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'The Chancellor's pension changes are both wonderful and horrid' blog discussion

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'The Chancellor's pension changes are both wonderful and horrid' blog discussion

31 replies 16.7K views
This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.




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  • tonyttttonyttt Forumite
    2 posts
    The new proposals for pension reform bring the UK rules into line with the USA (where I have a pension fund accumulated over many years working there). There are no restrictions in the USA, except that withdrawal are taxed and cannot be made without penalty until you are 60, I think. I have not heard of any issues in the USA, with people spending all their pension pots in one go, but I do agree it would be very good for people to be able to get good advice.
  • edited 20 March 2014 at 7:10PM
    octaviousoctavious Forumite
    5 posts
    edited 20 March 2014 at 7:10PM
    It's a shame this has happened too late for myself or my wife. Does nobody realise that buying a pension is a complete waste of money for the majority of people. If my wife died tomorrow the insurance company would laugh all the way to the bank. She only had a small pension fund and withdrew the 25% maximum that she was allowed. Even if they get no interest on your remaining pot, it would take over 20 yrs to empty it. How many people do you know or hear about that have died well before the age of 75. That is assuming they took their pension at age 55. The only way to get your money back is to die before you start drawing on it, and then I believe it goes to your estate. I am in a similar position as I safeguarded mine for 5 yrs, but that is just about to end. I for one, only know of 2 of mine or my wife's family who survived to a ripe old age.
    If any of my kids asked me for advice I would say, forget about a pension, put what you would have paid into it in a regular savings account and just make sure you don't draw on it.
  • LHW99LHW99 Forumite
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    Since final details are still undecided on all this, it may turn out that there will be a new type of "capping" to ensure that every one secures an income in retirement sufficient to keep them off benefits. Beyond that there is flexibiity. Hopefully if auto enrollment is improved most people will be in a position for this to be relevant at the point of retirement.
  • MSE_MartinMSE_Martin MoneySaving Expert
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    He's very specifically said 'unlimited' drawdown
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  • twardetwarde Forumite
    23 posts
    Part of the Furniture Combo Breaker
    MSE_Martin wrote: »
    He's very specifically said 'unlimited' drawdown

    I suppose it's up to the government to make it clear that if you burn through your pension savings you are only going to get the basic state pension.

    On the 5 live phone in at lunchtime a caller was bemoaning having just got an annuity but couldn't wait to get to his wife's pension savings as soon as she hits 55. A very short term view I think.
  • john539john539 Forumite
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    Feed them to the sharks who will "help" them with their money, create a consumer boom & inflate property prices !

    Very useful for the clueless Tory government.
  • edited 21 March 2014 at 4:16PM
    p00hsticksp00hsticks Forumite
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    edited 21 March 2014 at 4:16PM
    octavious wrote: »
    How many people do you know or hear about that have died well before the age of 75.

    Not many at all - perhaps I'm lucky, but most of my elderly relatives are living well beyond that age these days - both my parents are alive and approaching 80, my MIL is 86. Only my FIL died in his sixties, but my MIL still gets the benefit of his penison.
    octavious wrote: »
    If any of my kids asked me for advice I would say, forget about a pension, put what you would have paid into it in a regular savings account and just make sure you don't draw on it.

    In that case I sincerely hope that your kids don't ask for your advice , as 999 out of 1,000 it will make appalling financial sense. A regular savings account won't even keep pace with inflation, let alone provide a decent income for retirement. At the very least you need to be getting them to look at investing rather than saving (e.g. a S&S ISA)

    And depending on their individual circumstances, they could be foregoing a sizeable employer contribution by not contributing to a pension.
  • My late father served for 30 years in the police force, and on retirement, was permitted to "commute" (i.e withdraw as cash) a large part of his pension. I'm guessing that if it's been available to the police, it's also been available to other professions, such as the armed forces. Has any study been done on what's happened with this large group of people, offered a large lump sum on retirement? I've never heard of this option being used irresponsibly with police pensions.
  • p00hsticksp00hsticks Forumite
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    My late father served for 30 years in the police force, and on retirement, was permitted to "commute" (i.e withdraw as cash) a large part of his pension. I'm guessing that if it's been available to the police, it's also been available to other professions, such as the armed forces. Has any study been done on what's happened with this large group of people, offered a large lump sum on retirement? I've never heard of this option being used irresponsibly with police pensions.

    I suspect if you looked into it you'll find that the 'large part' was actually only a quarter of his pension fund though, and he would have received a (in his case, final salary) pension with the remainder. Any more of a lump sum and he would have paid a large amount of tax.

    Thats the same for most (all?) pension funds currently. It's a big difference between that and being able to cash in the whole lot leaving no pension at all.
  • octavious wrote: »
    It's a shame this has happened too late for myself or my wife. Does nobody realise that buying a pension is a complete waste of money for the majority of people. If my wife died tomorrow the insurance company would laugh all the way to the bank. She only had a small pension fund and withdrew the 25% maximum that she was allowed. Even if they get no interest on your remaining pot, it would take over 20 yrs to empty it. How many people do you know or hear about that have died well before the age of 75. That is assuming they took their pension at age 55. The only way to get your money back is to die before you start drawing on it, and then I believe it goes to your estate. I am in a similar position as I safeguarded mine for 5 yrs, but that is just about to end. I for one, only know of 2 of mine or my wife's family who survived to a ripe old age.
    If any of my kids asked me for advice I would say, forget about a pension, put what you would have paid into it in a regular savings account and just make sure you don't draw on it.

    All my grandparents survived to at least 70 and one to 92 despite them having hard manual jobs and living through two world wars. My parents are 81 and 73 and not flagging yet despite again being solidly working class. My in laws lived to 86 and 87. I don't know anyone who has had both parents die before they got to their late 70s and most have parents still living in their 80s.

    As a woman I'm expecting to live into my late 80s and probably statistically it will be my 90s. So plenty more than 20 years of post retirement life. When I get there I'll be very glad of my pension.

    As said above please don't advise simply putting money in a savings account. At the least get your children to save into stocks and shares ISAs where it should be possible to beat inflation.
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