Are pensions only for high rate taxpayers who own a house?

zagfles

laurel7172 wrote: »

Sigh. Yes, we didn't know that there's no such thing as risk-free investment. Thank you for your superior insight.

Whoosh...

We all know that the govt could decide to let pensioners starve, increase tax rates to 110%, or pass a law that everyone has to wear purple on Tuesdays.

And that investments can go down in value.

You're not safe "whatever happens". The state is safer than most investments, as current gilts yields prove.

That was the point.

real1314

Wouldn't the state 2nd pension apply equally to both scenarios?

Also, that £1.70 a week - is that based on earnings? You say it accrues at £1.70 a week for those on earnings "up to" £14.7k, but do you mean that those on £14.7k accrue £1.70 a week, with those on less getting less? You can accrue once you earn over £5.6k

Assuming you are correct, that would give £68 per week extra income at retirement, giving a total of £173 a week with the basic pension of £105. Why would anyone contract out of serps to go private on such a great return?

Incidentally that £1.70 is not on direct.gov. Which bit of DWP did you ring to get that figure? :cool:

zagfles

dunstonh wrote: »

Going back to the days of endowment sales as a measure of today is hardly useful information. What other events in history do you want to dig up to give as an argument?

How else do you make a point about projected long term investment returns being over optimistic without going back a few decades?

No it is being abolished and replaced with a single state pension. The point is to avoid means testing and have personal savings/investments/pensions impact on provision.

This is like wading through treacle. The point I was addressing was people saying you can't rely on state benefits still being there when you retire. If one benefit is simply being replaced by another, or by an increase in another, then anyone who was relying on that benefit is not going to lose out. Get it?

zagfles

jamesd wrote: »

I didn't miss the point. I deliberately answered the question that you asked about the last hundred years and which could be relied on during that time.

You don't "rely" on something which doesn't exist !!!!!!! The point was that the state promises of what you'll get in retirement have been better kept than those from private and company schemes, in general.

I do wonder if when asking the question you realised that the basic state pension only started in 1948 and was only expected to pay out for low single digit numbers of years before someone died of old age in their latish sixties, the relatively low proportion compared to now who even lived to the ripe old age of 65.

I don't think it's sensible to assume that we will continue to have a relatively generous pension with relatively generous earnings-linked increases. Compared to levels that it has been at in the past.

Why not? The govt is proposing exactly that, a higher basic state pension, and earnings-linked. With all party support in principle, as suggested and carefully costed in the Turner report.

gadgetmind

real1314 wrote: »

Incidentally, the rates of return you have both (Dunstoh & James) been using - they seem a bit high - are they based on any sort of historical information?

5% above inflation seems a bit high

No, that's pretty much right on the money based on multi-decade information.

gadgetmind

zagfles wrote: »

the state promises of what you'll get in retirement have been better kept than those from private and company schemes, in general.

My private pensions have *never* made any promises. Have yours? Really?

I decide my own contribution level, manage my own asset split. track my own capital, and project my own future performance.

I guess I could blame the bogey man if things go off track for a while, but I won't as that's not my style.

Summary: grow up, wise up, man up.

And while you're working out how to do this, shut up and listen.

dunstonh

Nice assertion, but it doesn't answer the key point. Would you think that £10k in the bank and £36 erm, nice try but it was only £7 better off, so £10k and £7pw is "better than nothing" if it cost you £20 per week over 40 years to get it

It was £7 because you used inaccurate figures.

Yes, I would consider £20pm to get £36pm and £10k as worthwhile.

It wasn't in the £41k based on £27 pcm; that needs 5% above inflation. Do you expect inflation to average 1% for 40 years?

It was covered in both. However, it really makes no difference as the contribution would be maintained in real terms to give a real terms outcome. So, in reality, by using projections that took into account inflation at 2.5% p.a. the final value was understated or the contribution overstated.

Why did you change £7 to £36? Playing with the numbers to create a different outcome?

£32k @ 6% = £1920 a year. £1920 divided by 52 = £36.92.

Can you link to a provider paying 6% as an annuity for the average 65 year old?

Did two pension annuities in the last week. One got 7.2697% and the other got 5.9276% but included a 10 year guarantee. The first was 65 already and the other 64.

real1314

gadgetmind wrote: »

No, that's pretty much right on the money based on multi-decade information.

FTSE 100 1985-2005 for £1000 gets to £3586, but inflation reduces that significantly, bringing it down to a value of £1714.

That is nowhere near 5%, closer to 2.6%

dunstonh

This is like wading through treacle. The point I was addressing was people saying you can't rely on state benefits still being there when you retire. If one benefit is simply being replaced by another, or by an increase in another, then anyone who was relying on that benefit is not going to lose out. Get it?

One benefit is not being replaced with another. The state pension is not means tested. Pension credit is proposed to be abolished. The basic state pension is proposed to be converted to a single state pension. The single state pension will not be means tested.

So, clearly people cannot rely on pension credit being there when it is already proposed that it is abolished.

Assuming you are correct, that would give £68 per week extra income at retirement, giving a total of £173 a week with the basic pension of £105. Why would anyone contract out of serps to go private on such a great return?

I contracted out of SERPS only for a limited period and that is currently on track for a protected rights (using pre April 2006 terminology) pension of over £150pw. That is near three times more than what my contracted in benefit would have been. I also get a 25% tax free cash payment from it whereas contracted in wouldnt. Plus, I can take it at an age of my choosing unlike contracted in. And if I dont make it to retirement, my spouse gets the whole value paid to her tax free as a lump sum.

dunstonh

real1314 wrote: »

FTSE 100 1985-2005 for £1000 gets to £3586, but inflation reduces that significantly, bringing it down to a value of £1714.

That is nowhere near 5%, closer to 2.6%

Thank you for verifying that the figures are correct. If the growth figure is 2.6% as you show, then when you add in just over 3% as the average dividend (which is not included in the FTSE100 value) then you see they are right.