MSE News: Guest Comment: The route to retirement riches

edited 13 May 2011 at 9:14AM in Pensions, Annuities & Retirement Planning
25 replies 3.2K views
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  • Linton wrote: »
    Carrying on your train of thought - you might be dead before you live to enjoy your pile of worthless paper (or pile of gold/silver bullion!!) under the bed, why not spend it all now....

    and then spend 30 years of retirement on the breadline.

    Now is the time to buy silver bullion while the price has been pushed so low, it will not be down here for long.
  • dunstonhdunstonh Forumite
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    Poshbird wrote: »
    Now is the time to buy silver bullion while the price has been pushed so low, it will not be down here for long.

    Can you not bother posting that in this section.

    The pensions section has largely avoided the metal rampers that the savings and investments section has had to put up with. We don't these types of posts spoiling this section too.
    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.
  • jamesdjamesd Forumite
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    dunstonh wrote: »
    Indeed, most of the rule changes over the last decade have seen greater flexbility and options brought in. the Govt does play around with pension legislation too much but it is mostly tweaks rather than whole sale changes. Personal pensions were introduced in 1988 and for the vast majority, the same rules on pre-retirement exist today as they did then.
    While that's true for the Labour government, except tax handling of dividends, the current government has had a much less auspicious start:

    1. Decreased income by 18% for those in drawdown with only a few months of notice for some, up to a maximum of five years notice.
    2. Increased tax on the pension pots of those who die before age 75.
    3. Decreased tax on the pension pots of those who die after age 75, making pensions attractive as an inheritance tax avoidance tool.
    4. Helped the wealthiest few percent of pensioners with the introduction of flexible drawdown, while putting the annuity/work/state income minimum level above the median pensioner income level so most would be shooting themselves in the foot if they used it.
    5. Lots of PR about a bogus claim to have removed the requirement to buy an annuity after age 75 that Labour had already removed.

    I do agree about most of the changes in the last ten years, though. But the recent changes do show what a less pension-friendly government can do. We also get to wonder whether they will increase tax on pensioners by merging income tax and NI and causing pensioners to pay that higher combined rate on their income.

    Still nowhere near as bad as the confiscation, with some modest income replacement, of private pensions that happened in Argentina a few years ago, though.
  • dunstonhdunstonh Forumite
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    Not disagreeing but putting it in context.
    1. Decreased income by 18% for those in drawdown with only a few months of notice for some, up to a maximum of five years notice.

    Only a minority use draw down and an even smaller minority go to the maximum. With the improvements they brought it (which will see more use drawdown), they had to prevent people from eroding pensions to end up claiming benefits. So, there is logic in that change.
    2. Increased tax on the pension pots of those who die before age 75.

    Hard to find anything positive to say about that! However, they are removing the inheritance tax charge on pensions. So, there is a bit of balancing there.
    4. Helped the wealthiest few percent of pensioners with the introduction of flexible drawdown, while putting the annuity/work/state income minimum level above the median pensioner income level so most would be shooting themselves in the foot if they used it.

    That is a strange one. Possibly it is a sweetener that most people wont understand and makes up a little for the over taxing higher earners have had to endure because of the Labour SPIN machine that basically labelled anyone earning over £150k a year as a banker.
    5. Lots of PR about a bogus claim to have removed the requirement to buy an annuity after age 75 that Labour had already removed.

    I can understand that. Whilst you didnt have to buy an annuity at 75, the 86% tax rate and the hoops to jump through basically meant it was a passive blocker. So, in effect there was annuity compulsion and it was still referred to as such even though technically that was not the case.

    All the above though focus generally on higher earners and more obscure cases. Not the mainstream.

    Dont forget they abolished Gordon Browns awful method that he was brining in to hit high earners.
    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.
  • gadgetmindgadgetmind Forumite
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    dunstonh wrote: »
    Only a minority use draw down and an even smaller minority go to the maximum. With the improvements they brought it (which will see more use drawdown), they had to prevent people from eroding pensions to end up claiming benefits. So, there is logic in that change.

    Maybe, but I was hoping to use larger drawdown to bridge the gap until state pensions kick in. Yes, I can use other funds to do this, but it means I'll be "wasting" some of my 20% tax bracket for 11 years and then risking 40% tax once I hit 66.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
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