Why the new Pension Rules are a Scam.

atush

The OP has been asked what product they had(and ben reminded we cant help til they do), mores to the point they have not responded to why they dont just transfer out of reassure?

I guess like Alf they find ranting more important

agarnett

Well, atush, perhaps you might be kind enough to point out which posts solicited any details of the actual contract from the OP?

There was some back and forth on general retirement options blurb from Reassure, but I see nothing about what type of contract he actually has and if my lists are anything to go by, there are a myriad of possibilities!

You have to admit there's been a hell of a lot of general urging to just transfer out and I am not sure that's wise until he knows exactly what he might be transferring away from.

Freecall

Thrugelmir wrote: »

In the general scheme of the national debt a £1 billion accelerated payment to the Treasury is small beer.

It doesn't seem that long ago that if you had £1 billion in your pocket, you considered yourself rich.

Happy days!

hugheskevi

How did the IFA arrive at figure? [Over £1 billion tax revenue from pension flexibilties] In the general scheme of the national debt a £1 billion accelerated payment to the Treasury is small beer.

Budget 2014 documents show on page 12 that estimated tax revenue is £320m in 2015/16, £600m in 2016/17, £910m in 2017/18 and £1,220m in 2018/19.

An extra £3bn of revenue over the next Parliament, and more than £1bn toward reducing the deficit. That is a bigger saving than many of the headline manifesto policies.

Whilst £1bn (or even £3bn) is a small fraction of the national debt, it is a decent chunk off the deficit and that is what all parties are focused on now. It is of about the same magnitude of an extra £200 on Personal Allowances for income tax by 2018/19 (page 4).

monkey_shoulder

I sat down with an IFA today and although I still don't fully comprehend what was said, he agrees with dunstonh, jamesd, and others, that ReAssure are not trying to rip me off.
Their "Retirement Account" can be transferred into without an immediate tax haircut.


So I stand corrected. Although I still think that Osbourne's relaxation of the pension rules is not primarily intended to make the over 55's happier, but to accrue tax revenue from the premature cashing in of pensions. I still think it is a bit of scam, just not as big a scam as I first thought.


Thank you agarnett for you interesting take on ReAssure and "Old Pensions" being like old cars, lovely. Dunstonh also makes that analogy in his post.


I didn't feel comfortable with telling you all what I have got, but tonight, having "dined well" I think I will.


I have two pots, one worth about £50k and the other £42k and they are described by ReAssure as "Personal Pension Rebate Unitised". They were originally one company pension that started in 1993 with my employer paying in half the contribution. When I left that employment, after about 10 years, my new company was not interested in paying in to it as they had their own "Stakeholder" scheme. So I consulted the provider and asked if I could continue the plan by paying both employer and employee's contributions. They ummed and ahhed a bit but agreed. What they did was split the thing into two which is why there is £8k difference between them.
The original provider was National Mutual Life, the policy is described as "Personal Harvester Unitised With Profits" and was a contract out of SERPS. G.E.Life took over in 2002, then "Tomorrow", then Windsor Life, finally ReAssure since 2008.


I am 62 this month, and after a career in the audio-visual industry, lost my job last year, was on the dole for months, and now I deliver cars for a living. I find it extremely difficult to get a job in the kind of technical field that I am qualified for, and suspect that potential employers take one look at my date of birth, and throw the CV in the bin.
My partner, who has already qualified for her state pension at 60, is disabled and finding it increasingly difficult to walk. It seems to me that I should take early retirement, and look after her. We own the house, so we don't need much, and I have found that we can get by on pension and unemployment benefit alone.
My plan was to cash in the smaller pot, and divide it into three. That's £14000 a year, (about £11900 after tax) to live on, and supplement my income with odd jobs and part-time work until I get to 65, and can claim state pension. Leaving the £50k pot until then, for beer money.
My IFA suggests that I should consolidate the pots, and bung the whole 90 grand into a scheme that allows flexible drawdown, and take the money as and when I see fit. I am yet to discover whether this will be acceptable to ReAssure, or if I should go elsewhere.


Thank you for your replies, some have been very useful.


MS

xylophone

My IFA suggests that I should consolidate the pots, and bung the whole 90 grand into a scheme that allows flexible drawdown, and take the money as and when I see fit. I am yet to discover whether this will be acceptable to ReAssure, or if I should go elsewhere.

Suggested in previous posts 2, 13, 21, 33........

You would approach the new provider and request a pension transfer.

http://www.ftadviser.com/2015/03/23/ifa-industry/companies-and-people/another-provider-unveils-post-april-pricing-ANAJUYHMqJQJydqxvKaxEJ/article.html

atush

And contact CAB/age concern about getting any help you qualify for.

Such as, if you retire to look after your OH, you might get carer's allowance?

kangoora

It's a little better than you think on the money front if you stop working entirely. Assuming you have no other pensions or income coming in the following should be possible.

Get your wife to transfer £1k of her personal allowance in your name if she isn't using it, which it appears she isn't if on SP only.

You can then draw out £11.6k per year tax free from your Pension Fund. If you go for flexible drawdown you can take 25% tax free extra in your payment each year.

So, 25% of £11.6k = £2.9k.

£11.6k + £2.9k = £14.5k/year without paying a penny in tax (or £1,208/month).

FYI If you have other income, Jobseekers allowance (which you would only get for 6 months anyway) is taxable, so is carers allowance (if you qualify) .

