can future gov destroy your plan

stu12345_2

quick question i worry about, im a few years, maybe 2 elections away from 55, paying large amount into pension, what if say a few weeks before i retire a future chancellor or gov says sorry folks, its back to annuities for you, the experiment we did in 2015 made pensioners blow their pension and its backfired, they have no money to pay for care home fees or they are now claiming council tax and housing benefit.

so tough. you missed the boat, you just retired too late just after we changed our policies.

hugheskevi

Policy change risk is ever-present. It applies to all investments, not just pensions, but there are more features of pensions for politicians to play with and the presence of tax relief provides a stronger political justification for change than for other investment vehicles. The closer you are to commencing pension the lower the risk, but it is always there.

It is another reason to diversify investments, just like other risks.

The main manifestation of policy change risk in recent years is probably the change to use CPI rather than RPI for pension revaluation/indexation, wiping a massive £200 bn from the value of pensions across public and private sectors (nearly twice the cost of annual running cost of the NHS). That affected all members, including pensioner members, demonstrating that policy change risk can affect anyone, even after commencing pension.

tigerspill

hugheskevi wrote: »

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The main manifestation of policy change risk in recent years is probably the change to use CPI rather than RPI for pension revaluation/indexation, wiping a massive £200 bn from the value of pensions across public and private sectors (nearly twice the cost of annual running cost of the NHS). That affected all members, including pensioner members, demonstrating that policy change risk can affect anyone, even after commencing pension.

I think this may depends on the pension. My pension still uses RPI. There was a disagreement on deferred pensions and this went to court resulting that this is also RPI rather than CPI.

hugheskevi

I think this may depends on the pension.

It depends on the wording of the Trust Deed, so each private sector pension had to be assessed individually.

In private sector the most common outcome was for indexation to remain based on RPI and revaluation of deferred pension to change to be based on CPI, but it depended on the drafting language used in the rules and whether or not it specified RPI.

stu12345_2

i have a workmate aged 24 i told him to autoenrol, but hes worried about the rules when hes 57, he prefers to use banks

Thrugelmir

stu12345 wrote: »

its back to annuities for you,

Hopefully one impact of the new freedoms will be far more competitive annuity products. To dismiss the principle of annuities out of hand is foolish. There'll be many stories of regret in the years to come I suspect. Not least if equities fail to perform in an era of stagnation.

stu12345_2

that wont help me as i need a higher income between 55 and 67, till state pension and small db pension.
if i use drawdown instead of annuity of dc pension at 55 i can take larger amount to fill the gap years between 55 and 67.
if it was a annuity i couldnt retire early as it pays not enough spread over too long,

if i did annuity for life id be too poor at 55 and too wealthly at 67. due to state pension, db pension, need to programme funds to pay required amount that i need, not too little when 55,

sleepless_saver

stu12345 wrote: »

that wont help me as i need a higher income between 55 and 67, till state pension and small db pension.
if i use drawdown instead of annuity of dc pension at 55 i can take larger amount to fill the gap years between 55 and 67.
if it was a annuity i couldnt retire early as it pays not enough spread over too long,

Fixed term annuities do exist, though personally I'd always go for the flexibility of drawdown.

stu12345_2

fixed term no help as it still wont pay enough to live on weekly, i need to draw capital and dividend, hence annuity no good as eg i need a fund of say 120000 to survive between 55 and 67, an annuity would only pay about 6000 a year , i need about 11000, hence drawdown what i need, but gov can put my plans at risk

jamesd

Yes, governments can put your plans at risk. You've considered one case but consider another when in 20 years the dependency ratio is a lot higher - people getting state pension divided by people of working age - and a "youth party" gets elected and adds higher tax rate on "old people who don't need it because they will die soon anyway". Or a government that says "we believe in sharing for all and so we are confiscating all private pensions to provide the same higher state pension for all".

The benefits of employer matching and tax relief still make pensions a good deal for long term retirement income.

stu12345_2

but they couldnt steal your savings tho to pay for state pensions. withdraw it from bank.

so keep money in cash and stockpile tinned food before it goes up when retired,