Pensions advice on the new changes 2014

whitejohn

I retire January 2014 and understand that there will be some changes to the state pension next year. Anything that is likely to affect me? Do I need to defer for a while until it's sorted? I could do with drawing ASAP as very little income, still self-employed.
Think the pension may go from £120 to £140 per week and I desperately need it.

History.

I have 3 frozen pensions that may bring in £1800pa

I opted out of SERPS about 25 years ago when employed and still out as now self-employed. The value of this fund is about £3OK and is one of the frozen pensions.

I think I have the 35 years NI contributions.

Thank you

bigfreddiel

whitejohn wrote: »

....understand that there will be some changes to the state pension next year. ........

......the pension may go from £120 to £140 per week and I desperately need it.

what do you think is changing next year?

Flat rate pension from April 6 2016 will be £144/week

Deffering till 2016 won't work other than 10% increase/annum which may bring it up to yhe same amount
hope that helps

fj

whitejohn

bigfreddiel wrote: »

what do you think is changing next year?

Flat rate pension from April 6 2016 will be £144/week

Deffering till 2016 won't work other than 10% increase/annum which may bring it up to yhe same amount
hope that helps

fj

Thanks for that, I did not realise it was 2016. If I start on the £120 PW am I stuck at that amount or will it increase in 2016 to £144?

xylophone

Do you mean that you will be eligible to draw your state pension in January 2014?

If so, your pension falls under the current rules - it looks as though you will be eligible for the full basic state pension and possibly some graduated pension/Serps/ S2P.

Your pension will increase in payment under the current rules - triple link for basic, CPI in September for the rest. https://www.gov.uk/state-pension-statement

You could defer your pension but it won't qualify you to be treated under single tier rules. https://www.gov.uk/deferring-state-pension/what-you-may-get

Linton

whitejohn wrote: »

Thanks for that, I did not realise it was 2016. If I start on the £120 PW am I stuck at that amount or will it increase in 2016 to £144?

Your pension will continue under the old rules. You may not be missing out on anything as the pension reform is for many people more a consolidation of existing payments and benefits for which you will continue to be eligible than an increase.

whitejohn

Thanks everyone, think I understand that now, no action needs taking and nothing to worry about.

jamesd

It is worth knowing that deferring the state pension is currently a good deal, adding 10.4% to it as higher pension for life for each year you defer, pro-rated for part of a year. If there's any way for you to afford deferring, like living off savings, it's likely to be to your benefit to do so for a year if you're a man in normal good health.

Deferring doesn't mean you'll get the new flat rate pension, though, that's based on when you reach state pension age, not when you take the state pension.

It's worth saying more about those frozen pensions. It's very important to do so if you have any health problems that might reduce your life expectancy. Whatever else you do, don't automatically buy an annuity from the firm that has your pension pot, it almost always gets you a lower pension than you could get by having an IFA go shopping around for you, even after allowing for the cost of the IFA, normally paid for out of the pension pot value, not directly out of your pocket. Even without health issues the shopping around can get you 10%-20% more income each year for life from a good deal place rather than a bad deal one.

whitejohn

jamesd wrote: »

It is worth knowing that deferring the state pension is currently a good deal, adding 10.4% to it for each year you defer, pro-rated for part of a year. If there's any way for you to afford deferring, like living off savings, it's likely to be to your benefit to do so for a year if you're a man in normal good health.

Deferring doesn't mean you'll get the new flat rate pension, though, that's based on when you reach state pension age, not when you take the state pension.

It's worth saying more about those frozen pensions. It's very important to do so if you have any health problems that might reduce your life expectancy. Whatever else you do, don't automatically buy an annuity from the firm that has your pension pot, it almost always gets you a lower pension than you could get by having an IFA go shopping around for you, even after allowing for the cost of the IFA, normally paid for out of the pension pot value, not directly out of your pocket. Even without health issues the shopping around can get you 10%-20% more income each year for life from a good deal place rather than a bad deal one.

Thanks, yes I thought that sounds quite good as you would not get 10% anywhere else. I'm selling my house and the funds from that will have to be my pension so I could manage. I'm assuming 180,000 x 2% (but then I have to rent out of that).
Just looked on the Aviva site and my £60K pot seems to get me between £1300PA (index linked) £1500 (3% PA increase) and £2200 fixed. (probably go for the latter) My health is very good and changing all the other figures around seems to make no difference. I have no family or dependents. I will shop around but guess an IFA will cost me a years pension so not worth it for this small pension.

jamesd

60k isn't small, it's bigger than most. An IFA would probably reduce that by £300-£600 to get the best annuity deal.

For the money from the house, if you were to invest it you could probably take between four and six percent as income, four percent being pretty cautious and having an excellent chance of keeping up with inflation. You could use a wide range of investments including corporate bonds and income-oriented share funds.

Taking a level annuity but deferring the state pension for longer can be a good combination. The state pension ends up providing for the long term income protection part of the picture, however long you live.

whitejohn

jamesd wrote: »

60k isn't small, it's bigger than most. An IFA would probably reduce that by £300-£600 to get the best annuity deal.

For the money from the house, if you were to invest it you could probably take between four and six percent as income, four percent being pretty cautious and having an excellent chance of keeping up with inflation. You could use a wide range of investments including corporate bonds and income-oriented share funds.

Taking a level annuity but deferring the state pension for longer can be a good combination. The state pension ends up providing for the long term income protection part of the picture, however long you live.

Thanks, feel better about what to do on the pension side now.
Not sure about the investments as I don't know what to do and cannot afford to take high risks. Anything simple that I can do or buy with the £180K to get more than 2% Thinking about going full time in a motrohome, no fixed address for a while but cannot do it forever and not as cheap as you may think with campsite fees. Alternative, buying something like a £100K property so I'm not paying out £450/month rent. Is it better to rent, no complications, no ties, live anywhere you please and get interest on the 180K or but property at £100K, tied, maintenance costs, interest on just 80K that wont last forever?

bigadaj

You could probably do better with invest nets but being inexperienced in investing and risk averse means that you wouldn't be compfortable with anything higher risk so were back on safe things with low returns.

Given that your still in good health have you looked at continuing to work in some capacity, its often good for people socially and mentally as well as financially. My father is still working at 78 and would be bored stupid if he didn't.

Downsizing may be good, if I were you I would buy a smaller property rather than rent for ten security this brings, though a problem woud be that you might miss out in means tested benefits with say £80k until this falls to below fifteen grand or so.

Given no dependents then you could also have a look at equity release though the terms may not be suitable and the money you might get would be low as you are relatively young for this.