Someone could double-check my figures (not 100% sure I calculated the 25% tax-free bit correctly )

I'm sure the government will do well out of these changes. There will be a lot of people not considering the tax implications correctly and just seeing a 'big bag of cash' they can get at which will raise extra tax revenue. The government will then benefit a second time by people then spending that cash by getting extra VAT on everything they buy. However, having said that, it is people's retirement savings and they should be free to spend them as they see fit.

My only concern, is sometime in the future, there'll be a ticking time bomb of people who blow all their retirement savings and then blame the government for allowing them to spend all 'their money' and how it's all the 'governments fault' they have to live on the basic state pension. Unfortunately, the pension freedoms, can't legislate for some people's stupidity (not having a dig at anyone in this thread by the way )

jamesd

monkey_shoulder wrote: »

My partner, who has already qualified for her state pension at 60, is disabled and finding it increasingly difficult to walk.

One thing worth knowing is that if she defers claiming her state pension it will be increased by 10.4% a year increasing with CPI and pro-rated for parts of a year of deferral. Deferring can be done once by a person who's already claimed it. Most of the deferral increase is inheritable by a spouse. If her life expectancy is reasonable this could provide a useful increase in long term income.

Your own deferring will be at 5.8% CPI lined and not inheritable because you will reach state pension age after the flat rate comes in.

monkey_shoulder wrote: »

It seems to me that I should take early retirement, and look after her. We own the house, so we don't need much

Given her mobility issues you might also consider whether moving to a place that may be easier to get around and perhaps smaller/cheaper might be useful Better to do it while both of you are as able as possible than wait until it's more difficult.

monkey_shoulder wrote: »

My IFA suggests that I should consolidate the pots, and bung the whole 90 grand into a scheme that allows flexible drawdown, and take the money as and when I see fit. I am yet to discover whether this will be acceptable to ReAssure, or if I should go elsewhere.

I agree with the IFA. I doubt that ReAssure will go for it but that's OK, moving is easy enough.

monkey_shoulder wrote: »

I still think that Osbourne's relaxation of the pension rules is not primarily intended to make the over 55's happier, but to accrue tax revenue from the premature cashing in of pensions

Before the changes the amount of money that you could draw in a single year from the 5% that is not the tax free lump sum would have been restricted to about no more than 8% of the money, using the age-related GAD limit calculation. You are likely to want to draw more than that and to be one of the huge number of people who benefit from the increased flexibility.

Feedback in a particular survey was mentioned in the flat rate plans. I gave quite extensive feedback in that survey that described cases where existing pension rules forced me and other people not to use pensions for their retirement income planning. Your case is one of those, a desire to draw at a high rate until state pension age to replace the state pension that you don't yet get.

There will be higher initial income tax revenue but don't let that get in the way of seeing the benefits that you and others are going to get from the changes.

agarnett

atush wrote: »

... if you retire to look after your OH, you might get carer's allowance?

Yes, carer's allowance ostensibly for you, and depending on your wife's age (but you mention she is over age 60 and you are 62, so perhaps she's nowhere near 65 yet), maybe attendance allowance for her - both not means tested I think - or maybe only attendance allowance is not a means tested benefit - https://www.gov.uk/carers-allowance/what-youll-get.

Now then - to specifics on your two? Personal Harvesters - this interesting document which is a formal 2014 declaration by Reassure to the regulator mentions "Personal Harvester" and the magic words "annuity guarantee" in the same sentence !

This other document I have Googled also mentions the same thing and gives an example of a Personal Harvester with a Guaranteed Annuity Rate of 9.75%.

So perhaps some kind FA could say if perhaps there may be gold in them tha' hills which might be lost if you transferred out ?

And as it indeed seems to be with-profits business, I would be very interested in any special bonus distributions that may be on the cards (again this is something you might lose out on if you transferred out).

If this turns out to be [strike]one[/strike] two of those badly repainted re-badged classics you'd be best advised to keep then, in your shoes, I might then be the one inclined to give the appropriate salute to any FA who had failed to investigate the nitty gritty before advising to transfer

And here is another document that perhaps relates quite closely to the management of the two policies in question: https://www.reassure.co.uk/SiteCollectionDocuments/DOC0122_NMWPF_PPFM_Dec_14.pdf

I would argue that any suggestion that Reassure are not ripping off customers is premature until the vagaries of that document have fully played out. You might particularly keep your eye on the word "Estate" in that document which is mentioned 38 times. Proceeds from the estate are owned 90% by policyholders and 10% by Reassure. In one section you are reminded what they think they are allowed to spend it on - mis-selling compensation, for example, on a 100% shareholder basis you might mistakenly presume, because the reality is that Reassure pay only 10% and policyholders as a group pay 90% from the estate in a closed fund like this. Sickening isn't it?

This webpage in particular shows how they have messed with NM with-profits and the very existence of a "Fairness Committee" should ring alarm bells with customers and FAs alike (Google suggest it is a phrase used almost uniquely by Reassure - although Goldman Sachs have also used it - so you'll have to excuse my cynicism when I tell you it instantly conjures an image in my mind of exactly how Reassure staff might commonly talk, Honest Guv!)

However, this next page on their website indicates (at the foot of the page under the heading "Contributions from the Estate" that as the policy base shrinks (probably as much to do with people blindly transferring out of their original contracts as anything else) that Reassure have been obliged to increase something called the "asset share" in the past couple of years, so that may be yet another reason why transferring out of the original contract prematurely may be akin to shooting oneself in the foot, and it is what I meant about "special bonus distributions on the cards" earlier, despite the word bonus not appearing in the phrase "asset share". Not to worry - these insurance companies all love to use their own uniquely obfuscating jargon