MSE News: The great pensions shake-up: What you need to know

jamesd

MothballsWallet wrote: »

So, how's this going to affect people like me who have a personal scheme? I don't want to be auto-enrolled into anything, so are there any standards set out for the schemes that are NEST-compatible?

You can still have as many personal pensions as you like. There are minimum standards for workplace schemes that are appropriate for auto-enrolment, NEST and NOW:Pensions are two of the workplace schemes available but most existing workplace pensions will also be suitable and will have larger employer contributions than the minimum. The law requires that employers who have enough employees to be covered must opt all employees in and must do it again every three years for any who opt out or set their contributions below the normal minimum. You will be sent an opt-out letter and if you opt out within a month of it being sent your employer will have to refund any deductions taken from your pay.

So if you don't want to be in a work scheme you're going to have a little hassle every three years for as long as this continues. An employer covered by the auto-enrolment rule isn't allowed to take opt-out instructions before enroling you.

mswan wrote: »

I joined a pension 10years ago, paid in every month for a year until the company went bust, this year I received a settlement for my pension, a nice cheque for £10 woop. My hubby was on a final salary pension until the company decided to change the rules, he still pays in but won't get a great deal for his retirement.

Since then the Pension Protection Fund has been introduced and regulation of workplace final salary schemes is tighter to ensure that they don't get so far behind with contributions that it'll cause a pittance of a payout.

The private sector schemes covered by auto-enrolment will usually be defined contribution schemes, where the employee owns the money, via trustees, at all times and where the employee has responsibility for choosing the investments to use. Those don't even have a need for the PPF because the money leaves the employer's pocket each month.

jobdone1 wrote: »

Strange that in the last budget approx 3 weeks ago they said that they would introduce a re viewable pension retirement age so for many of use with years ok decades before we might be told its now ok for you to retire you can park your zimmer frame for a bed lol

Some may need a zimmer frame. Longevity has been increasing rapidly and that means that the number of years that pensions pay out for has also been increasing rapidly, but the number of years worked and money paid in wasn't also increasing. So later retirement and higher payments while working are needed to provide the money to pay for those years in retirement.

This doesn't prevent people from retiring whenever they want, though. They just have to invest enough money for retirement and they can retire whenever they like. Up to each individual person to decide when they want to retire and see if they can put away enough money to do it. retirement investing doesn't necessarily mean investing within pensions, though they are usually good for some of the mixture.

hugheskevi

I joined a pension 10years ago, paid in every month for a year until the company went bust, this year I received a settlement for my pension, a nice cheque for £10 woop.

In addition, you presumably also will receive payments from the Financial Assistance Scheme once you reach Normal Retirement age?

organic_farmer

OK, the experts will hate this response, even the shnorrer won't like it.

1. Unless you are really clever you will get NO value from your pension savings. I will illustrate this later with my own experience having saved all my working life.

2. By signing up to what the government want you are guaranteeing their deliberate attempt to fleece you and much worse, you are ensuring some city boy continues to get his undeserved Porshe sized annual bonus. Additionally, you add credibility to the expressed government point of view.

Let's start with your pension pot. Like me, if you have worked all your life you probably have an average pension pot yo-yoing around £100,000. So what can you do with it. Well do you really want to give it to an annuity provider and get an annual return hardly different to what you would get if you put the cash into an interest bearing account, but giving up any right to your £100,000. We have to do this because the Government has sucked up to the chisselers that offer these products and who knows what kickbacks they are being paid. Yes there must be kickbacks because how could something so manifestly unfair be your main option?

Now you do have another option. You could take the income drawdown option, invest the money yourself and keep hold of your money. Well it isn't quite that simple. When you die the Government steals 55% of it. Why 55%? Because our politicians are fundamentally dishonest. You have avoided paying 20 % tax on the money you saved, so where does 55% come from. Then there is probably an expensive "wrapper" that stops you accessing your cash, like with ISAs where most years in the last 20 you get less interest than you could get elsewhere, invalidating your reason for saving that way. Similarly the cost of the "wrapper" could put you at a terrible disadvantage. (Strange that Martin Lewis doesn't point any of this out - have the politicians knobbled him too now that he is a celebrity and part of the establishment?)

Much better to save without the tax relief and retain control of your savings, unless the employers contributions invalidate my argument. Even so, adding costs to your five person employer is hardly likely to add security to your job.

Now lets look at the State pension. The dishonest creeps we elect have been devaluing this for as long as I can remember, while constantly increasing the funding for it (NI). They deliberately keep the high impact items out of the inflation index. Perhaps you don't believe me. Council tax is outside the index. Mine was £32 a year when I bought my house in 1978 and is now around £1500. What sort of inflation rate is that. How on earth am I going to be able to pay council tax in ten years time.

Well if you save nothing you get an enhanced pension, your council tax paid and if you don't own your home, you get your rent paid. If you scrimp and save all your life you may well be worse off than someone who has saved nothing. Think about it. Don't fall for their lies.

