Pension reform

dunstonh

At least they are getting the hang of pensions a bit better now. (IMHO;) )

I would say its getting worse. If pensions had some stability and didnt keep getting changed then it would help bring some confidence back.

You always get a mop up after a major finance act to close loopholes that were missed but to change your mind on something that was known well before the act came in is incompetent.

You cannot trust this Govt with pensions as there is no confidence that they will not blow your plans out of the water with a U turn or a retrospective change of rules.

Especially if stakeholder schemes, like my current scheme are scrapped?

Stakeholders wont be scrapped. They will become personal pensions. A bit like how FSAVCs and retirement annuity contracts are now personal pensions. The name stakeholder will go but the products will remain running.

james3333

iam afraid iam at a loss with all this now.
can anyone tell me what they think will happen to my scheme now
(my Company contribute 8.7% to a CARE shceme)

jamesd

james3333, it's unlikely that these changes will affect it much and in any case it won't be for five or more years.

Andy_L

james3333 wrote:

iam afraid iam at a loss with all this now.
can anyone tell me what they think will happen to my scheme now
(my Company contribute 8.7% to a CARE shceme)

Probably nothing. You company could choose to end their (8.7%) scheme & only give the NPSS minimum (3%). However they could currently decide to end the schem & give you nothing.

Whether they would do that depends on:
How likely that would cause them to loose staff/have trouble recruiting
Strength of local Union representation
T&Cs of employment contributions

dunstonh

More news....

You will not be able to transfer in or out of the Personal Accounts. So, you wont be able to move your old pensions into it. You also wont be able to move your money out of the NPSS into pensions with better investment options.

There will also be an annual limit, initially £10,000 on how much people can put into their account each year. This will drop to £5,000 in subsequent years.

I would suggest that you wouldnt want to put any extra in. The Govt has confirmed there will be limited fund options and they are almost certainly going to be a FTSE based tracker, cash and maybe a global tracker. That sort of investment choice is useless. Again it highlights that the personal account is targeted towards those that basically do nothing or very little at present.

Employees with no employer sponsored scheme at present should now be lobbying the employer to introduce group personal pensions on the same contribution terms. It wont cost the employer anything different but at least it would give the employees greater flexibility of investment choice for those that want it.

EdInvestor

They say that there will be some 'branded fund' choices.

If they can really keep charges at the 0.3% level it will be worth a look for many people IMHO.

dunstonh

"The Department for Work and Pensions has revealed in its White Paper published today that it wants a centrally administered system with investors given a limited choice of branded funds within it."

It has to be noted at this stage that no provider or fund house has said that they can do it at 0.3%. Nowhere in the world has managed it that cheap so far.

Plus I dont believe that branded to you and me means the same as branded to them. When we think of investment fund brands we think of Invesco Perpetual, Gartmore, Fidelity etc. I believe that they are thinking of high street names like Legal & General, Norwich Union, Barclays Bank. Remember who they are targeting with the personal savings accounts.

0.3% doesnt buy you fund management. Its got it be tracker. Or, God forbid, it could be some sort of GEB. Low or no charges but with no dividends. Or even a conventional tracker as they never used to pay dividends either.

jamesd

So use it only to possibly get a cheap (and hopefully not bad) FTSE tracker or opt out and out-grow any lost matching funds, which seems likely to happen within 10-15 years.

The key goal seems to be getting lots of people with too much inertia to opt out, then not having to pay them as much in benefits (or politically speaking, lifting them out of poverty) in retirement because this money makes them ineligible, at a cost of only 1% government matching funds today.

Paul_Herring

Are there going to be restrictions on running a 'Personal Account' and a normal pension fund at the same time? Specifically I have 2 jobs, a full time one where my employer contributes a matched 5%, and a part time one where there is no pension currently. I can see the part time boss being forced to start one of these up; as things stand at the moment, will there be any conflict?

EdInvestor

Plus I dont believe that branded to you and me means the same as branded to them. When we think of investment fund brands we think of Invesco Perpetual, Gartmore, Fidelity etc. I believe that they are thinking of high street names like Legal & General, Norwich Union, Barclays Bank. Remember who they are targeting with the personal savings accounts.

They do seem to be following quite closely the recommendation of the Pensions Commission, though, and IIRC the man who ran that was believed to be thinking about Merrill Lynch Or was it Fidelity?

You might get new suppliers coming into the market for big volume like this - eg Vanguard, which does trackers at 0.1% in the US I believe :eek:The BGI funds may well also be a big players.The amount of business is such that it could be worth the fund managers putting in quite a bit of effort. The smallish volume of the UK market is one reason why prices are so high compared with the US.