why are pensions reccomended

rpc

agarnett wrote: »

Now you've kind of made the same mistake! It is dangerous to say that. The very fact that we are talking "pension" and not "ISA" or "family property portfolio" means that at a stroke the government could change the rules massively just as they have done so many times in the past!

And what about when they change ISA rules to land you with huge tax bills? Or new taxes on property that is not owner-occupied?

Any investment is at risk from the government. What you need to recognise is that the trend for pensions is to make them less restrictive, not more so. But there is nothing at all to stop a future government taking us back to the 1990s in pension terms.

agarnett

atush wrote: »

That is just silly. You have to think about things they way they are now. As a future govt could take your house, your car, your first born if they want to? Future legislative risk is there for every aspect of your life and every asset you hold.

Sure, but there is firmer ground under some asset classes. There is no firm ground currently under pensions. We are as good as being told "better take the money now while you can - and don't question the numbers we give you, nor come bleating to us in a few years telling us you never had a choice because the government has locked it all up again." None of the asset classes (sic) you mentioned are likely to be sequestered by any future government - unless you are a hunted down bankster!

Pensions, along with bank accts, Isas etc are a good thing to have for now and in retirement.

They are if you already have them stocked full of cash.

Just like when people come where who are nearly 50 or over, having never saved a penny but are now out of debt and ask abt retirement we tell them what we think they might want to do or least look into.

We always say save in cash first.

Why? Why not tell them to spend it and enjoy it or at least consciously gamble with it to turn it into something meaningful inside 10 years.

Have we so easily forgotten how little cash grows currently - I've even one forgotten cash fund that was going backwards due to annual charges! Charges for what? Stealing my money?

And have we forgotten the massive yo-yo's of other "normal" pension funds which can go down as well as up and damned well do too, by thousands? What good is a pension wrapper as a protection other than if you are a high earner and can get 40% or more tax relief on what you put in it? Even then, your buckshee 40% extra courtesy of all other taxpayers only serves as an emergency comforter when the next financial crisis hits and the funds representing your own contributions have plummeted!

Should not tax relief on pension contributions be in inverse proportion to the highest marginal income tax rate in order to create the sort of community-wide saving behaviours we are hoping to achieve?

I mean non-tax payers should be given an additional 50% (a sort of tax credit that we could perhaps call a pension tax credit contribution) if they somehow manage to pay £10,000 of their own money into their pension i.e. up to £5,000 pa of tax relief type contribution enhancement.

Then tax-payers whose top rate of tax is 30% could be given up to that same £5,000 if they save £10,000 in a pension + up to 40% of the next £30,000 they may save in a pension i.e. max £17,000 of potential government contribution to their chosen pension if they somehow manage to put their entire £40,000 salary into it. Then taxpayers with a top marginal rate of 40% could only achieve very modest amounts extra for their pension up to full investment of their entire salary of £150,000 into a pension i.e. get 10% additional pension contribution credits for any money they or their employer put into a pension above £40,000 up to £150,000. Their total pension tax credit contributions at the expense of HMG would therefore be £5,000 + £12,000 + £ 11,000.

Then those paying a top rate of 50% or more should get no tax relief on pension contributions above £150,000 a year and indeed should have their lower band pension tax credit contributions removed at the rate of £1 per £1 invested above £150,000 per year, so anyone investing over £300,000 in a year would get no HMG incentive whatsoever.

The maximum tax free cash would be 25% at State Retirement Age. There would be no access for any early retirees. If someone wants to do that, they'd have to fund it another way. With luck we might then actually keep some senior wise heads within companies and improve corporate culture by keeping the reins away from the bright young things for whom profit is the only motivator.

For those who fall ill and justify early retirement, they still get no access but should be invited to give up their CETV to the government who will then use it to subsidise some kind of early tax free cash sum and ongoing meaningful government administrated ill-health premature retirement benefit until such time as they reach NRD.

There, I think I have probably solved the pension savings crisis in one post :rotfl:

atush

I've forgotten nothing. For me cash is a safety net, it isn't there to 'grow'. I use investments for that. Cash to me is safety and freedom.

