Is there any point to having assets at retirement?

Grumpy_chap

IAMIAM said:

Grumpy_chap said:

IAMIAM said:

I just do not get what the point is for qualifying years for state pension. it's best not to have qualifying years as you are then topped up anyway and given all the extras too. Basically, if you never save into a pension and even never pay NI at all and have no qualifying years at all, you get full state pension anyway. So you could live for now, self employed, cash salary for everything, save for no pension at all and pay no tax, declaring you earn exactly the tax allowance and still get full state pension

Except, none of that applies to a person in this position:

IAMIAM said:

being mortgage free and having that asset 
civil service pension 

This person has an income in retirement above that many people have in work and a guaranteed roof over their head.  All of this means the individual has choice which becomes ever more of a luxury.  The obvious thing would be care provision, but that might mean healthcare provision.  Say, the individual reached around 75 and found mobility restricted by a fixable thing such as knee or hip joint but the NHS waiting list is 5 years (made up time period).  Would the individual choose to use their assets to get that operation done and enjoy all of the remaining years, or wait their turn and get the operation only after they are too late to make use of the improvement?

They would probably take out a loan or a credit card to pay for private and then declare they cannot pay it back anyway, no assets. 

The person with no assets and low income will be unable to secure the loan.

dealyboy

@hyubh said:

dealyboy said:

Excellent topic.

Well you tell me was I sensible or stupid. I saved and prepared for my retirement at 66.

I worked in two minimum wage jobs for the last 8 years of my working life, these were tough. I gained a maximum new state pension + 5% deferred, bought a small park home for £50k out of savings and put money into an S&S ISA over the years for future care costs. I also have about £40k in a SIPP.

Out of my state pension I pay council tax, pitch fees, standard energy tariffs and pay full optician fees and NHS dental costs. This leaves me with about £7,000 £6,000. I expect to pay tax on my SP in a couple of years time. I have a basics only lifestyle.

On the other hand If I hadn't saved and ensured maximum state pension I could have received tax free pension credit. This would have provided with about the same as SP for income and I would not have the costs detailed above. Further if I had not bought my home outright I would likely receive mortgage relief. I would also be eligible for the Warm Home Discount and Cost of Living Payments. I would have a comfortable lifestyle.

Well you tell me was I sensible or stupid?

Genuine question - how come you only reached the maximum post-2016 state pension...? E.g., do you have a contracted-out pension as well - or perhaps, given in another post you reference being a software engineer by profession, you were an independent contractor paying class 2 NI conts...?

Hi hyubh ...
Are you asking whether I had private pensions in addition to the state pension? Yes I had three small ones which I cashed in under the small pots and trivial commutation rules. The sums were added to my savings which went to a SIPP, a stocks and shares ISA and interest bearing bank accounts. This happened about five years ago.

I was not a contractor, except for once. My employment status varied but always as an employee of a company, mostly in computing. My motivation was not money making.

I am not drawing my SIPP, yet, and my savings are mostly in the ISA intended for my future health/care needs. Of course capital is counted in any means tested benefit and so I doubly don't qualify for pension credit.

My thinking is it was the right thing to do to prepare for my future rather than prepare for living off the state. If the welfare system advantages those who are state dependent at pension age then that is a matter for the state. I am not that familiar with the benefits system and I do not begrudge the genuinely needy.

I know there are regular contributors to these forums who have low incomes and those who have to live with physical and social disadvantages, I certainly do not compare myself with them. I also know that the benefits system does not work for them either.

Although I do not have much disposable income, I am good at managing money and do not lack for anything.

Malthusian

Grumpy_chap said:

The person with no assets and low income will be unable to secure the loan.

No problemo, they can cook crystal meth to pay for their private healthcare. While using their free bus pass to run the county lines.

IAMIAM said:

I just do not get what the point is for qualifying years for state pension. it's best not to have qualifying years as you are then topped up anyway and given all the extras too. Basically, if you never save into a pension and even never pay NI at all and have no qualifying years at all, you get full state pension anyway. 

Even if you did want to live off means tested benefits and the tender mercy of the state, you have a Civil Service pension so it is probably far too late for that.
As you already have a Civil Service pension, State Pension qualifying years and other resources, your extra State Pension isn't going to be means tested away. Unlike people "fortunate enough" to be marginally above the breadline. 
I am afraid that if you wanted to live on the breadline it sounds like it is far too late for that. 

Malthusian

Out of interest OP, what line of work are you in? (In vague terms.) You have a public sector job and you say you spend a lot of time interacting with people who make very bad financial decisions, so I suspect the two things are connected. And that you may have spent too long staring into the abyss and having the abyss stare into you. 

Albermarle

IAMIAM said:

arnoldy said:

amanda1024 said:

The benefits system seems to be set up such that it's best to go into retirement either fully self-funded - which OP probably be, with civil service plus state pension - or with very little income/savings (excluding a home to live in) and thus becoming eligible for pension credit and all the other benefits passported on. It seems like if you end up in the middle you get the worst of both?

This is so true. I know people who are just above pension credit with their small works pension who are significantly and substantially worse off than those on pension credit...no £1000+ cost of living bung, TV licence to pay, no extra winter heating ££s, no "social" tariffs, no massive discounts on private and government schemes. etc etc etc. All wrong, so so wrong.

