Is it possible to become a millionaire (or near to) through investments?

talexuser

BananaRepublic wrote: »

Except that the details given by the Guardian are so sparse that we don't know what they looked at, and what assumptions they made.

The details were that someone on 15k salary with 20 years of NI contributions will lose out £1200 a year on the new flat rate compared with the old state pension. Further if you contribute for longer you lose proportionally more. I merely point out that a knowledgeable firm of pension experts have actually worked out the new figures and concluded 20 million low paid people will lose out long term on the new system, the exact opposite of your statement that it is "better for low paid workers".

BananaRepublic

talexuser wrote: »

The details were that someone on 15k salary with 20 years of NI contributions will lose out £1200 a year on the new flat rate compared with the old state pension. Further if you contribute for longer you lose proportionally more. I merely point out that a knowledgeable firm of pension experts have actually worked out the new figures and concluded 20 million low paid people will lose out long term on the new system, the exact opposite of your statement that it is "better for low paid workers".

20 years is far less than most people work. My neighbour worked 50 years. I've done 30 years plus two degrees, and two years overseas, which do not contribute credits. So 20 years is not a reasonabe figure for comparison. They do not give details of how these "20 million low paid people will lose out long term" which is the problem. Are they all assumed to work only 20 years? Does anyone expect to retire after 20 years?

talexuser

We shall see, but for someone who wants details, you provide none at all for your statement, so I know who I'll believe in the meantime. I've seen various articles saying that only a small minority will get the full £155 odd in the new system, because it treats the secondary state pension worse for those who have opted out in private schemes over the years and thus they will get the old system amount, which is higher than what would have been the new system amount under the new calculations. This applies to my own pension forecasts.

The DWPs own example of someone who has worked 35 years here:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/447195/new-state-pension--effect-of-being-contracted-out.pdf

gives him £75 under the new system against £127 calculated under the old. When the transition period expires it is clear young people reaching pension age will eventually be worse off as described here in the "biased" telegraph:

http://www.telegraph.co.uk/finance/personalfinance/pensions/12100070/At-least-16m-young-people-worse-off-under-new-state-pension.html

Glen_Clark

planteria wrote: »

the waste within our public services is off the scale compared with that in Germany..

Well yes, we talk about EU Bureaucracy, yet since Cameron sent another 40 unelected troughers to the House of Lords (including the one charging for cleaning out the moat on his second home) the House of Lords alone is bigger than the EU Parliament. And don't get me started on the unemployed - I don't mind paying the unemployed REASONABLE benefits but the Royal Family are just taking the p*ss :mad:

Glen_Clark

bowlhead99 wrote: »

But basically the whole country knows that vat is 20% of the ex-vat price of most things you buy, except for the things that don't have vat on -like most grocery food (the major exceptions being booze, soft drinks, confectionery, crisps and ice cream), and books, mags, children's clothes. The ones that don't have standard vat on them are usually flagged as such with an asterisk on your supermarket receipt.

The range of things with an intermediate rate of vat on are relatively few and typically not encountered in the weekly shop (eg my bread and milk doesn't appear oh the same invoice as my domestic gas supply or my solar panels or a child car seat). So the only ones that get mixed in at the supermarket are things like nicotine patches or sanitary napkins.

The idea that you have to look at a receipt to see what vat you paid and maybe get the calculator out does not make vat a "stealth tax". By contrast the fact that your receipts always show a VAT number if the seller's registered should remind you "oh yeah, I pay vat on things I buy".

Anyway, at its core, vat is something charged on the value added as "stuff" (goods and services) gets made and sold. The business takes money off you and gives it to the government at the same time as claiming back the vat that they incurred on their inputs. The more value added the greater the tax. So in a sense, that's pretty similar conceptually to corporation tax, or income tax on the profits of a sole trader.

In other words, the person buying the product knows that not all the money that they hand over to a retailer or trader will make it back into the hands of the business owner, because government wants a cut of the value added or the profits made. That's not a stealth tax. Tax rates are public and we all know about them. Does the customer specifically need to know that 10p of the price of a 60p Mars Bar is vat, if they don't know that 6p is UK corporation tax paid by the retailer and distributor and manufacturer and 1p is US corporation tax paid by Mars Inc and 1p is US income tax on the dividends ultimately paid to Mr and Mrs Mars?

You must move in different circles to me bowlhead. Most of the people I know don't even know the rate of VAT let alone what its charged on. But they sure know whats deducted from their pay slip.

Glen_Clark

N1AK wrote: »

It would depend on personal opinion and investment mix (though I'd generally agree) but that's probably too long a discussion for here, especially as the exact numbers aren't that critical for the point I was making. Even with more conservative rates you'd expect to see very considerable returns if you are investing for decades.

