Is there really a difference on your pension between being a 20% or 40% taxpayer....

atush

But once you buy an annuity- that is it. If rates go up, yours won't. Which makes them poor value today, due to the effects on gilts with Quantitive Easing.

And annuity is no longer your only choice. you can take your TFLS of 25% and go into Drawdown with the rest (ie it stays invested and you take an income of approx 4-6% depending on the GAD rate which fluctuates like Annuitites based on Gov Gilts.

jamesd

cusssi wrote: »

You then said about one increasing with inflation 3% -what did you mean. Did you mean you would only get an annuity of £3k per year and this figure would increase each year with inflation?

Sort of. After say 30 years of 3% inflation each Pound of a £6,000 a year annuity would only have the buying power of 41p at the start. The inflation-linked annuity would be paying out £2.43 for each Pound it initially paid out to keep up with that. So the £6,000 a year level annuity would only have the buying power of £2,470 but the inflation linked one would still have the buying power of £3,000. The £6,000 a year one would be paying £6,000 lower value Pounds and the inflation linked one would have raised its Pound payout to £7,290.

cusssi

jamesd wrote: »

Sort of. After say 30 years of 3% inflation each Pound of a £6,000 a year annuity would only have the buying power of 41p at the start. The inflation-linked annuity would be paying out £2.43 for each Pound it initially paid out to keep up with that. So the £6,000 a year level annuity would only have the buying power of £2,470 but the inflation linked one would still have the buying power of £3,000. The £6,000 a year one would be paying £6,000 lower value Pounds and the inflation linked one would have raised its Pound payout to £7,290.

I would love to know what this meant....

Thanks for trying though:beer:

jamesd

The inflation linked annuity will pay out £7,290 a year after 30 years of 3% inflation, while the level one will still be paying out £6,000. The inflation-linked one will still buy as much then as it did at the start, while the level £6,000 one will now be buying only 41% of what it could initially.

atush

cusssi wrote: »

I would love to know what this meant....

Thanks for trying though:beer:

Think about a loaf of bread. what it cost 10 years ago, 20, 30 etc. VS what it costs today.

So, say a loaf is 1 quid now. Say in 20 years it is 3.00. So that effect on 1 quid is inflation. So one quid isn't worth one quid anymore as it only buys 33.3 p worth of goods in the future.

kidmugsy

atush wrote: »

So, say a loaf is 1 quid now.

Pah! You'll never be Prime Minister.

FatherAbraham

Lokolo wrote: »

But yes, pension income is like normal taxable earnings income, but no NI (NI is a tax no matter what anyone says otherwise ).

The bit in brackets is a bit of a non-sequitur, and untrue to boot.

National Insurance is a compulsory workers' insurance scheme, and one's contributions record is important for certain benefits, unlike taxes. Taxes just have to be paid, and confer no benefits.

Certainly there are some parts of National Insurance which are tax-like (for example, the levy above the upper accrual point), and this will get worse for most workers after the 2016 reform comes in (since S2P will be removed).

However, the fundamental principle of National Insurance is that it's insurance (the clue's in the name), not tax. This is precisely why it's not levied on pensions income or savings income -- it's related to insuring workers against periods of unemployment and old age.

Warmest regards,
FA

John1993_2

FatherAbraham wrote: »

Taxes just have to be paid, and confer no benefits.

That's not even close to true. In exchange for my taxes the authorities provide roads, an army to discourage invasion, the rule of law, consular support, and so on and so forth.

To say that they confer no benefits makes no sense at all.

atush

kidmugsy wrote: »

Pah! You'll never be Prime Minister.

I used one for easy maths lol.

And I just bought a loaf last week for a pound for my son at Tesco. They cost half again as much here in my local store ;-)

hyubh

FatherAbraham wrote: »

Taxes just have to be paid, and confer no benefits.

Given that, I'm surprised you haven't left this statist hell-hole and set up libertopia on a boat...!

Certainly there are some parts of National Insurance which are tax-like

The main tax-like aspect is that fact it isn't formally optional according to the law of the land. Paying utilities bills isn't optional in practice, but you don't by law have to purchase gas and/or electricity (let alone from such-and-so supplier) in the first place; in contrast, you can't even formally avoid participating in the state insurance 'scheme'.

(for example, the levy above the upper accrual point), and this will get worse for most workers after the 2016 reform comes in (since S2P will be removed).

Yes, though originally NI was supposed to pay for more than just the state pension.

That said, you seem to be hinting at a general distinction between payments to the state that are directly 'for' something and payments that just go into a general government spending pot (nobody paid or pays a 'middle eastern war levy', for example - the cost just comes out of general taxation and government borrowing). Council tax doesn't really fall into the latter though - local government, police and fire authorities have services by law they must provide, and council tax to a large extent is their means for paying for them.