can you tell me please what this means in simple words?

machinor

hello

can you tell me please what this means in simple words?

http://uk.finance.yahoo.com/news/budget-2014--the-biggest-shake-up-of-british-pensions-since-1921-180900360.html

thanks!

Winter_Phoenix

machinor wrote: »

hello

can you tell me please what this means in simple words?

http://uk.finance.yahoo.com/news/budget-2014--the-biggest-shake-up-of-british-pensions-since-1921-180900360.html

thanks!

Well, I'll give it a go!

When you retire, if you have paid enough National Insurance contributions, you will get a State pension.

However, this is not much money to live on. So lots of people, during their working lives, save for an extra pension by paying money into a private pension fund.

Until now, when you reached retirement age, you had to use at least three-quarters of this saved-up money to buy something called an annuity. (If you refused to use this money to buy an annuity, the Government took away more than half your saved money in tax.) So you handed over a big lump sum of money, and in return the annuity company paid you a pension every year.

In recent years, the amount of money newly-retiring people receive as a pension from their annuity has got much less than it used to be - 5% instead of 10%. (And once you have bought an annuity, the % you get each year never changes.)

The Chancellor now says that in future you will no longer HAVE to buy an annuity - you will have other options (such as leaving the money invested in shares). And if you do use the money for other things, the Government won't tax it as highly as at present.

He's also made some other changes. For example, if your total "pension pot" savings are £30,000 or less, you will be able to take the whole lot as cash if you want to (but then you won't get a pension from it, of course). He's also going to make it possible for more people to take income from their pension savings.

As always with financial matters, there are pros and cons. Some people will manage their pension savings extremely well, and make much more money than an annuity would have given them. Others will not. At least with an annuity you are guaranteed to get some pension, even if not very much.

I hope that helps a bit - it's just my understanding of the situation, I don't guarantee that it's 100% correct!

Steve059

Annuity; A claim to insight, for example," Annuity he was lying, 'cause he turned red".

machinor

pensions from private organizations, from investing in private shares, etc, all these seem much more risky that the pension you receive from the state

aren't there any chances that you will lose part or whole of the money you saved to a private pension company?

dunstonh

machinor wrote: »

pensions from private organizations, from investing in private shares, etc, all these seem much more risky that the pension you receive from the state

aren't there any chances that you will lose part or whole of the money you saved to a private pension company?

No, its not possible to lose all your money unless you are really silly.

whatever you are invested in would need to lose all of its value. Most investment funds have no more than a few percent in any one company. the main multi-asset funds will usually have less than 1% in any one company. To have complete loss would require complete meltdown and if that happens, you wont care about money any more as there wont be money.

kidmugsy

machinor wrote: »

pensions from private organizations, from investing in private shares, etc, all these seem much more risky that the pension you receive from the state

That's not been the experience in Greece. But then we're not in the Euro. Yet.

atush

Winter_Phoenix wrote: »

Well, I'll give it a go!

When you retire, if you have paid enough National Insurance contributions, you will get a State pension.

However, this is not much money to live on. So lots of people, during their working lives, save for an extra pension by paying money into a private pension fund.

Until now, when you reached retirement age, you had to use at least three-quarters of this saved-up money to buy something called an annuity. (If you refused to use this money to buy an annuity, the Government took away more than half your saved money in tax.) So you handed over a big lump sum of money, and in return the annuity company paid you a pension every year.

In recent years, the amount of money newly-retiring people receive as a pension from their annuity has got much less than it used to be - 5% instead of 10%. (And once you have bought an annuity, the % you get each year never changes.)

The Chancellor now says that in future you will no longer HAVE to buy an annuity - you will have other options (such as leaving the money invested in shares). And if you do use the money for other things, the Government won't tax it as highly as at present.

He's also made some other changes. For example, if your total "pension pot" savings are £30,000 or less, you will be able to take the whole lot as cash if you want to (but then you won't get a pension from it, of course). He's also going to make it possible for more people to take income from their pension savings.

As always with financial matters, there are pros and cons. Some people will manage their pension savings extremely well, and make much more money than an annuity would have given them. Others will not. At least with an annuity you are guaranteed to get some pension, even if not very much.

I hope that helps a bit - it's just my understanding of the situation, I don't guarantee that it's 100% correct!

Very nearly perfect, apart from the Having to buy an annuity currently bit. You had to either buy an annuity OR use Drawdown (which is a bit like what will happen going forwards). except you could only take a limited amount of cash each year as opposed to as much as you like.

The only pots where you HAD or should buy an annuity was if you had a guaranteed AR that was higher than todays rates, and if you had a smaller pot where no one would allow DD.