaranteed to come in. Currently, the Govt is talking with the pension industry as to whether the private sector can deal with it. It has already been put back several times and there is a feeling it could go back further or be completely replaced with a brand new product that combines ISAs and pensions in some way.

Many of the companies that are affected by NEST have been aware of it for nearly 5 years now. Many have factored in the costs already or are of the belief that it wont happen.

no so

I can withdraw my money from an ISA anytime I like
I contributed to a pension for amny years on the clear basis i could have a pension at 50; that 'contract' was unilaterally changed by government

why trust them now?

dunstonh

I can withdraw my money from an ISA anytime I like
I contributed to a pension for amny years on the clear basis i could have a pension at 50; that 'contract' was unilaterally changed by government

why trust them now?

The access to capital has certainly changed with the increase from 50 to 55. Although in reality it makes little difference to the majority as age 62 was the average age of commencement and its been increasing slightly in recent years. I think the move was short sighted by the Govt and should have had a longer run in before it took effect. Or maybe come out with a new version of pension just as what happened in 1988 when personal pensions replaced retirement annuity contracts. Those with RACs kept their terms. Whereas everything bought after 1988 was on slightly different terms. They could have done the same now with a new product on new terms with new features. It could have breathed new life into an area that once the UK was the best in Europe but has now been wiped out.

It was typical Gordon Brown to fiddle with things retrospectively but that wasnt just pensions he did it with.

However, the post I quoted seemed to indicate that it wasnt the tax wrapper they didnt trust but where they can invest. That reason may have been valid in the 80s or 90s but not in the 2000s where pensions have ceased to be a product but have become a true wrapper (although you can still buy product type pensions if you want to).

To ignore pensions as a tax wrapper is foolish. Its not perfect. It has limitations but it also has advantages. For most people a combination of pension and ISA is the best thing. You know that already though. Although readers who dont frequent the pension forum here may not.

marklv

Not sure what the big deal is. OK, so companies will be forced to contribute, but most do offer some kind of pension scheme anyway, and the ones that don't are not good employers. Personally, the government should force employees to put in 5% of salary and employers at least 8% minimum.

PasturesNew

olly300 wrote: »

For temping agencies it's going to be a mess especially if they are only employing people for a few weeks.

With regards to the self-employed I won't be surprised if they are forced into the government NEST scheme at some point.

First time I've ever heard of that, no idea what it is.

PasturesNew

marklv wrote: »

Not sure what the big deal is. OK, so companies will be forced to contribute, but most do offer some kind of pension scheme anyway, and the ones that don't are not good employers. Personally, the government should force employees to put in 5% of salary and employers at least 8% minimum.

I've mostly worked for small firms (1-8 employees), most fairly new. Most small/new companies don't offer any pension. Even companies that used to offer one had criteria (you had to work for them for 2 years before you could join).

If I'd worked for a firm that had a pension, and if I'd worked for a firm that hadn't closed/relocated/downsized/etc, I'd have definitely gone in for one. I was just never offered one.

There are thousands of small firms without a pension provision.

vivatifosi

marklv wrote: »

Not sure what the big deal is.

OK, imagine you are a low-paid shop worker at somewhere like Tescos. The firm is a large one, so they will be one of the first impacted. AIUI they also have a pretty good pension scheme.

Whether you want it or not, you'll be opted into the pension scheme and it will be up to you whether you then opt out. You're earning something like £12k pa so it may be extra money that's hard to find.

Do you think:

a)'Yes, I'll start putting away for my pension'

b)'No chance, I'll opt out straight away'

c)Agonise over decision because you know that governments love tinkering with pensions. You worry that 20-30-40 however many years down the line when you rock up to the government at 65-70 whatever age it is, try to claim your Pension Credits and they say "sorry, no can do, you opted out so tough, be gone and don't darken my doorstep" (except they won't do that, because it will be all electronic by then, so computer will just say no).

Are you not even a little bit worried that it might be C?

Malcolm.

As I see it, automatic enrolment (incidentally the government had to check with the EU that this was permittable) will impact those at the lower end of the spectrum most. Many on a high income will already be paying into a private pension.

Unfortunately, for many low earners, paying into a pension will decrease the expected means tested pension benefits when they retire. As such, it might not be financially beneficial for them to pay into such a scheme.

It's also those on lower wages who will not have access to advice, many may not opt out through inertia.

This may be what the governments hoping for. Perhaps it's one step towards all employees being forced to pay into a private pension...

vivatifosi

Malcolm. wrote: »

Unfortunately, for many low earners, paying into a pension will decrease the expected means tested pension benefits when they retire. As such, it might not be financially beneficial for them to pay into such a scheme.

They're caught between a rock and a hard place. If they pay in they will be poorer than they are and may erode future state benefits.

If they don't pay in then there's a good chance that the pensions landscape 20-30 years from now will look markedly different and they risk getting less than they expect. Even if they get advice, nobody can predict what government entitlements will be in the long term.

kabayiri

vivatifosi wrote: »

They're caught between a rock and a hard place. If they pay in they will be poorer than they are and may erode future state benefits.

If they don't pay in then there's a good chance that the pensions landscape 20-30 years from now will look markedly different and they risk getting less than they expect. Even if they get advice, nobody can pre.dict what government entitlements will be in the long term.

What assurances do we have that future governments don't tinker with things, or put their hand in the pot, just like Gordon Brown did?

The government needs to earn people's trust, not assume it has their trust as an automatic right.