If the politicians weren't dishonest they would provide a fair option. Say you had an alternative to invest in any National Savings product at the same rate as a non pension customer, with the money remaining yours and the unfair 55% tax abolished. That might work but it would do nothing for the dishonest politicians who just love devaluing your pension pot or pension in payment by printing money willy nilly. They call it quantitive easing because they know most of us are too stupid to recognise what they are up to.

Don't fall for their lies. Make them provide a fair alternative.

Howard Dare

MothballsWallet

jamesd wrote: »

You will be sent an opt-out letter and if you opt out within a month of it being sent your employer will have to refund any deductions taken from your pay.

So if you don't want to be in a work scheme you're going to have a little hassle every three years for as long as this continues. An employer covered by the auto-enrolment rule isn't allowed to take opt-out instructions before enroling you.

So, I will lose some money first and have to get it refunded, do you know why they did it that way, considering this NEST/NOW:Pensions thing is presumed consent/"opt-out required", which would be against EU recommendations if we were talking about marketing communications?

Mishomeister

Bigmoney2 wrote: »

With a company or personal pension you can still take pension early (with a reduction), may be able to take an il health pension earlier than normal retirement date, may have death in service benefits attached ( getting rarer I know).

The reduction would mean you will get about £300 per month. So how would you survive on this money? Don't forget companies are amending their pension schemes all the time. I am 27 and do not believe there will be any decent retirement minimum age available(55-60). Death in service benefit is for someone to benefit of your death. No interest to me as that someone will not be me.

Bigmoney2 wrote: »

The example you quote assumes that housing and council tax benefits wil still be available when you get to retirement age. With the way benefits are being cut this is a risky stratergy in my opinion.

The only way to guarranttee a reasonable standard of living in old age is to make your own provision, either via pensions or some other means.

I don't ague the importance of saving for retirement just don't see the point of doing via pension as by the time you get there your company might amend it's minimum retirement age policy to 70-75

jamesd

MothballsWallet wrote: »

So, I will lose some money first and have to get it refunded, do you know why they did it that way

To exploit human inertia: if people are automatically opted in, more of them will stay in than if they have to take an explicit action to opt in.

It's possible that you won't have any money deducted. Depends on the timing, the earlier you opt out, the greater the chance that it'll be before the first payroll run after enrolment.

Mishomeister wrote: »

I don't ague the importance of saving for retirement just don't see the point of doing via pension as by the time you get there your company might amend it's minimum retirement age policy to 70-75

For the defined contribution pensions that those in the private sector have it's the minimum age of 55 that sets when you can take the income, not an age set by the company. The 55 age may increase by the time you get there, though. And if you want to retire before that minimum age you'll need some other investments. This is part of why it's often good to use a mixture of pension and non-pension investing for retirement.

EDDSMITH

I couldn't agree more with MISHOMEISTER's comments on Pensions.
I have just ended a long 2 year battle to get a Pension Company to honour their Gauranteed Fixed Annuity.
The Policy Schedule of over 20 years and backed up by the few statements Gauranteed a pension of £5,500pa, there were a couple of times they sent statements with a lower figure of £2.500 but when challenged apologised for sending the lower figure.
On nearing retirement, and because of past wrong figures, I needed confirmation on the higher figure before I committed my life savings to puchase a small flat for my retirement.
This confirmation was given 3 times to my IFA, so I went ahead with the puchase.
5 weeks before I retired the company apologised for their mistake but said to my IFA, a Gaurantee is null & void if a mistake can be shown to have been made all those years before. This statement was reiterated by the Pension Advisory Service and the Ombudsman
Consequence no life savings, a property which can't be brought up to standard, so valueless and a pension more than halved.
The Ombudsman was very critical of the Pension Company (probably the largest in Europe), but they never even had their wrists slapped.
So rather than hope to secure your future with Pensions look to other investments, maybe property, wish I had.

littlerob_2

Am I being a bit cynical with these latest proposals by the government?

Making everyone automatically pay into a private pension sounds suspiciously like a precursor to abolishing the state pension. By introducing the auto-enroll process does this not give the government the perfect excuse to claim everyone already has a pension so there is no need for a state one?

jamesd

littlerob, that isn't the point. It's more about ensuring that more people won't rely on benefits when this plus the state pensions are combined. The reports of the Turner Pensions Commission covered this sort of thing in great detail around the middle of the last Labour government and both Labour and the current government have been generally moving in the direction of implementing the recommendations made in those reports.

One of the challenges of that has been means tested benefits which have meant that very low earners in retirement might not gain from making pension contributions. They could lose the value of the private pension due to the higher income level reducing the income from means tested benefits. Moves towards a lower number of qualifying years and a higher basic state pension to replace means testing are intended in part to eliminate that disincentive to put money away for retirement.

With the changes that are happening it's becoming increasingly unwise for even those on low incomes to just assume that means tested benefits will top up their income in retirement. There's still no compulsion to use a private pension, though. People are free to choose to be relatively poor in retirement if they want to.

oswemid

See if you can get into the House of Lords, they get £45,000 a year for just attending.