Will the age that private pensions can be accessed at ever change?

hugheskevi

Don't you get the non-means tested contribution-based Jobseeker's Allowance for the first six months of unemployment?

Personally I struggle to view being eligible for income-based Jobseekers Allowance as an advantage of pensions over ISAs. I want my assets more liquid, not less, if I am in danger of losing income - that is one of the reasons I save, as a safeguard against unforeseen events and so I don't have to try to survive on £70 per week Jobseekers and have the Govt. sniffing into my affairs every fortnight.

Perhaps this comes back to the discussion in another thread about different opportunities between those with more disposable income, but if I'm in danger of losing income I'd expect redundancy payments and/or income protection policies to kick in, along with precautionary savings. Whether investments are in an ISA or a pension, all those extra payments should add up to a lot more than the £16,000 capital limit.

jamesd

grey_gym_sock wrote: »

ISAs do have the advantage over pensions, that if they change the rules and they become unattractive, you can take all your money out ASAP.

You're making a big assumption there: that a government making them unattractive in some way doesn't also ban withdrawing money or limit how quickly it can be taken out. it's not a bad assumption but it's not certain, governments can do really dramatic things if they are really keen. Things like the plan just introduced to cut the state pensions for most employees by making it a flat rate substitute for means tested benefits for all.

hugheskevi wrote: »

Don't you get the non-means tested contribution-based Jobseeker's Allowance for the first six months of unemployment?

Yes. Then a large ISA pot will mean you get nothing until it's mostly drained.

hugheskevi wrote: »

Personally I struggle to view being eligible for income-based Jobseekers Allowance as an advantage of pensions over ISAs. I want my assets more liquid, not less, if I am in danger of losing income - that is one of the reasons I save, as a safeguard against unforeseen events and so I don't have to try to survive on £70 per week Jobseekers and have the Govt. sniffing into my affairs every fortnight.

I'm unlikely to ever qualify for income-based JSA any more, since one of my objectives has been to get sufficient capital accumulated to live as I do now indefinitely even if I never worked again, as a step towards retirement planning. I've reached that point, though not with sufficient safety margin yet, and it gets easier as I get closer to 55 and ability to access pension income, as well as because one year closer is one year less to pay for.

grey_gym_sock

jamesd wrote: »

You're making a big assumption there: that a government making them unattractive in some way doesn't also ban withdrawing money or limit how quickly it can be taken out.

true.

though if we want to consider extreme scenarios, it's more realistic that governments might raid pensions, i.e. either "borrow" money from them, or direct them to invest in projects of the government's choosing.

if 1 made pension contributions, and then saw such a scenario possibly developing, there might be nothing 1 could do about it. which is 1 reason why a raid on pensions would be more likely than on ISAs. another reason being that ppl don't expect to have immediate access to their pension fund.

to clarify: i don't think that these scenarios are at all likely in the UK.

however, unfavourable changes to the rules and taxation of pensions are not an unlikely scenario at all. there have been plenty of them in recent years.

property.advert

I fully expect them the screw us over again and push it to 60 as well as letting the tax benefits at the front end be eroded by inflation if not actually reduced further.

The balance between owning up to your true income and putting some away in a pension versus aggressive tax mitigation and non pension funding is going to be pushed further towards the latter at the expense of the former.

hugheskevi

as well as letting the tax benefits at the front end be eroded by inflation if not actually reduced further.

This is what concerns me most.

The Annual Allowance is annoying, not least due to its naive treatment of Normal Pension age (it ignores it) and an individual's age (it assumes everyone is aged 48), but ultimately it is a calculation you can work within and is a restriction on what goes in, much like the ISA allowance in function.

The uncertain Lifetime Allowance is a massive uncertainty however.

I'm aged 35, and on fairly conservative assumptions (2.5% CPI, 6% investment return net of charges) I'd have £750,000 of pension in cash terms when I come to be assessed against the LTA if I make no more contributions. That wouldn't buy much pension - something like £21,000 p/a from age 60 in today's price terms.

So already at age 35 I'm not too far from the point of wondering when pension contributions start to become a risk, and dependent on future administrations increasing the LTA...indeed, given that in the last 3 years the LTA has been reduced by over £500,000 if those reductions continue I'm already at risk, and would need to choose between taking protection (assuming fixed protection continues) or gamble on future uprating.

It all seems to be getting a long way from the sensible 2006 regime that has now been picked apart

peterg1965

I think there may well be more tinkering with pensions legislation in the future, but I firmly believe it will be just that, tinkering. Any current or future Government that wholesale decides to tax the 25% tax free lump sum, or markedly change the tax rules of pension savings which effect middle income earners and below will be signing their own death warrant.

If it is all about decreasing the deficit, issues like leaving the EU (saving £15bn a year in membership fees) or further reducing the Welfare budget will come to the fore. Lets face it, the only reason for the last batch of pension changes in the Autumn Statement have absolutely nothing to do with issues surrounding longevity but absolutely to reduce the 'cost' to central Government. There are also lots of unintended long term finanial consequences of making big adverse changes to pensions rules that can cost an enormous lot to future generations.

kidmugsy

hugheskevi wrote: »

on fairly conservative assumptions (2.5% CPI, 6% investment return net of charges)

I can't for the life of me see why assuming such low inflation and high growth (for, presumably, about 30 years) can usefully be described as "conservative".

jamesd

Since the UK main stock market return over the last hundred plus years has been around 9% before inflation or around 5.2% after, those are significantly more cautious than past reality overall.

hugheskevi

I can't for the life of me see why assuming such low inflation and high growth (for, presumably, about 30 years) can usefully be described as "conservative".

Low inflation is a cautious assumption in this context as I have some Defined Benefit pension linked to inflation. Hence high inflation would more rapidly erode my remaining LTA (assuming the LTA stayed fixed in cash terms).

6% is described as cautious for the reasons jamesd describes.

In other circumstances I would use an ever lower return rate to be cautious, especially over short horizons and different investment classes, but there comes a point in long-term forecasting where you end up being recklessly cautious - I think anything below 6% nominal for equities over long term would fall into that category.

Pedent

Rich1976 wrote: »

Don't forget though that if you just use S+S ISA's and the value of all your savings goes over a certain limit and you get made redundant you will be required to draw on the ISA before you can get JSA. This may well deplete your ISA fund which had been earmarked for retirement. Where as in a pension the money doesn't count towards JSA.

It's not just JSA that's worth thinking about. Under Universal Credit, the limit on capital will apply to a much wider range of benefits, so the risk of being worse off due to having retirement savings in an ISA rather than a pension will be much greater.