Well I'm basing it on the QE which has boosted asset prices. They have already taken it to the point where the strongest economies have negative interest rates, so they can't take it much further. So I can't see the next few years returns being as good as the last. Claude Littener said he is looking for Capital Preservation, rather than Capital Gains. But no one can guarantee even that because the rate on safe index linked bonds is negative.

bowlhead99

talexuser wrote: »

The DWPs own example of someone who has worked 35 years here:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/447195/new-state-pension--effect-of-being-contracted-out.pdf

gives him £75 under the new system against £127 calculated under the old. When the transition period expires it is clear young people reaching pension age will eventually be worse off as described here in the "biased" telegraph:

http://www.telegraph.co.uk/finance/personalfinance/pensions/12100070/At-least-16m-young-people-worse-off-under-new-state-pension.html

Clearly there will be some winners and losers by the time we have got through transition.

In my case, presumably similar to Banana, I have paid into Serps and S2P at high rates by being a high earner, and will (hopefully) continue to do so, but I won't be able to end up with a £200pw pension, because it's all going flat rate, and I won't be allowed to get there. So maybe I have £50 of entitlement today versus my neighbor on £49 who didn't contribute so much to Serps because he was a low earner, but we'll both now continue going until we've qualified for £151; i get there a little earlier but we'll both keep working until we're of age, and I won't actually get more money out to reflect my higher contributions. In this way, the system is better for the low earner because his lower contributions don't change what he takes out, he can get what I get.

As we all aspire to be in the group that can get £200+ instead of £151, today's young (particularly males who would -according to history- have typically clocked up more years) may feel hard done by, compared to someone retiring today. But that's an intergenerational difference not a "unfair to low earners" difference.

I'm not sure why you are saying the new system is unfair to low earners based on the example you linked.

They showed an example of someone who under the old system had £116+ 78 of gross potential extras from Serps and s2p. Under the new system post transition, we are giving up on some people having £116+0 and some having £116+ 78 and some having £116+ 130, based on earnings etc, and saying all can have £116+35 = 151 regardless of how much gross serps/s2p their earnings would have got them.

So, stands to reason that the person in the example would have a lower amount under the new system. Because he was previously, on a gross basis, earning with a profile for £116+78 not £116+35. We can infer that he was earning higher than the median.

So when we compare the schemes as they do in the link:

Under the current system, because of being contracted out, he loses most of his extras, because he didn't pay for them, and so is left with not much more than £115- he just gets £128.

Under the new system, we say the flat rate for all is £151, and you have been building up a private pension elsewhere instead of paying full "normal" contributions for your earnings level, so we will take off those imputed benefits off you, so you're left with only about £75, because you chose not to pay into our scheme and went and did your own thing with your NI contributions.

So, this guy is worse off under the new scheme than old. He was someone earning at the level of £116+78 and now he is capped of at £116+35, so of course that's a reduction, because we are sharing differently now, to improve what low earners get and reduce what higher earners get. And as a side note, we're acknowledging that he never paid full contributions in the first place, preferring to pay into a private scheme - his choice not ours.

I don't really see how that translates into "low earners are getting a raw deal". Once transition is finished and nobody is contracted out, low earners are getting a better deal IMHO, because that's the point of everyone getting £151 instead of some getting £116 and others getting £250 or whatever.

Granted, I'm not a low earner, I'm a high one, and male. But as I'm "losing out" by the £250 no longer being on the table, and it's a zero sum game, I have to assume that it's the low earners and females who are the net beneficiaries.

What am I missing?

grey_gym_sock

bowlhead99 wrote: »

I have to assume that it's the low earners and females who are the net beneficiaries.

What am I missing?

the winners are ppl who didn't get any S2P/SERPS/graduated pension on the old system, viz. the self-employed, home responsibilities allowance (i.e. being paid child benefit), unemployed, or voluntary contributions.

the low-paid employed are small losers.

the high-paid employed are bigger losers.

talexuser

bowlhead99 wrote: »

What am I missing?

The original article I linked in #79:
http://www.theguardian.com/money/2016/feb/20/20-million-lose-out-pension-reform
Apparently unbelievable just because reported in the Grauniad

bowlhead99

Some low earners previously got a little boost in S2P which they will no longer get because there's no S2P any more.

Your link to the gov UK site perhaps confused matters because it brought in discussion of contracted out stuff which, while perhaps relevant to you personally will not be relevant to a lot of people, and not once we're done with transition, and broadly seems fair ish.

The guardian article has as its intro line "the burden falling most heavily on low-paid private sector workers" but as per grey gym sock above, there is more burden (per person) on high paid workers such as myself, and in any case if 20m people are going to be worse off then presumably 20m are better off... and broadly that's not the richest 20m, right?