my dads private pension

valley114

Hi everyone

My dad just retired at 65. For the last year he has been working part time through ill health.During this time He was claiming full council tax benefit and housing benefit.Due to his reduced earnings.Now he has retired he has started to claim his £80 per week private pension plus his state pension.He now has been told that he is over the threshold and he can no longer claim benefits. Without the private pension he would of been able to claim £90 per week in benefits which means he is ten pounds worse of having a private pension.I to am a council tenent, and I am seriously wondering why I am paying £50 per week towards my pension if this is going to happen to me.
Are there ways of avoiding this situation.


Many thanks
Valley114

dunstonh

and I am seriously wondering why I am paying £50 per week towards my pension if this is going to happen to me.

It depends on whether you want to live below the breadline or not.

If you want a poor retirement then stop paying them money. That is what it really comes down to at the end of the day.

Remember your retirement is going to be around 25-30 years. In that time you will not have the capital to make any real expenditure above the cost of living. No new cars, no holidays, no gifts for grandchildren, no new furniture, struggle to pay bills when a large bill arrives.

Is that really what you want when you are older?

valley114

I am not saying I want to live below the breadline,but that fifty pound a week could be better invested .If Im only going to enough to cover what I could of claimed off my rent and coucil tax whats the point. Would I not be be better of putting that money into a cash isa in my daughters name for the next twenty years.At least that way I will not have to declare any earnings to them ,which means I can claim housing and council tax benefit and still have that isa to fall back on .

jamesd

valley114, if you investigate a few years before retirement there are things you can do to avoid this. For example, if he didn't take a lump sum, taking a lump sum might have put him below the threshold for benefits (though the capital might have disqualified him then, if it was over that limit). For your father the coming increase in age allowance will probably make him better off, since about the first 9500 a year will be tax free for those over 65 in a few years.

The solution for you is to start planning now: talk about your current situation, get your current state pension forecast, the work and personal pensions you and any wife have and what your attitude to investment risk is. Add in your age and it should be possible to suggest something helpful.

Once you have things planned, you should review investment choices once a year and your whole plan at least once every few years, in particular ten and five years before retirement.

dunstonh

Would I not be be better of putting that money into a cash isa in my daughters name for the next twenty years.At least that way I will not have to declare any earnings to them ,which means I can claim housing and council tax benefit and still have that isa to fall back on .

Putting the money in your daughters name allows her to run off with it. It would also mean her husband/spouse gets the money if she dies and you end up with nothing. Plus, if you do it you would fall foul of money laundering rules and benefit fraud.

Having the money in your own name wouldnt help as you are only allowed a small amount before the pension credit and benefits get reduced.

Debt_Free_Chick

valley114 wrote: »

He now has been told that he is over the threshold and he can no longer claim benefits. Without the private pension he would of been able to claim £90 per week in benefits which means he is ten pounds worse of having a private pension.

Has he looked into eligibility for the Pension Credit?

seven-day-weekend

I agree it can leave a nasty taste in the mouth to find that you've paid in all those years and are worse off than someone who didn't pay anything. But IMHO, even if your father is slightly worse off financially, he is better off in another way because the money is his by right, and no-one can query it or take it away as they can if he relies on State Benefits. He does not have to fill in any forms or jump through any hoops to get it.

If you put the money in your daughter's name it is her money and not yours. Also trying to 'hide' money like this in order to claim State Benefits is benefit fraud.

Also, how do you know there are going to be any comparable State Benefits by the time you retire? I certainly wouldn't want to base my retirement plans on this assumption!

peterg1965

valley114 wrote: »

Hi everyone

My dad just retired at 65. For the last year he has been working part time through ill health.During this time He was claiming full council tax benefit and housing benefit.Due to his reduced earnings.Now he has retired he has started to claim his £80 per week private pension plus his state pension.He now has been told that he is over the threshold and he can no longer claim benefits. Without the private pension he would of been able to claim £90 per week in benefits which means he is ten pounds worse of having a private pension.I to am a council tenent, and I am seriously wondering why I am paying £50 per week towards my pension if this is going to happen to me.
Are there ways of avoiding this situation.


Many thanks
Valley114

It is exactly this type of situation that puts people on lower incomes off pensions. We have the Government to thank for this situation, it effectively penalises people who have very small personal pensions who then do not quailify for a range of state benefits. Having said that I do not have sympathy with those who have earned good money throughout their working lives and have failed to plan for retirement. Although I do not know all the details in your case, I do know that quite a few genuine people will be in a similar situation, it is the hard and fast limits for 'means testing' that create this problem. In my view there should be a sliding scale to the method of means testing used to avoid people, certainly those that have had modest incomes and have genuienly made an effort to save for retirement, being caught in this trap.

dunstonh

means tested benefits should be there for those that cant look after themselves financially. Not an excuse to allow those that cant be bothered to save.

I would like to see an extension to the NPSS coming in 2012 which makes it compulsary for anyone earning over £15,000 a year. Only allow the low earners an opt out.

Alternatively, give advance notification of withdrawal or reduction of pension credits. Of course that may still happen as the country will not be in a position to pay all these pension credits at the current level in years to come. So a reduction somewhere is required.

peterg1965

dunstonh wrote: »

means tested benefits should be there for those that cant look after themselves financially. Not an excuse to allow those that cant be bothered to save.

I would like to see an extension to the NPSS coming in 2012 which makes it compulsary for anyone earning over £15,000 a year. Only allow the low earners an opt out.

Alternatively, give advance notification of withdrawal or reduction of pension credits. Of course that may still happen as the country will not be in a position to pay all these pension credits at the current level in years to come. So a reduction somewhere is required.

dunstonh, I agree. Whilst compulsion is a blunt tool it is necessary particularly as there are now so many public sector workers who will be taking their pension from the state as well as Old Age Pensions for all. Compulsion should be supplemented with companies being mandated to provide and assist employees in establishing a pension fund(s) from the start of the individuals working life. As you say, giving fair warning of the withdrawal of state benefits (ie pension credit and the like) will focus the mind! State benefits should be what they were originally meant for, a safety net for the most needy and vulnerable people. With have this current (rather dubious) Chancellor to thank for the huge expansion of the benefits systems.

Shaunyboy

My old man was in a similar situation. He had a low paid factory job (there are a few left) for 35 years which he was sick of by the time he was 58 so packed it in and took his peanuts of a pension and lived off that..just about.
When he hit 60 he was better off because of Pension Credit, meaning no rent or council tax to worry about.
Perversely, when he hit 65 and started getting his state pension, he was worse off again, having to pod out for council tax and rent.
The thousands of pounds he put into his pension over 35 years was a total and utter waste of money. Our family had to suffer some hardship during those years while he was making those contributions for absolutely NO BENEFIT AT ALL. He should have kept the brass and spent it at the time on his family and maybe even a holiday once in a year or two. The benefits to him and us would have been incalculable!
I really wish pension advisors would wake up to this fact. There is NO point in people on low incomes investing money they really need NOW into pensions for when they come to retire they will be no better off.
This is the real world and the harsh reality for millions of workers earning very little.
It is a lesson I learnt by looking at my Dad's situation.