What does the Chancellors pension revolution mean for us?

kidmugsy

I'd recommend that people take advantage of these reforms as soon as they can, because some future government will reverse them, as more people are discovered to have dissipated their pots and then demanded that the taxpayer support them. How do I know? It was fairly common in Australia when I lived there.

SallyG

I printed out and posted the bit of the Chancellor's budget speech that most applies to me because I just couldn't believe it - all those years of people being forced to buy an annuity and GAD rates and drip feeding - what happens now if I blow the lot and then look for pension credit - surely I will be penalised .......he can't possibly really trust us with our own pensions?????
Was he on something?

Seabee42

Your quite right this would not work with pensions credit but supposedly that's going for good with the new state pension that is coming in.

There are other benefits though like housing benefits.

atush

So, is the govt going to pay the IFAs for this 'free advice'? It seems like he was saying that?

[Deleted User]

Leo83 wrote: »

This is a monumental move and this day should go down in history.

I am a 30yr old male with a pension pot already into 6 figures and the thought of buying an annuity at the age of 65 at around £3.8k pa (3% inflation linked) or £5.5k fixed, it annoyed the crap out of me as it is downright daylight robbery. You have to live around 20yrs just to get your money back at these rates and that is ignoring the potential re-investment of funds generating growth to the initial pot.

This was a surprise and a very good one at that. Things needed to change and now things have moved up a hundred levels with regards to pension savings. These companies offering awful annuities will need to start re-thinking otherwise they are going to go out of business. I'm sure some greedy robbing IFA's will go out of business too as managing the funds yourself will cut out this costly middle man

I now wonder if it is worthwhile cashing in even final salary schemes into this new plan if possible? If you have a history of early death running in the family, you would surely want access to all funds as soon as possible to manage them yourselves?

Many many questions but this is MONUMENTAL.

MAJOR THUMBS UP:T

Agreed.
Shares in the big annuity companies have gone down immediately - alwaysa good sign that it's good news for the consumers although,ironically,many of their pensions are invested in those companies.

richbeth

Well I'm very happy, these changes almost sound to good to be true and will definitely make it more attractive for me to increase my pension savings.

I plan to retire early but decreased my pension savings and increased investments elsewhere as modelling showed I'd just end up with a lot of money tied up in a pension pot that I couldn't access it.

Also we have a variety of income sources all coming in at different times. My wife and I have 3 final salary pensions all kicking in at different ages then the state pensions so we will now be able to use the DC pensions pots much more flexibly to smooth out the changes.

Very happy indeed !

Richard

atush

I now wonder if it is worthwhile cashing in even final salary schemes into this new plan if possible? If you have a history of early death running in the family, you would surely want access to all funds as soon as possible to manage them yourselves?

It was always the case that those in very poor health, who would probably die soon that transferring a FS to a PP was a good idea- esp if they had no spouse.

Leo83_2

SallyG wrote: »

I printed out and posted the bit of the Chancellor's budget speech that most applies to me because I just couldn't believe it - all those years of people being forced to buy an annuity and GAD rates and drip feeding - what happens now if I blow the lot and then look for pension credit - surely I will be penalised .......he can't possibly really trust us with our own pensions?????
Was he on something?

Think of the benefits to the government by adopting such a scheme Income tax receipts will rocket.

TBC15

kidmugsy wrote: »

I'd recommend that people take advantage of these reforms as soon as they can, because some future government will reverse them, as more people are discovered to have dissipated their pots and then demanded that the taxpayer support them. How do I know? It was fairly common in Australia when I lived there.

A population whose stock was exported from blighty as being vagabonds not being financially prudent, are you sure of your facts?

hugheskevi

An interesting consequence will presumably be some form of limiting pension contributions post 55.

Otherwise, at retirement you may as well just contribute the higher of £40K+whatever carry-forward you have and your taxable income into a pension, then immediately withdraw it (or stagger the withdrawals if you like - either way you gain) for a tax benefit. With flexible drawdown that is already possible, but only for one year and in the new regime it will apply to far more people for far more years.

Perhaps that will lead to a return of the pre 2006 regime whereby pension contributions were limited to a percentage of your income for those in a position to instantly crystallise?

Will also be interesting to see if there is protection regarding minimum pension age of 55 as was done in 2010, or whether the increase to 57 will apply to all (presumably excluding those with protection of age 50).

I also expect some issues around charges at-retirement in the future - those with somewhat small pensions may well object to the costs of withdrawing which at the moment are usually a fixed cost regardless of pension size (as provider has to operate PAYE and may well lose the pot entirely so no future revenue, and so less incentive to compete on that element of costs). The costs may therefore be high in proportion to a smallish pension (although higher Trivial Commutation might help there, as well as the benefit of scale to reduce costs). The funding of the 'free' advice at retirement may also lead to cost pressures depending on who has to fund them, which may again add a fixed element to at-retirement costs.