Budget

seven-day-weekend

badger09 wrote: »

I don't consider myself 'wealthy' but this is great news

And I am a 'pensioner'

Same here:)

seven-day-weekend

Murphybear wrote: »

I will be drawing state pension next March, aged 62.5. I will not be able to buy the new Pensioners Bonds for a further 2.5 years. Would anyone care to hazard a guess as to the logic of this?

Because it is for over 65s? I also am too young at the moment, although I have drawn my State Pension since 2010 . However, I am 65 in January 2015, the same time as the Bonds start.

An age limit, that's the logic.

talexuser

innovate wrote: »

I agree with lvader. Your post is headed "Budget" and then you proceed to pick a random detail to pour scorn on it.

Ok then, my mistake, let's be incredibly daring, throw caution to the winds and pretend the thread is called "Pensioner Bonds."

SnowMan

If you think of this as an election budget, then the tories are bound to be concerned about existing annuitants who can't cash in their pensions.

It seems pretty obvious that the pensioner bond was an attempt to provide something for this group. As talexuser rightly says it isn't that much of a give away.

I wonder if all the Steve Webb stuff about annuity switching, was an attempt to look at whether existing annuitants could sell themselves out of existing annuities.

BillJones

Archi_Bald wrote: »

It would take a severely deranged or unfortunate person who invests for their retirement all their life, then blows it all so they can claim benefits. However, if they do end up destitute at some stage in their lives, they will have access to state / local authority help under exactly the same rules as those people who never bothered making any provision for their old age.

Which is exactly as it should be. I I save as much as I can for thirty years, then blow it on retirement, I certainly shouldn't be treated worse than someone who blew it as they went.

As you say, though, it's ludicrous to suggest that those of us who've always planned ahead will simply withdraw and spend a lifetime's savings and then claim benefits.

bowlhead99

talexuser wrote: »

They had a pensioner on the news just now saying how wonderful the budget was for pensioners who have suffered from such low savings rates for so long....

At a glance, they have:

- access to a secure (100% government guarantee) savings option which appears to deliver 50%+ more income than the current rates that the commercially competitive market would deliver to non-pensioners such as me;

- more than doubling (160% increase?) of the max amount that can be sheltered in a cash ISA annually; for an S&S investor, the limit has increased by over 10x inflation; with great flexibility for moving S&S ISAs to cash if judged appropriate;

- scrapping (i.e. 100% reduction to) the tax charged in what was formerly a £5k band of 10% savings and investment income over the personal allowance;

- confirmation that the basic personal allowance will increase by £500 (5%) in the next year;

- massive extra flexibility on methods of accessing pension pots which have not yet been put into annuities, improving the options for current and future pensioners

I think a pensioner who has been moaning about how they rely on savings and investment income and have "suffered from such low savings rates for so long" (although not a huge percentage of their life), should be reasonably happy with these measures, as each of them improves their opportunities in relation to savings and investment income. Many media outlets have said this should help the grey vote on the basis that all these things are positive for pensioners or those who will become pensioners at some point. So it is unsurprising that some pensioner on the news said it was a good budget for pensioners.

The pensioner bond (NS&I) will only be available from next January

Some pensioners will be dead by then which can't be helped. Others will live 30-40 years from that point. A budget announcement being implemented 9 months after a budget speech is not the end of the world. Presumably you prefer it being available from January 2015 than, say, 6 April 2015?

be 4% on a 3 year fix

Which is 50% above the top commercially available rate. If you look at a bank like Aldermore which has been hungry for business and has frequently made the leaderboard for savings products, they are only offering 2.2% on a 3 year fix which probably still beats at least 4 out of 5 products. But the government is touting 4%, which at 80% over Aldermore's rates would be commercially unsustainable. It is 130% over Lloyds Bank's rates for a 3-year fix.

max £10000

Like I say, it is a rate that would be comercially unsustainable and is way higher than that acheivable on gilts with the same credit risk. You have to cap it somewhere and many pensioners would feel quite well off if they had 10k in cash that could be tied up for 3 years. Clearly many would like more, but the ones who want 100k of cash savings are not the ones who need government subsidy.

with withdrawal of the bonds as soon as they get 10 billion in.

So at 10k maximum a pop, the product can be distributed to a million pensioners and in reality many times that number because some cannot afford to use their entitlement.

Have I got this right, 4% on £10000 is £400, £320 a year after tax

Correct. £400 for a nil rate taxpayer, £320 for a basic taxpayer.

