MSE News: Budget 2012: Single state pension plan confirmed

Nomad2006

Tancred wrote: »

What the government should do is allow people to withdraw ALL of their private pension pots tax free and let them invest it into rental property instead of some poxy low return annuity. :mad:

Yes, that would do wonders for housing affordability for all the young people priced out of owning a home.

Old_Slaphead

According to FT this increase will not apply to anyone retiring before 2017 so many people reaching state retirement age in next few years will miss out by up to £40pw

dunstonh

What I like would like to know is what is going to happen to people who have already built up S2P entitlements? The BBC mentioned something about 'getting their money back' but how on earth would that be calculated? Even £20 a week is worth a pot of several thousands - would the government really give back such sums? I doubt it.

It is a key unknown. It is unlikely you would get the money back as it was never yours in the first place. The DWP know how much of your SERPS/S2P you have contracted out of. So, the logical thing would be to lower that amount off the £140 base figure. That was the suggestion in the early proposals but we need more detail to see if that is still the plan.

What the government should do is allow people to withdraw ALL of their private pension pots tax free and let them invest it into rental property instead of some poxy low return annuity.

Most people buy annuities which have a higher yield than rental properties. People that prefer having greater potential and investment risk, such as property, will not typically buy an annuity but use income drawdown instead.

Linton

dunstonh wrote: »

It is a key unknown. It is unlikely you would get the money back as it was never yours in the first place. The DWP know how much of your SERPS/S2P you have contracted out of. So, the logical thing would be to lower that amount off the £140 base figure. That was the suggestion in the early proposals but we need more detail to see if that is still the plan.



Most people buy annuities which have a higher yield than rental properties. People that prefer having greater potential and investment risk, such as property, will not typically buy an annuity but use income drawdown instead.

Judging from many of the comments on this and other MSE forums, most people given a large lump sum would rush off and buy a BTL. After all they have heard that property wont let you down.

gadgetmind

Well, there are undoubtedly worse things to do with lump sums, but there are also far better ones.

Southend1

So I see contracting out will come to an end as part of the changes. I am I the final salary section of USS. So I will pay higher NICs. But will they also increase my USS contribution rate? I'm not sure if somehow some of the contracted out NICs ended up in USS?

Linton

Old_Slaphead wrote: »

According to FT this increase will not apply to anyone retiring before 2017 so many people reaching state retirement age in next few years will miss out by up to £40pw

Yes, but a fair number (like me) would have built up a SERPs pension of more than the increase so we wont be any worse off than those retiring after 2017 from my understanding of how the new system is going to work.

Tancred

Nomad2006 wrote: »

Yes, that would do wonders for housing affordability for all the young people priced out of owning a home.

Then build more homes! Moreoever there is no law that says you must own a home - on the continent many people rent all their lives. This ownership obsession came about with the Thatcher years, it was never like that before.

Anyway, this independent approach is already happening, with many people opting out of a pension altogether and investing in ISAs etc to build up a pot to invest. It's about flexibility and giving people the right to invest their money in the best way possible. In the USA there is already a lot more freedom to do this, but here as always there are roadblocks. :mad:

Tancred

dunstonh wrote: »

Most people buy annuities which have a higher yield than rental properties. People that prefer having greater potential and investment risk, such as property, will not typically buy an annuity but use income drawdown instead.

True, but unlimited drawdowns are only possible if you have a very big pot. Most people won't be able to do this.

gadgetmind

Tancred wrote: »

True, but unlimited drawdowns are only possible if you have a very big pot. Most people won't be able to do this.

Um, so what?

Drawdown and annuities will both provide a larger annual income from your pot than you're likely to get from rental property, with the former leaving at least something for descendants and the latter being stunningly low risk.

(Rental property could provide more income with gearing, but does someone really want to take on a heavily-gearing speculative investment as part of their retirement plans?)