Pension Age Going Up and Strikes Public Sector

gadgetmind

Kew2u wrote: »

how about a offering a few pension savings options to those people without the money to do it?

I personally know a number of people who claim they can't afford to save into a pension, and haven't joined the scheme here despite the company contributing quite generously and payment being via a very efficient salary sacrifice system. The minimum entry is 2% of gross salary.

Given that I've encouraged them to join, their colleagues have encouraged them to join, and our payroll people keep encouraging them to join, yet they choose year after year to take the money instead, it's hard to know what advice to give that might help.

hugheskevi

how about a offering a few pension savings options to those people without the money to do it

Many of this group will be on the 41% taper in Tax Credits, along with 20% income tax relief. That is quite an incentive.

Add in things such as salary sacrifice, possibly employer NICs rebated and employer contributions and for many the net cost of making contributions will only be perhaps 20% or so of the total amount going into the pension, perhaps less.

For those that truly have the lowest earnings, the State pension provision will be sufficient. Sadly that is simply as the meagre State provision replaces their meagre income, but that is the way of the system. For those earning more than the minimum, it is a lifestyle choice.

dunstonh

Many of this group will be on the 41% taper in Tax Credits, along with 20% income tax relief. That is quite an incentive.

Very good point. The theoretical maximum if you treat tax credits as tax relief is around 73%. i.e. 73% of the pension contribution can be paid for in tax relief and tax credit increases. (pension contributions lower income and therefore increase tax credits).

gadgetmind

dunstonh wrote: »

Very good point. The theoretical maximum if you treat tax credits as tax relief is around 73%. i.e. 73% of the pension contribution can be paid for in tax relief and tax credit increases.

Our payroll department will do a "dummy run" for people with various percentages in there, so people can see how little their take home drops and how much would go into their pension.

I'm pleased to say that this works with most people who go through this exercise but sadly there are many who cant even be bothered to ask for the numbers.

Ladywriter1968

What about when you are laid off from one company that had a pension scheme, but the new company does not run one, so your company pension from the old company remains frozen until you retire and you cant put any more into it. The new company does not have one.

Ladywriter1968

Plus I was told also and this happened to the lady downstairs, they have put her private pension from her old company with the state pension and put them both together, rather then they being separate, what do you make of this also? is this right? why are government combining privates with state pensions? why do they do this?

Ladywriter1968

Plus not all companies have a pension scheme either.

hugheskevi

What about when you are laid off from one company that had a pension scheme, but the new company does not run one, so your company pension from the old company remains frozen until you retire and you cant put any more into it. The new company does not have one.

It isn't frozen. If it is defined benefit, it is deferred and receives increases in-line with a measure of inflation, possibly subject to a cap.

If defined contribution, it remains invested.

Plus I was told also and this happened to the lady downstairs, they have put her private pension from her old company with the state pension and put them both together, rather then they being separate, what do you make of this also? is this right? why are government combining privates with state pensions? why do they do this?

My best guess is that there was less than 2 years of service in a contracted-out scheme, there was a short-service refund made, and the person was reinstated into Additional Pension for the period.

But without more detail cannot be sure. Alternatively, she may be talking of tax treatment, with HMRC looking across all pensions, or benefits, with DWP looking across all pensions. Or it could even be a scheme entering the Pension Protection Fund, and she is confusing that with Govt and State pension. Lots of things

Plus not all companies have a pension scheme either.

Anyone can have their own personal pension.

gadgetmind

Ladywriter1968 wrote: »

The new company does not have one.

NEST will force most companies to have a scheme but not to contribute. I think HMG hope that companies will chip something in, or at least allow salary sacrifice, but that seems a trifle optimistic to me.

The other option is to contribute to a personal pension. OK, it's not as tax/money efficient, but if an 18 year old started a pension tomorrow, and put just a tenner a week into it, then their own pension provision would match that from the state.

A tenner a week and you get twice as much a week when retired.

(There are many assumptions in there, including increasing that tenner in line with inflation, and a level annuity, but you get the idea.)

gadgetmind

hugheskevi wrote: »

Anyone can have their own personal pension.

My daughter has one and she's still at school!

OK, we don't lob much in for her, roughly in line with the example I gave, but it removes future inertia as she doesn't have to do anything more than sign the new direct debit mandate once she's earning for herself.