Pensioner's 'perks' under review.

lazer-zxr

Sapphire wrote: »

I think that limitations to state pensions could be introduced – but that it should be for higher rate taxpayers only.

And what's fair about that???? :mad:

I am a higher rate tax payer, contributing towards providing the state pension, and so feel I am entitled to it maybe even more than those that don't contribute so much :mad:

MABLE

I have a bus pass but never use it because as I cycle, walk and drive a car its unfair on the public purse. As for the winter fuel allowance I do accept that because it pays for our coal for the winter. As for fairness perhaps when they are looking at making cuts they will take into account the pensioners who qualified for the new flat rate state pension to the ones like me who get the basic £119 a week. Fortunately I have two final salary pensions as well.

Silvertabby

I have a bus pass but never use it because as I cycle, walk and drive a car its unfair on the public purse. As for the winter fuel allowance I do accept that because it pays for our coal for the winter. As for fairness perhaps when they are looking at making cuts they will take into account the pensioners who qualified for the new flat rate state pension to the ones like me who get the basic £119 a week. Fortunately I have two final salary pensions as well.

Mable - I agree, but don't forget that not all 'new' pensioners will get the full £155 per week if, like you, they have been contracted out in favour of a final salary pension.

Silvertabby

“ 70 for both men and women. Not only that, but it was means tested, so only the destitute qualified for payment - so as very few really poor people survived to that 'grand old age', the pensions bill must have been miniscule.
Originally posted by Silvertabby ”
No it wouldn't, it would have been minuscule. 😄😄😄😄

Thank you ffacowffipawb - senior moment! However, I still think that my version is more logical - ie, mini for small rather than minus for, well, minus!

Cardew

Malthusian wrote: »

In the context of the saver we were talking about - someone who has released a large lump sum from their downsizing, .

With respect the context wasn't about the downsizing to release capital; it was this statement:

However having been encouraged all through their working lives to save, save, save, over the last few years the dramatic drop in interest rates has hit those with savings.

i.e. Current pensioners having saved throughout their working lives

The downsizing case was merely to illustrate the effect of cuts in interest rates on £100k.

Cash invested in bank/building society/ISA in UK has always been low risk, indeed risk free now up to a certain level.

Not so with 'investments' which have carried more risk. Those investments included endowment policies which 30 years ago were very popular and, for the reasons outlined by D, have turned out to be a poor investment.

Incidentally I am not arguing that, on balance, investments( particularly property)haven't performed far better than cash savings;

[Deleted User]

Where to put money, it's always a balance...




Certainly in the quest for a decent return Solar PV is [orig FIT tariff] light years ahead of cash ISAs etc




Cheers

xylophone

I have a bus pass but never use it

Why did you apply for it?

Sapphire

Malthusian wrote: »

Higher rate taxpayers already have their State Pension withdrawn at a rate of 40p for every £1 they receive over the threshold. What do you think the rate should be?

I think that the 'benefits' to pensioners should not be tampered with for lower rate taxpayers. Within that group there are people who are very badly off, and who, despite having worked hard all their lives, have never earned high enough incomes to be able to 'invest'. There's also the fact that people are increasingly having to fund their own care in old age, including those who are in the lower income tax brackets. They will decreasingly be able to do this. Relying on the state to provide care is condemning many to a terrible life, given the standard of care that is provided. I know of one pensioner, for example, who is 90 years old and has Alzheimer's, but has been waiting since March to be assessed by the local authority (Lambeth in London). As a society, we should be looking after our own first.

That's why I think higher rate taxpayers (if anyone) should be considered for reductions in 'benefits', but certainly not lower rate taxpayers, and especially those who have worked hard for their entire lives. Reducing 'benefits' could additionally send signals to private pension providers that they can employ similar tactics, on the pretext that they 'cannot afford it'.

dunstonh

Cash invested in bank/building society/ISA in UK has always been low risk, indeed risk free now up to a certain level.

As long as the cash remains in the bank account and the interest along with it then it is low risk. When you start drawing the interest you introduce risks that push it up the scale. You introduce increased inflation risk as you are guaranteeing a loss in real terms on the money. You also have shortfall risk if the interest is insufficient to meet needs.

£100k in 10 years would be worth around £65k (as previously mentioned). Then £42,250 after 20 years and then £27,762 after 30 years.
Lets say the interest was 3%. That is £3000 in year one. However, by year 10, that has the spending power of £1950. After 20 years £1267, after 30 years £823.

What you see time and time again is the saver starts to dip into the savings to make up the loss in real terms purchasing power. So, that £100k starts to go down as the person chips away at it. That starts to accelerate the loss process as they also get less interest. So, they draw more capital and get less interest. So, they draw more capital and get less interest. So, they draw more capital and get less interest. So, they draw more capital and get less interest. Until ultimately they run out of money.

If interest rates fall (as has happened) then the person used to getting £3000 a year may now only get £1500. So, they start to draw capital which reduces the interest..... cycle repeated until money runs out.

That is why cash savings for income provision cannot be considered low risk when you are drawing all of the interest. You cannot call an option low risk that can lead to 100% loss of capital through shortfall risk and inflation risk.

Not so with 'investments' which have carried more risk.

They carry increased investment risk but haveh lower shortfall risk and lower inflation risk.

Those investments included endowment policies which 30 years ago were very popular and, for the reasons outlined by D, have turned out to be a poor investment.

But they were not poor because of investment returns. They were poor because of target growth rates being set too high. They suffered shortfall risk because of that. They were also inflexible and obsolete for tax reasons by around 1995. At that point, no endowment had ever fallen short as returns had hit the target growth figures (partly through tax benefits that were removed and partly through higher inflation).

You could argue that a cash saver is now suffering similar issues to what the endowment holders were suffering.

Tammykitty

Silvertabby wrote: »

Mable - I agree, but don't forget that not all 'new' pensioners will get the full £155 per week if, like you, they have been contracted out in favour of a final salary pension.

Indeed


However, excluding the effect of this, for someone with no contracting out.


Person 1 - Retires Mar 16, gets the basic £119
Person 2 - Retires Apr 16, gets £155


Ok - many people may get more than the basic due to AVC's etc, however many will only get £119 or at least get less than £155.