Sure people can live their life and spend if they want to. but that should be budgeted for, just like a pension.

bowlhead99

agarnett wrote: »

There, I think I have probably solved the pension savings crisis in one post :rotfl:

Maybe, I may have skipped over some of it when laughing at your faux incredulousness that after saying you wanted someone to run and administer a cash fund for you in a zero rate environment, they had the tenacity to want to charge you the agreed fees.

Your scheme to reverse the tax breaks for contributing to retirement just increases people's marginal tax rates and thus reduces the incentive to work and be productive. If you can't defer it efficiently and don't really need it now, why even try to earn it?

If I earn an extra £x, perhaps not only do I go up a tax bracket, I also lose £y of annual allowance and £z of income deferment opportunity and so on. It is not really worth asking my boss for some extra work that would give me the thrilling opportunity to receive a tiny extra bit of cash compared to the cash he has to pay out (including social security contributions etc).

But obviously there is no perfect solution otherwise we would all have concluded unanimously whether being right wing or left wing is 'better'.

agarnett

atush wrote: »

I've forgotten nothing. For me cash is a safety net, it isn't there to 'grow'. I use investments for that. Cash to me is safety and freedom.

Sure, I understand the sentiment, although unused but available credit lines can just as well give safety and freedom too. Sooner or later either will run out if not big enough. Then what? Same result?

Sure people can live their life and spend if they want to. but that should be budgeted for, just like a pension.

Nice the have the time to budget and plan, atush.

The great unwashed should be so lucky. You make a retirement sound like a thrifty decision to go on a 30 year round the world cruise. For most people now it is no such thing. It is something they approach with trepidation because they dare not stop working and worry not about how soon they can retire and relax, but how soon they will be forced to retire so they no longer can earn a living even if they are still capable of doing so.

The only way to fund even simple costs of living is with a normal income of the type that can be earned and progressively increased with inflation until you drop. No-one should be forced to give up work and all age discrimination claims should uniquely be completely free to pursue at the Employment Tribunal in order to bring in the new order that will respect senior citizens rights to work until they drop. Old style standard enforced retirement dates are now barely appropriate in any sense.

bowlhead99 wrote: »

Your scheme to reverse the tax breaks for contributing to retirement just increases people's marginal tax rates and thus reduces the incentive to work and be productive. If you can't defer it efficiently and don't really need it now, why even try to earn it?

Depends on who you mean by "people" - if you believe those on above average earnings are the most valuable and productive members of society then you may not like my idea much. You'd also be somewhat naive I think.

If I earn an extra £x, perhaps not only do I go up a tax bracket, I also lose £y of annual allowance and £z of income deferment opportunity and so on. It is not really worth asking my boss for some extra work that would give me the thrilling opportunity to receive a tiny extra bit of cash compared to the cash he has to pay out (including social security contributions etc).

I am sure my upside down table of pension tax relief could be tweaked to put back some incentive if really needed, but since you are already questioning such high minded concepts as 'income deferment opportunity' I imagine you wouldn't need me to tweak it in order for you to find a way around it and start smiling again;)

atush

Nice the have the time to budget and plan, atush.

The great unwashed should be so lucky.

The great unwashed, even you, has time to budget and plan. If they want to. If they deliberately refuse to?

Their choice. Not a smart one.

agarnett

atush wrote: »

The great unwashed, even you, has time to budget and plan. If they want to. If they deliberately refuse to?

Their choice. Not a smart one.

Their choice? ... Your bad

Chrysalis

I forgot I asked this question.

I will clarify one thing.

By saying I find it less useful at old age, I mean when younger its more someone will be less wealthy, have more desire for holidays, funding a family, luxuries etc. plus at pension age the state will provide something (even if they claim they wont in 30 years they always will).

I am also referring to pensions that are not employer related.

atush

have more desire for holidays, funding a family, luxuries etc. plus at pension age the state will provide something (even if they claim they wont in 30 years they always will).

there is a difference between wants (desires) and needs. Holidays and luxuries if you want them, should be budgeted for and saved for, Alongside saving for your retirement.

And if you think you can get by on the state pension of 114 per week, go for it. Not me.

moneysaver21

I opened a SIPP and put in £40k. The government are adding another £30k in tax relief. I know I won't see if for around 30 years, but its the easiest £30k I will ever make!