Lloyds would give their millions of over-65 customers only £175 pre tax (over £200 worse) on a 3-year. RBS would give you £135 pre tax on a 2-year and only £115 on a 1-year (which is perhaps £150 worse than the new pensioner deal for a 1-year, pre tax). Some of the savings institutions which are not government-owned and pay better, may go bust leaving you at the mercy of the industry compensation scheme. A pensioner favourite, premium bonds, with the same level of credit security, only pay a post-tax return of £130.

So basically the government are stepping in and offering to enhance pensioner-saver's returns by > £100-200 depending on where you currently bank. Many who are not MSE-ers will have a good enhancement and even the ones running the gauntlet of shoddy customer service at ICICI, topping the leaderboard on this site, can benefit by over £100.

Is £100-200 useful? Well, if you took away a pensioner's £100 winter fuel payment and told them they should have put more money away for wooly jumpers over the first 65-70 years of their lives - or trimmed their state pension by a couple of percent (£2 a week) - they would be outraged, even though large numbers of them are not in such hardship that they need the £100 payout from the government coffers each year.

If those fortunate enough to have £10k of savings are specifically complaining about the effects of the world economy hitting their savings income and you give them an opportunity to make £100-£200 extra by offering government-backed savings products at rates that would not be affordable if offered to the general population, as just one part of a range of measures to assist them, it is a shame if that is met with derision or ridicule.

, and this is the great savior for pensioners?

It is not 'the great saviour' when compared with the game-changer of the once-in-a-generation pension reforms. And for some with savings income taking their annual income up to 15k at a historic marginal 10% rate of tax that now drops to a nil rate of tax, the general existence of a new high rate savings product is not the most significant boost they will experience through this budget.

However, offering an exclusive product with better-than-commercially-available rates is better than saying the pensioners will have to suck up whatever the market offers from week to week, no?

On the other hand the 15 grand limit on ISAs suits me just fine!

Oh, so it was a good budget for people living off savings and investment income - such as pensioners - then?

grizzly1911

Archi_Bald wrote: »

It would take a severely deranged or unfortunate person who invests for their retirement all their life, then blows it all so they can claim benefits. However, if they do end up destitute at some stage in their lives, they will have access to state / local authority help under exactly the same rules as those people who never bothered making any provision for their old age.

So why would that be any different than giving away capital saved through other means.

Save £100k in a savings account, save £100k in a pension.

Current rules on care home fees would see LAs endeavor to chase down £100k "gifted" from the first pot.

£100k "gifted" from a pension pot would be OK?

grizzly1911

lvader wrote: »

Deprivation of assets doesn't cover regular spending on one selves, i.e. they can't stop people buying cars, holidays, having fun money.

An accumulated pension pot would give an annuity of say £5k/£100k on slow burn, investment in in a an average buy to let or fund probably not much different on a long term average.

So burning away at say £30k pa for 3 years would be OK?

Me thinks that sort of burn rate out of normally accumulate d savings would come under scrutiny.

Think it is time my little old mum brought herself a new car.

Archi_Bald

grizzly1911, it is quite a ridiculous suggestion to possibly prescribe how much anyone can spend of their own money on themselves (which is what we are talking about here)..

It is equally ridiculous to suggest that people who paid taxes all their lives should not be able to fall back on the country's social provisions should they unexpectedly fall on hard times.

But as I said before, people who have prudently saved all their life are incredibly unlikely to burn through their lifelong investment just so that they can lower their standard of living.

grizzly1911

Archi_Bald wrote: »

grizzly1911, it is quite a ridiculous suggestion to possibly prescribe how much anyone can spend of their own money on themselves (which is what we are talking about here)..

It is equally ridiculous to suggest that people who paid taxes all their lives should not be able to fall back on the country's social provisions should they unexpectedly fall on hard times.

But as I said before, people who have prudently saved all their life are incredibly unlikely to burn through their lifelong investment just so that they can lower their standard of living.

LAs looking to reduce their commitments will consider what is and isn't relevant. Not sure why pension assets should be considered differently to other assets, in making that distinction, now certain pension assets are being opened up for free disposal.

It is also ridiculous to suggest that people would be likely to seek to shelter their assets to escape paying care fees no doubt.

People who have prudently saved are not likely to waste that money I grant you.

I don't disagree that state assistance should be provided for those with assets/income, where they have been contributed to, in the same way as those that have been profligate.