Pension income outside of tax/means test

grey_gym_sock

in any case, most of these physical assets are poor long-term investments. some might roughly hold their value, i.e. keep up with inflation. (cash under the mattress has little chance of even doing that.)

OTOH, if you put your money in more normal investments (which could be held inside a pension, an ISA, or neither) for a few decades, you have a good chance that it will double in real value, or more.

yes, there is always the possibility that some of the greater gain from proper investments will be clawed by tax or means-tested benefits. but you start out a long way ahead by using more sensible investments.

Linton

gadgetmind wrote: »

But to ignore such eventualities also seems foolish. My retirement plans assume zero state pension and zero benefits. I could include these things but what happens then if I don't get them?

Seems a little drastic to me seeing as the government already has a policy to increase SPA with life expectancy. If you take the same line with all potential eventualities you will never retire. If ignoring state pension made the difference between being able to retire when you wanted and having to work several years longer what would you do?

However to put together a retirement plan you need to understand and accept the full set of risks and assumptions you are making. The wildly pessimistic ones should be balanced by ones that are less so. Its not too useful to discuss them separately.

But balancing risks is a bit different to the policy proposed by the OP whereby ones whole investment strategy is twisted to meet just one of many possibilities

gadgetmind

Linton wrote: »

If ignoring state pension made the difference between being able to retire when you wanted and having to work several years longer what would you do?

Save enough to be able to retire when I want and not include SP coming in later to bail me out as part of my model.

However to put together a retirement plan you need to understand and accept the full set of risks and assumptions you are making.

HMG changing the rules is the largest risk facing me so is the one where I need to assume worst case. BTW, I recently removed 25% tax free cash from my model as I see the probability of this still being available uncapped in 5 years time as 0.5 at best.

atush

Ok, I'll play. Take 80 and put it under a mattress. In 10 years when you want it A, it could be gone ie stolen or burnt in a house fire, B it will be just 80 and C that 80 might be worth only 50-60 in buying power.

Take the same 80, put it in a pension, it becomes 100. If an employer matches yours, it could be 200. So your 80 becomes 200. Then in 10 years time, it might be 300(150 is no matching by employer). Multiply the figures by 10, 100 if you could put away more than 80.

So, would you rather have 300 or 80? Is having the 80 that might not be means tested, better than having the 150-300 that could (but probably wont)?

Personally, while changes to SP could happen (and are happening), I can't see what you propose happening in the 9 years til you can retire. AS whoever did it would commit electoral suicide.

Anything you can squirral away might be worth less than it is today (ie cash will decrease with inflation, and the price of gold has been falling for several years).

Had you applied this strategy and bought gold to hide 2 years ago, it would be worth quite a bit less today.

I say, to act in the proposed way is foolish.

One good thing abt a pension is, that if you have one the money inside it is safe from means testing until you retire and take it as income.

Uncle_Stinky

atush wrote: »

One good thing abt a pension is, that if you have one the money inside it is safe from means testing until you retire and take it as income.

Wise words. Something I wish I had realised years ago. Disillusioned by a dodgy company pension in the late 60/70s (providing subsidised mortgages to executives, etc) I went down the Private pension supplier route (with their high fees, ongoing commission, poor performance) until I though "sod it, I'll fund my own pension with savings, Tessas, then ISAs.

This was going fine until I was made redundant at 60 and immediately afterwards had health problems. As a result, after 6 months JSA, having assets of over £16000, I was cast adrift to support myself from my "pension fund". After four years it is seriously depleted (just one year to go).

Now IF those assets had been in a pension fund or an expensive home ...? Ain't hindsight wonderful?

grey_gym_sock

another factor is: did you actually invest, as oppose to save, your "pension"? (you mention Tessas, but not PEPs, which makes me wonder.)

Uncle_Stinky

grey_gym_sock wrote: »

another factor is: did you actually invest, as oppose to save, your "pension"? (you mention Tessas, but not PEPs, which makes me wonder.)

Started S&S ISAs in the 90's with the rise of the Internet. I agree I should have started earlier, but tbh didn't know much about brokers or buying through a bank until then. It wasn't covered much in the type of papers I read in the '80's!

However the fact remains that even if the pot had been bigger, holding it in a form that is counted as an "asset" as far as benefits are concerned would have had a similar, if not so severe, result.

The point I was trying to make was that all assets are not equal when benefits and means testing are considered. How one can judge which assets will be considered in the future is beyond me.

My hunch is that one should avoid, as far as possible, assets that are liquid. For instance, as far as I am aware, during the Cyprus crisis, only bank savings were confiscated, not share investments, pension funds or property.

grey_gym_sock

fair point.

(and PEPs were a pretty niche product to start with.)

nothing was really confiscated in the cyprus crisis. some banks went bust, and a result, their unsecured creditors lost a lot of money. this included deposits in excess of the amount supposed to be protected. there was a (disgraceful) initial proposal to hit the protected depositors, too, but they backed down on that.

almost any kind of asset could be hit in a crisis, depending on the nature of it, and how it plays out. though probably owning your own home is relatively safe, because treating homeowners harshly would affect a lot of ppl and be very unpopular.

gadgetmind

grey_gym_sock wrote: »

(and PEPs were a pretty niche product to start with.)

I guess you could argue that S&S ISAs are niche even now. I don't recall exactly when we started PEPs but we were in our mid 20s so they must have had a fair bit of mainstream press.

there was a (disgraceful) initial proposal to hit the protected depositors, too, but they backed down on that.

That would have completely changed the rules of the game and not in a good way.

Teeonethousand

Thank you everyone that replied - very interesting and i learned quite a bit :-)

I do have traditional pensions including a small final salary and few pots accumulated over the years and still paying a hefty amount per month via salary sacrifice so i am definately in the traditional game - my consideration was whether other alternatives should be considered in addition.

As for the trust trust thing - yes i am wary and i dont really trust either the government or the financial services industry to keep the playing field level and tbh i think that is healthy

Thanks again