Lump sum rumours!

BobQ

lvader wrote: »

Irresponsible people wouldn't have saved in the first place, if they somehow become irresponsible later on in life they should still have the same possibilities to rely on the state as people that have been irresponsible all their life.

I cannot agree. Many people about to retire were presented with a pension scheme that they were automatically enrolled in with a large employers contribution. While they could always opt out, it was relatively rare and many were not even aware they had the right. There was no need to demonstrate responsibility.

The changes mean that individuals can be tempted into taking too much. Now their level of responsibility is being tested. As atush says there are many people who are already looking for ways to dip into their pensions early. They have failed that test already.

Others will be faced by options that they never had before. Its very clever, bribing people with their own money by exploiting their weaknesses!

They will indeed have the same chance to rely on the state as those who have been irresponsible. The difference is that the irresponsible probably have no money that the state can use, whereas these people who have been a little irresponsible by exploiting the flexibilities to buy a new car and taking a few world cruises will probably still have accessible funds that the state can direct them to spend! For example, as well as making them sell their home to fund care, they may also make them use their pension as capital, or include profligate spending from the pension in any deprivation of assets calculation.

Tom2023

atush wrote: »

I guess you haven't been reading the Can I Cash in my Pension Threads then?

Many people experience money problems. Just because they may want to cash in their pensions doesn't mean they are going to squander the money.

noh

Tom2023 wrote: »

Many people experience money problems. Just because they may want to cash in their pensions doesn't mean they are going to squander the money.

It usually means they already have squandered their money.

hugheskevi

Interesting today to read the comments on BBC news regarding Steve Webb saying advice will include information about life expectancy. Given the very large number of people who confuse life expectancy at age 65 with life expectancy at birth, and cohort with period life expectancy, it seems entirely sensible to give information about how many years more an individual might expect along with the uncertainty around it.

The 5 'top comments' relevant to the topic were:

This could scare some people. How accurate will it be. If someone is told that they may live for 10 more years for example they could easily live much longer which could leave them with money troubles. Sounds like poorly thought out nonsense.

Can we just enjoy our retirement and stop this fiasco of worrying us all into an early grave ! Spend all your pension money before Osborne gets his mits on it ! Mines going on holidays , booze and women ! The rest I'm going to squander.

Has the 'silly season' started already? The Gov can tell people how long they might live, but won't actually let people who want to die and to be able to chose when, do that. Public money is being wasted on this rubbish - those responsible should be sacked to recoup some of the loss to the taxpayers.

Sorry, this is a pointless exercise. Life expectancy can be estimated accurately on an average basis, hence the fact annuities and insurance works. Its the law of large numbers. You cannot estimate individual life expectancy in the same way.

What an awful idea.

So it seems many folk don't think an estimate of how long you have left to live is very important in determining when to commence pension and how much to draw. Rather concerning.

BobQ

hugheskevi wrote: »

Interesting today to read the comments on BBC news regarding Steve Webb saying advice will include information about life expectancy. Given the very large number of people who confuse life expectancy at age 65 with life expectancy at birth, and cohort with period life expectancy, it seems entirely sensible to give information about how many years more an individual might expect along with the uncertainty around it.

The 5 'top comments' relevant to the topic were:


So it seems many folk don't think an estimate of how long you have left to live is very important in determining when to commence pension and how much to draw. Rather concerning.

Its always interesting to know what statisticians think the future will be, its just that many of us would not want to base a major financial decision on it being accurate.

I have seen lots of these calculations but none give the assumptions on which it is based or any indication of the statistical accuracy of the forecast

Dunnit

BobQ wrote: »

Its always interesting to know what statisticians think the future will be, its just that many of us would not want to base a major financial decision on it being accurate.

I have seen lots of these calculations but none give the assumptions on which it is based or any indication of the statistical accuracy of the forecast

If you wonder how accurate and complicated these statistics are have a look at the pay scales for an Actuary.

hugheskevi

Its always interesting to know what statisticians think the future will be, its just that many of us would not want to base a major financial decision on it being accurate.

I agree I wouldn't fancy betting my future lifetime income on the forecasts being accurate, particularly given the very poor forecasting of the last 30 years. But unless I want to over-provide to an extent that the probability of me running out of money is remote regardless of how long I live, I'm not sure I have much alternative but to take a view on my life expectancy when deciding the rate at which to draw down funds and how to invest it?

The duration over which the pot has to support me is integral to investment and de-cumulation decisions, and whilst I might not want to base my life expectancy decision on statisticians and actuaries being accurate, I'm not sure what better alternative I have?

I could purchase an annuity, but that rather assumes the issue away given that the policy change is to remove the annuitisation requirement. Similarly the Govt. could mitigate/remove the issue by paying higher State Pension to the very old, removing the tail risk of longevity, but that isn't the system we have so I have to bear the risk myself. It may be that Govt. facilitates the over-provide option by making pensions into a decent inheritance vehicle (so have lots of funds in a pension to be used if you live a long time, and for inheritance if you only live as long as expected), but that isn't the purpose of a pension.

So I don't see any alternative to deciding how long I have left and the associated uncertainty when deciding investment and de-cumulation choices, unless I'm willing to live on State Pension only should I survive longer than expected.

BobQ

Hugheskevi, I agree that is the way the system expects you to behave but all I am saying is that a spot figure based on no stated assumptions does not give any confidence.

I would feel more comfortable if they quoted it in a meaningful way like:

90% chance of living to X, 50% chance of living till Y, 10% chance of living to Z

BobQ

Dunnit wrote: »

If you wonder how accurate and complicated these statistics are have a look at the pay scales for an Actuary.

I know how complicated these calculations are, but I think you will find that as with bankers, salary is not an indication of competence!:)

Tom2023

noh wrote: »

It usually means they already have squandered their money.

No it doesn't.

It means they see a great big pile of money with their name written on it and they believe it would could be put to good use in their own hands.