A pension outside 'the system' for the paranoid?

robmatic

gadgetmind wrote: »

Annual allowances, special annual allowances, GAD limits, dividend taxation, residential in a SIPP blowing hot and cold, and much much more.

That's not leaving fairly well alone IMO.

Relative to other parts of the pensions landscape (e.g. DB) personal pensions have escaped relatively lightly.

hugheskevi

And how many people in the country were affected by those changes? Annual allowance at £50k is aimed to stop high earners getting too much tax relief.

It's a right pain working out whether you are affected or not, even if it turns out you are not affected.

I can make DB AVCs. Thanks to being a lot younger than the average person upon which HMT base the x16 multiplier on, my (actuarially neutral, ie no employer subsidy) contributions are deemed to be the best part of twice as much as they actually are.

Thanks to my scheme having a calendar year rather than financial year PIP, this financial year's contributions (lump sum, at end of tax year) will score in the next financial year.

Which all meant that my c£30,000 pension accrual for the coming financial year (moving to monthly payment of AVCs) is deemed to be a bit over £100,000:eek: Fortunately I have just about enough spare carry-forward for that.

I wish a CETV would value those £30,000 worth of benefits at £100,000 The calculation is barking mad, but hey, pensions are just a big game to avoid tax ultimately so best play along :rotfl:

jamesd

jago25_98 wrote: »

Now I'm reading about what happened in the last financial meltdown and see that pensions were raided.

Pensions were no more raided than anything else that involved dividend payments, if you're referring to that change. ISAs and investments outside all tax wrappers were also affected.

jago25_98 wrote: »

My question is, are there lower risk pensions?

Of course. You can ask your employer about the options to transfer the pension pot elsewhere and can probably do that every few years with reasonable efficiency. You can open whatever other pension you like to transfer it into that and get whatever options you need that are legal within a pension. Within a SIPP type pension that's a huge range.

jago25_98 wrote: »

Is there any other way to get the benefits of security in a pension? Can't one bag those employer contributions and use it for a house?

Not for a house but you can buy commercial property within a pension if you have sufficient money to afford it and possibly the mortgage that you get to do it. I think that the borrowing limit is 50% of the pension pot size, per pension law.

jonny2510

gadgetmind wrote: »

Brown's £5bn a year raid was before that.

Anyone fancy offering an objective overview of what Gordon Brown actually did?

I'm forever hearing about Brown's "raid on pensions", though have no real idea of what it was, and who it affected.

atush

Dividends have an automatic 10% tax deducted, that pensions used to be able to claim back from t he govt. Which Gordon brown decided he could take instead into govt cofffers and spent it on diddly squat (a quango anyone?). he certainly did not save that 5 billion a year for lean times. If he had, we might be in a better position today?

So the income into pensions, which was tax free before, became taxed at 10%. Over time, this had a huge detrimental effect to how the investments grew, leaving less pension at retirement for private pension holders (and those with ISAs) as it was amplified over time by the lack of interest being compounded.

gadgetmind

dunstonh wrote: »

And how many people in the country were affected by those changes?

Huge numbers, but it doesn't really matter how few. All the constant fiddling gives the impression of a system that, despite being intended for long-term investment, has ever-changing rules that make planning difficult, results uncertain and introduce a FUD factor.

So, while I accept that this is as much perception as reality (50:50?), the end result is that people are scared off pensions.

GAD limit reductions were not great but not a major issue

They were a major issue to those who found their income halve over night. OK, so there were other factors, but GAD was a fair bit of it.

Tax credit affected pensions, ISAs and unwrapped.

Yup, a truly major raid on the UK's savings and retirement income. Well, other than for those on final salary deals such as MPs!

gadgetmind

jamesd wrote: »

Pensions were no more raided than anything else that involved dividend payments, if you're referring to that change. ISAs and investments outside all tax wrappers were also affected.

Yes, but for most people, by far the largest effect was to their pensions, partly because most people have more in there than in ISAs, and also because the money is typically in there for longer.

noh

atush wrote: »

Wrong. I pay 10% on tax on dividends in my pension. Which I could reclaim against tax before. Now I can't.

If you do then you are the only one that does.

atush wrote: »

Dividends have an automatic 10% tax deducted, that pensions used to be able to claim back from t he govt. Which Gordon brown decided he could take instead into govt cofffers and spent it on diddly squat (a quango anyone?). he certainly did not save that 5 billion a year for lean times. If he had, we might be in a better position today?

So the income into pensions, which was tax free before, became taxed at 10%. Over time, this had a huge detrimental effect to how the investments grew, leaving less pension at retirement for private pension holders (and those with ISAs) as it was amplified over time by the lack of interest being compounded.

There is no tax deduction from dividends at source.
There is an attached 10% tax credit which can be used by a tax payer to satisfy their tax liability.
If that dividend is paid into a tax free wrapper such as a pension or ISA there is no tax due therefore the tax credit is of no use.

dunstonh

Huge numbers, but it doesn't really matter how few. All the constant fiddling gives the impression of a system that, despite being intended for long-term investment, has ever-changing rules that make planning difficult, results uncertain and introduce a FUD factor.

So, while I accept that this is as much perception as reality (50:50?), the end result is that people are scared off pensions.

The constant meddling of extreme limits is a pain and does create the perception of legislative risk as you say. However, in reality, things for the average consumer and in particular those with small contributions like the OP is looking at, havent seen any negatives in the changes in legislation that have occurred.

They were a major issue to those who found their income halve over night. OK, so there were other factors, but GAD was a fair bit of it.

It was a major issue to a minority of people who were exceeding 100% GAD in the minority option of using unsecured income. I had only one person exceeding 100% and by the time his next GAD review comes due he shouldnt be too badly affected.

Fundamentally though, if you look at defined contribution pension rules for the average consumer in 1988 then they are same today.

gadgetmind

dunstonh wrote: »

It was a major issue to a minority of people who were exceeding 100% GAD in the minority option of using unsecured income.

But how many (like I did to a certain extent) had their retirement planning built around this limit? OK, I had flexibility built in there (I had to as I'm mostly in equities!) but others might have been in less volatile assets.

Fundamentally though, if you look at defined contribution pension rules for the average consumer in 1988 then they are same today.

Yet it's mostly the average people who have been most scared off by the constant meddling. On the one hand, HMG woffle on endlessly about the pensions crisis, while on the other they are busy creating one!

Every bout of careless fiddling will negatively impact some people, and those people, having few/no ways to improve their lot, will complain bitterly to the media, who then print under-researched articles with BIG HEADLINES!, and onwards it goes.

The perception comes across that HMG actively dislike private pensions and intend to constantly chip away at them until little of value is left.