Pension and yesterday's budget.

McKneff

When does the rule come in where pension cash can be withdrawn in full.


Just as an aside, if someone takes all their pension out of the pot, then blows the whole lot, what happens then. Presumably they will have their state pension but its not going to be a lot to live on.


Surely under those circumstances they cant claim means tested benefits.
Or am I missing something.


It is just curiosity, I already receive state pension

Seabee42

Currently the plan is to make changes to the legislation to implement the change from April 2015.

dunstonh

ust as an aside, if someone takes all their pension out of the pot, then blows the whole lot, what happens then. Presumably they will have their state pension but its not going to be a lot to live on.

With the introduction of the single state pension in 2016, Pension credit is being abolished. So, there is a small overlap period but if your state pension is after 2016, you wont get pension credit. There will be a small number of other benefits that could apply but they are mostly means tested.

Current means testing rules take into account deprivation of assets and "blowing it" is largely covered under the existing rules.

Linton

I guess people emptying their pension and going on a world cruise isnt too much of a problem in that people with that mindset would be unlikely to have accumulated a significant pension anyway.

More of a problem could be sensible people underestimating their life expectancy. If they drawdown on the basis of "everyone in my family was dead by 75" life could become very difficult should they live well into their 80's as, according to current estimates, most will.

atush

Yes, I have come across people here just like that (even earlier this week) saying 'no one in my family lived past 67' etc.

Forgetting that those in question smoked, drank, ate a poor diet and did no exercise. You have to be careful when figuring a personal LE.

I am worried that some will blow it, and others wont figure in living til post 90.

Drp8713

Linton wrote: »

I guess people emptying their pension and going on a world cruise isnt too much of a problem in that people with that mindset would be unlikely to have accumulated a significant pension anyway.

More of a problem could be sensible people underestimating their life expectancy. If they drawdown on the basis of "everyone in my family was dead by 75" life could become very difficult should they live well into their 80's as, according to current estimates, most will.

I think there might also be another problem.

People may phase taking their income, but depending where they invest, probably too much in equities, when there is a crash they are all going to go sod this for a laugh and withdraw the rest, paying lots of tax, also meaning they cannot recover the loses and then losing out by putting it in a savings account with easy access and spending it and losing the rest to inflation.

zagfles

dunstonh wrote: »

With the introduction of the single state pension in 2016, Pension credit is being abolished.

No it isn't. Pension credit will still exist for those without a full state pension

So, there is a small overlap period but if your state pension is after 2016, you wont get pension credit. There will be a small number of other benefits that could apply but they are mostly means tested.

Current means testing rules take into account deprivation of assets and "blowing it" is largely covered under the existing rules.

It depends when you blew it and the reason for blowing it. It's not a straightforward case of if you spend more than necessary to survive you'll be denied benefits.

mania112

I believe those with pension pots of £50k or under are going to cash it in (mostly).

Those people haven't accumulated a big enough pot.

Those people are therefore not bothered about retirement income.

And those people are likely to be low earners.

mania112

^ oh and besides other income, this amount will not cause a HRT bill.

kidmugsy

dunstonh wrote: »

Current means testing rules take into account deprivation of assets and "blowing it" is largely covered under the existing rules.

Aye, current rules do. Not forever, though, surely? That would run counter to the history of the welfare state since the 1945 reforms.

zagfles

kidmugsy wrote: »

Aye, current rules do. Not forever, though, surely? That would run counter to the history of the welfare state since the 1945 reforms.

And it's completely different with pensions at the moment. The money in a pension is never counted as capital/savings which you declare in the same way as an ISA or unwrapped savings.

For instance someone with £50k in an ISA wouldn't normally get housing benefit because of the capital rules, but someone with £50k in a pension could, since the income from that pension would be what counts not the capital. Income would perhaps be £2k from an annuity/drawdown, which could easily mean HB is still payable perhaps with a small reduction due to income.