MSE News: New pension freedom means it pays to know when you'll die

Sapphire

Pincher wrote: »

At 80 years old, I doubt there's anything worth transplanting. Still, medical students always need cadavers to practise on.

Various human remains also make remarkably good fertilisers.

Abbey1

I'm trying to gen up on all this pension stuff..... I've never really taken much notice. My question is: could I draw down all of my pension pot, I know I would have to pay tax on 75% of it. Are there any restrictions on this? I would rather use the money to buy a property. Sorry if this is the wrong place to ask the question. But you all seem very knowledgeable... TIA.

kidmugsy

Abbey1 wrote: »

I'm trying to gen up on all this pension stuff..... I've never really taken much notice. My question is: could I draw down all of my pension pot, I know I would have to pay tax on 75% of it. Are there any restrictions on this? I would rather use the money to buy a property. Sorry if this is the wrong place to ask the question. But you all seem very knowledgeable... TIA.

How old are you? What sort of pension is it? Why are you keen to pay more tax than you need to?

JimmyTheWig

Pincher wrote: »

A group of people pool their pension pots. The manager invests some of it, with enough cashflow for regular payouts. The payout should obviously be proportional to your original contribution.
...
The single person pension pot means you have to save a huge pot JUST IN CASE you need it. The Tontine gives you some of the pooling benefits of a Final Salary scheme.

Is that not an annuity by a different name?

Pincher

Abbey1 wrote: »

I'm trying to gen up on all this pension stuff..... I've never really taken much notice.

I have been taking an interest for about 30 years, ever since Margaret Thatcher started the whole "(financial) service industry" revolution.


The whole convoluted nightmare stems from the tax rebate, which the government doesn't really want you to have. The moment you try to take the money out, they want their cut.


You investing YOUR MONEY should be your business, and liquidating it to spend on Lamborghinis and loose women is also your business. The problem is, the moment you want the tax rebate, a whole ARMY of bureaucrats and pension managers descend on you. The bureaucrats effectively say NO to EVERYTHING that involves you spending the money. The pension managers are like vampire bats that are lick the blood from (cash) cows, with a license from the bureaucrats.


My own investments have done incredibly well.


My pension schemes, with all the tax rebates from my salary years, are a joke. The bigger joke is, I can't even take it out until the RIGHT age, and then I have to pay tax, so what was the point of getting the rebate? Pension Freedom is only freedom if I can take 100% of my fund TAX FREE.


Final salary scheme, good.
Civil Service index linked pension, gold dust.
State Pension, it's your right.


Everything else, consider investing freely without the shackles of the pension !!!!!.

Pincher

JimmyTheWig wrote: »

Is that not an annuity by a different name?

The pooled fund is still partially invested, so there is potential for growth (and loss). A Tontine is likely to last for 30 years.


The longer living survivors get more benefit than they contributed.
Obviously the short lived members lose out, but this is the same as a Final Salary scheme.


So if you live longer, the pay out you get is more than you would have got under a single life annuity for the same initial outlay.

greenglide

You investing YOUR MONEY should be your business, and liquidating it to spend on Lamborghinis and loose women is also your business.

You have always had the choice of investing in a pension which has always had its rules and regulations and investing through ISAs or any other scheme.

You accepted when investing in a pension that you could defer the taxation and in return would probably purchase an annuity or more recently enter drawdown (capped or flexible).

On what basis are you now whingeing about the pensions having rules that you seem, now, not to like?

Look on pensions (old age pensions) as a way of funding retirement rather than a financial instrument to use for tax avoidance and relatively short term investing.

kidmugsy

JimmyTheWig wrote: »

Is that not an annuity by a different name?

But there's no need for over provision against life expectancy: if there is any it is eventually returned to the last surviving member of the tontine, instead of accruing to later generations of annuity buyers plus the shareholders of the provider.

JimmyTheWig

I still don't get the difference, Pincher.

Pincher wrote: »

The pooled fund is still partially invested, so there is potential for growth (and loss).

So is the money held by annuity companies, surely.

A Tontine is likely to last for 30 years.

Ok, so that's a difference. But I don't see why it should matter.

The longer living survivors get more benefit than they contributed.
Obviously the short lived members lose out, but this is the same as a Final Salary scheme.

All of which is the same as an annuity.

So if you live longer, the pay out you get is more than you would have got under a single life annuity for the same initial outlay.

Why?
[Unless the flip side of this is that if you live for a shorter length of time you get less than you would have done with an annuity?]

JimmyTheWig

kidmugsy wrote: »

But there's no need for over provision against life expectancy

The fewer members the more over-provision is needed. That's the advantage of the Tontine over drawing down the capital yourself.
But surely, then, an annuity is better placed than a Tontine from this angle as they have more members?

if there is any it is eventually returned to the last surviving member of the tontine, instead of accruing to later generations of annuity buyers plus the shareholders of the provider.

I take your point about shareholders.