MSE News: Pension system 'too complex'

John_Pierpoint

Presumably if I leave a wife, who would get any money from my taxable estate tax free anyway, the holder of my pension fund and/or my executor could be challenged if I tried to leave my pension pot to anyone else?

gadgetmind

My (limited!) understanding is that the trustees will look at who you have nominated as a beneficiary, but they can also look at the overall situation regards spouse and other dependants and make their own decision.

jamesd

Yes, a pension pot is typically outside your estate. It's normally controlled by an "expression of wishes" form sent to the trustees of the pension operator. They are not obliged to follow those instructions but normally will unless there has been some substantial change since it was sent, like remarrying or having a new child. In such circumstances you should update the expression of wishes form to clarify your intent and remove the need tor the trustees to speculate.

The decisions of trustees are subject to possible legal challenges.

If you do not wish to leave the money to a spouse or children you should be very explicit that it is your deliberate intent not to do so, to remove any shred of doubt in the minds of those making the decision.

coastline

For those who understand investing I to like the idea of a portable lifetime pension...where you employer could simply add their contribution into your pot...
As most people haven't the knowledge to invest then the government could simply provide a top up system to the state pension...
Contributions on top of National insurance could go into a Citizens Managed Fund which could be handled by the pensions industry...
There doesn't have to be limits as you'd be buying units every month with your salary..

Aliwilly

I believe that the real problem is that the UK private pension provision is uncompetitive - so people vote with their feet and look for alternatives.

There was a report from the RSA a while ago that highlighted how the charging structure of private pensions in the UK significantly reduced pension pots when compared to say the Dutch system. (the report can be found at the RSA website - unfortunately as a new member I can't attach link)

If you add in the extremely low annuity rates, this makes the product unattractive, even allowing for the tax relief on the original contribution.

I am not sure why the UK system is so uncompetitive - I suspect that vested interest and deliberate complexity plays a role. I am surprised that there is not more of a campaign to challenge the government and the financial services companies. In fact - if anyone is interested in starting a campaign - I will happily join? :T

jamesd

You should first learn a bit more about how little choice the Dutch system gives people over their retirement income investments. Then you might look at inexpensive UK investments and pensions if those are of interest to you. You don't have to buy the expensive ones if you don't want to. It's a free market and you have choice.

There's no need to buy an annuity when you retire, the last Labour government eliminated that requirement when they introduced Alternatively Secured Pensions five years ago.

Aliwilly

Thanks James. Seems like a fair point - I suspect you may be a bit more knowledgeable about financial services than me!

The RSA report did not indicate any significant differences in what was on offer between UK and Netherlands. Are you able to demonstrate what the restrictions are in Netherlands?

One of the key findings of the report is "If a typical Dutch and a typical British person save the same amount for their pension, the Dutch person can expect a 50 percent higher income in retirement."

Thats a pretty powerful statement from a very respected source. From my individual perspective I am not sure how interested I am in the product per se - I am more interested in the end result i.e. my income in retirement.

John_Pierpoint

In the "good old days", when the early leavers paid for the "loyal" staff who stayed the course, and inflation robbed the pensioners; who mostly died too befuddled to understand what was being done to them; companies ended up with a massive investment pot and were able to do things like buy a nice new office block for the company with it.
That conflict of interest explains why very few people were offered portable pensions.
When inflation went away, people started living longer, and the equity boom stopped for over 10 years - the model fell apart - helped on its way by the fact that ever expanding government spending will always put a tax on something that is making a surplus. Nice one G.Brown.

I remember back in the 80's asking my former employer the transfer value of 10 year's service and being given a figure of x thousand pounds.
I then asked my new company what £x was worth in the new bigger but more expensive pension offering and was offered y years if additional service where "y" was about 30% of the length of service that had created £x.

Three years later I got a transfer value from the then pension fund and found that the years of service had again been devalued by not 70% but only 50% wow.
I was very pleased to see that I had not made the mistake of transferring £x from the first to the second pension fund.

jem16

Aliwilly wrote: »

The RSA report did not indicate any significant differences in what was on offer between UK and Netherlands. Are you able to demonstrate what the restrictions are in Netherlands?

I am going to assume you are talking about the research between UK and Dutch pensions that was discussed on here a while back. If you read through that thread, you will find that they didn't do a like-for-like comparison.

https://forums.moneysavingexpert.com/discussion/2771172