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

talexuser

bowlhead99 wrote: »

and broadly that's not the richest 20m, right?

Right, but not the point under discussion which was banana's assertion that the new scheme is "better for low paid workers" (no qualifications about winners and losers and in any case the Grauniad article could not be trusted even though worked out by a firm of pension experts).

Except they maintain an 8bn plus for the treasury, so not cost neutral with as many winners as losers after all?

Maximum_Saving

It is possible to enter the lottery and win millions. However if the person spends lots then in 15 years time he or she won't have any money left. I think people aged 40 to 60 years old could have millions if he or she invested the maximum 12 times every single year from age 20 years old. The money would have grown through excellent investment results.

bowlhead99

Well, it's better for low paid workers than for high paid workers, albeit of course some of the low paid workers will be winners and some losers.

Banana's point was that the article was light on detail and didn't give any particular example with a working to help you understand why the low paid are so much worse off, so he didn't want to take their word for it, whereas he had "done the math" on his own situation to conclude that it definitely wasn't the high paid which were being made better off under the scheme.

Perhaps what he missed was the bit that talked about Brown's previous sweetener for the low paid:

Gordon Brown made changes to the way the low paid accrue state pension, which resulted in employees with earnings below around £15,000 accruing relatively large amounts.

This will go away because having a boost to your s2p doesn't work if nobody is getting any s2p.

So, clearly there are some lower paid people among the losers, though only if they were previously getting a booster to take them over £150ish, right? While the ones under £150ish now get boosted up to £150 for free (as long as they served their time and didn't contract out to build up a separate stash). A simplification perhaps.

The article mentions the changes had to be cost neutral so it didn't cost more than the govt could afford. The article also mentions a small saving of some £8billion (not sure of government figures or consultant's figures) but doesn't say over what time frame. Does the new structure result in £8bn saved of £80bn (significant) or £8 trillion (trivial)?

talexuser

Agreed, a time scale for the saving would have been more useful, but I saw an ONS figure for state pension, additional state pension, winter fuel allowance and pension credit of 94 bn for 2012/13, so indeed significant for state pension.

bowlhead99

talexuser wrote: »

Agreed, a time scale for the saving would have been more useful, but I saw an ONS figure for state pension, additional state pension, winter fuel allowance and pension credit of 94 bn for 2012/13, so indeed significant for state pension.

Right, so that's 94bn per year or 940 per ten years or 1.9 trillion over two decades, plus a bit for the magnitude of today's costs versus 2012 costs. So if there's no time scale for the saving, how are you able to conclude it is "indeed significant" in terms of what we pay OAPs?

Obviously if we were paying £94bn and now only paying £86bn it's significant because making the changes have slashed 8.5% off what was going out the door every year. Whereas if the £8bn is just the aggregate total of what is being saved from future pensioners in a retirement lifespan of age 66 to 86, it is under half a percent and far from being "indeed significant" - instead, it's "pretty much cost neutral".

talexuser

I found a link here
http://www.telegraph.co.uk/finance/personalfinance/pensions/11961347/Millions-to-lose-1400-on-average-under-new-state-pension.html

which has
"The Government will save around £8 billion a year from the changes by 2060, according to official forecasts."
so that puts it into perspective as not so significant straight away. but presumable will ramp up to that amount.

However it still estimates around 10 mil winners against 20 mil losers straight away?.

BananaRepublic

talexuser wrote: »

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

You seem to be confusing a lot of different cases, when you originally argued with me on the issue of the lowest paid, and now you talk about people who were contracted out, and young people.

The truth is that no government can afford to carry on paying pensions at the current level, including the various tax rebates. I recall hearing that the bulk of the tax rebate goes to those paying higher rate tax, which cannot be fair. The new pension will indeed lead to some people (such as me) being worse off. In fact I think a lot of people will be worse off. So yes, young many people today will be worse off. I do not disagree with many of the points you've made.

My original argument - and the one I thought you were debating - was based on figures from the government web site. The old system gave a basic pension of roughly £6,000 for someone with 30 qualifying years. The more wealthy would also get the additional state pension. The new flat rate system gives roughly £8,000 for someone with 35 qualifying years. Someone working a decent number of years on the mimimum wage would thus be better off with the new system. And the better off are much worse off. In addition the wealthy are now limited to £40,000 per year which limits the tax they can in effect get back.

As I said the Guardian article was not good on specifics. They might have a point, but the assumptions they used need to be brought out into the open.

I happen to think the fact that very wealthy people could claim back most of the tax they paid using a pension was wrong. Yes they would end up paying much of that back when the pension was drawn, but they still benefited quite a bit.

BananaRepublic

talexuser wrote: »

I found a link here
http://www.telegraph.co.uk/finance/personalfinance/pensions/11961347/Millions-to-lose-1400-on-average-under-new-state-pension.html

which has
"The Government will save around £8 billion a year from the changes by 2060, according to official forecasts."
so that puts it into perspective as not so significant straight away. but presumable will ramp up to that amount.

However it still estimates around 10 mil winners against 20 mil losers straight away?.

I believe I stated at the outset that many people would be worse off. We have an aging population, and an ever increasing pension bill. I suspect one reason Labout liked immigration was that immigrants being young help pay the pensions bill. But what happens when they age? It is in effect a Ponzi scheme.

talexuser

BananaRepublic wrote: »

The old system gave a basic pension of roughly £6,000 for someone with 30 qualifying years. The more wealthy would also get the additional state pension. The new flat rate system gives roughly £8,000 for someone with 35 qualifying years.

Yes, but you have no idea how many this will apply to compared with the number who lose out. You ridiculed the article 20 year example, when they said as the years increased the loss increased too, so I found a 35 year example from the DWP themselves showing just how poor the new system could be once transition is removed. The other points I pretty much agree with because they are all different subjects to the low paid are all better off.

bowlhead99

talexuser wrote: »

so that puts it into perspective as not so significant straight away. but presumable will ramp up to that amount.

However it still estimates around 10 mil winners against 20 mil losers straight away?.

That doesn't sound right, given that the other Guardian article had pensions minister saying (and not obviously challenged by guardian or the consultancy company) “In the years between now and 2030 the majority of women will get higher state pensions than under the existing system, and 70% to 75% of both genders will be better off. But to make the state pension sustainable many will get less than they would have done under the old system [in the longer term]"

So that doesn't sound compatible with 2 of 3 people worse off "straight away".

In the long term it's quite possible that more will be worse off, with me getting my £155 instead of £255 and nine middle to low earners getting £155 instead of £166 (average loss of the 10 losers: £20pw), and five unemployed care-givers getting £155 instead of £115 (average gain of the 5 winners: £40pw).

You have to carve it up some how. By the time we actually get half a century into the future to 2060, the "£8bn a year saving" probably won't exist as demographics always differ from projections.