Pensions uncertain in the future?

stinktankcynic

Neverland wrote: »

They are two very different things:

Pensions are a tax deferral product - you pay tax on the income at the end

ISAs are a tax free wrapper for savings - you pay tax when you get paid, but not on any investment growth or income after that

Pensions are hugely advantageous to anyone who pays higher rate tax on their current income, but will only be a basic rate tax on retirement (which is almost all higher rate tax payers)

However, even as a basic rate tax payer, if you put £100 into a personal pension, it will instantly and risk free become £125 - thats about 5 years investment growth risk free right there

I would do some spreadsheets and you can see the magic of the tax relief yourself

I have. I know about the tax advantage, but it's the lack of control and uncertainty about annuities and means testing is holding me back. The pot could be rendered useless if the government decide to tinker and the insurance companies decide to do a number on pensioners via annuities. I would imagine, if your current pensions and forecast state pensions come to near what the personal allowance would be at retirement time, then an isa would be just as good, especially if no employer cons and 20% taxpayer.

atush

stinktankcynic wrote: »

There are people out there who can see the older generation who had good pensions and annuities, they look at falling annuities, no final salary schemes, means tested benefits and wonder are they completely wasting their money.

Because previous generations had better annuity rates (but also 15% mtgs) isn't a reason not to save into a pension. As you don't need to buy an annuity anyway. It may just mean, you need to save harder/longer to get to that comfortable place.

Means tested benefits, yes saving into a pension (or ISAs) will prevent you from claiming., But unless you are on the breadline in work, being on t he breadline in your pensionable years isn't a thing to aspire to. It is a fairly miserable experience.

We save to make sure we, and our children, will NEVER see a benefit (unless it is CB which we got, but no longer would do if ours were still young enough). Never even collected Jobseekers.

I have. I know about the tax advantage, but it's the lack of control and uncertainty about annuities and means testing is holding me back.

Lac of control- ISAs and pensions are merely tax wrappers. You can have the same control (or even more control) in either.

I would say you would suffer more from means testing using ISAs/cash savings than pensions.

dunstonh

I have. I know about the tax advantage, but it's the lack of control and uncertainty about annuities and means testing is holding me back.

What lack of control? Pensions offer the same investments you can hold in an ISA or unwrapped.

Means testing is being virtually abolished and actually pre-retirement, means testing favours pensions. Annuity is just one income option but not the only one.

The pot could be rendered useless if the government decide to tinker and the insurance companies decide to do a number on pensioners via annuities.

That is just silly talk. The Govt does play around with pensions too much. However, the bulk of the changes have been beneficial and improved things. Even when they have capped areas, they have brought in transitional relief to allow those who have already committed themselves to larger amounts to protect themselves from the changes.

I would imagine, if your current pensions and forecast state pensions come to near what the personal allowance would be at retirement time, then an isa would be just as good, especially if no employer cons and 20% taxpayer.

Close but the pension still wins for income provision.

gadgetmind

hyubh wrote: »

Who is proposing that? Go on, name them.

The Centre for Policy Studies, amongst others.

http://www.cps.org.uk/publications/reports/costly-and-ineffective-why-pension-tax-reliefs-should-be-reformed/

gadgetmind

hugheskevi wrote: »

Although 10-15% of individuals paying 54% of the total income tax does look rather unfair.

That's a very capitalist view so unlikely to go down well around here!

We're all supposed to sponge off the state, expect others to carry our dead weight, and keep moaning about "the rich". Didn't you get the memo?

atush

I am not sure why anti capitalists hang around a forum about pensions and investing. As investing is all about capitalism.

grey_gym_sock

how the UK works is a mixture of capitalism, socialism, etc ... the same goes for most ppl's beliefs ... it's not all or nothing.

personally, i'd like a moderately progressive tax system, i.e. 1 where ppl pay a gradually higher % of tax as they get wealthier. but without any limit after which they're officially rich and it's OK to soak them for as much as possible.

i'm also happy to share ideas for maximizing 1's own wealth and saving tax. i don't see any contradiction there.