I just do not get what the point is for qualifying years for state pension. it's best not to have qualifying years as you are then topped up anyway and given all the extras too. Basically, if you never save into a pension and even never pay NI at all and have no qualifying years at all, you get full state pension anyway. So you could live for now, self employed, cash salary for everything, save for no pension at all and pay no tax, declaring you earn exactly the tax allowance and still get full state pension.

It's the same with renting. Rent and become unemployed the government take over and pay your rent. Mortgage and become unemployed, you get the full throttle of no credit, bad credit file, no help, sell home etc etc. Talking worst case scenario. 

Away from the breadline/pension credit issue, the state pension is good value for money for most people. If you for example had £10K pa in state pension and £10K pa in an ex employer pension, then the state pension would most likely have cost you less, and is on better terms ( full inflation link and guaranteed) compared to a private sector auto enrolment pension for example.

hyubh

dealyboy said:

@hyubh said:

dealyboy said:

Excellent topic.

Well you tell me was I sensible or stupid. I saved and prepared for my retirement at 66.

I worked in two minimum wage jobs for the last 8 years of my working life, these were tough. I gained a maximum new state pension + 5% deferred, bought a small park home for £50k out of savings and put money into an S&S ISA over the years for future care costs. I also have about £40k in a SIPP.

Out of my state pension I pay council tax, pitch fees, standard energy tariffs and pay full optician fees and NHS dental costs. This leaves me with about £7,000 £6,000. I expect to pay tax on my SP in a couple of years time. I have a basics only lifestyle.

On the other hand If I hadn't saved and ensured maximum state pension I could have received tax free pension credit. This would have provided with about the same as SP for income and I would not have the costs detailed above. Further if I had not bought my home outright I would likely receive mortgage relief. I would also be eligible for the Warm Home Discount and Cost of Living Payments. I would have a comfortable lifestyle.

Well you tell me was I sensible or stupid?

Genuine question - how come you only reached the maximum post-2016 state pension...? E.g., do you have a contracted-out pension as well - or perhaps, given in another post you reference being a software engineer by profession, you were an independent contractor paying class 2 NI conts...?

Hi hyubh ...
Are you asking whether I had private pensions in addition to the state pension? Yes I had three small ones which I cashed in under the small pots and trivial commutation rules. The sums were added to my savings which went to a SIPP, a stocks and shares ISA and interest bearing bank accounts. This happened about five years ago.

No, contracted out pensions specifically. Given what you've previous said, I surmised you only had a few post-16 NI years. Had you been a full time employee all your working life, I would have expected you to have accrued under the old state pension system a higher figure than the maximum post-16 state pension (potentially quite a bit higher). While that accrual would have stopped from the 16/17 tax year onwards, you wouldn't have lost the additional amount accrued to that point.

dealyboy

@hyubh said:

dealyboy said:

@hyubh said:

dealyboy said:

Excellent topic.

Well you tell me was I sensible or stupid. I saved and prepared for my retirement at 66.

I worked in two minimum wage jobs for the last 8 years of my working life, these were tough. I gained a maximum new state pension + 5% deferred, bought a small park home for £50k out of savings and put money into an S&S ISA over the years for future care costs. I also have about £40k in a SIPP.

Out of my state pension I pay council tax, pitch fees, standard energy tariffs and pay full optician fees and NHS dental costs. This leaves me with about £7,000 £6,000. I expect to pay tax on my SP in a couple of years time. I have a basics only lifestyle.

On the other hand If I hadn't saved and ensured maximum state pension I could have received tax free pension credit. This would have provided with about the same as SP for income and I would not have the costs detailed above. Further if I had not bought my home outright I would likely receive mortgage relief. I would also be eligible for the Warm Home Discount and Cost of Living Payments. I would have a comfortable lifestyle.

Well you tell me was I sensible or stupid?

Genuine question - how come you only reached the maximum post-2016 state pension...? E.g., do you have a contracted-out pension as well - or perhaps, given in another post you reference being a software engineer by profession, you were an independent contractor paying class 2 NI conts...?

Hi hyubh ...
Are you asking whether I had private pensions in addition to the state pension? Yes I had three small ones which I cashed in under the small pots and trivial commutation rules. The sums were added to my savings which went to a SIPP, a stocks and shares ISA and interest bearing bank accounts. This happened about five years ago.

No, contracted out pensions specifically. Given what you've previous said, I surmised you only had a few post-16 NI years. Had you been a full time employee all your working life, I would have expected you to have accrued under the old state pension system a higher figure than the maximum post-16 state pension (potentially quite a bit higher). While that accrual would have stopped from the 16/17 tax year onwards, you wouldn't have lost the additional amount accrued to that point.

Ah OK. I was contracted out for a few years and had an opt out series of NI contributions to a personal pension which was one of the three I closed. I started that in 1990.

I retired in 2020, so four full years post 2016 which brought the new state pension to the maximum.

Understand your point re. old state pension. My pension forecast around that time showed a COPE amount and was about £5 short of the maximum nSP.

justme111

people , you know so little about the ins and outs of healthcare system ( not said with arrogance, I am surprised by it as well) - if you knew all the facts you would not have said "it is as good as and in any case free" and the example of a joint change is not the largest of your worries.. Yes I know there are countless examples of when you were very happy with a free system but there are countless examples of when you were not I am sure and one of the sad bits that we do not  even know what is possible so we are grateful for anything..
Mind, the private healthcare system seems to be so rudimentary in this country that I not great at all either in many cases...

Moonwolf

If we assume that you aren't going to earn or be able to save enough to have an income clear and above what you would get on benefits, what we are talking about is choice and autonomy.

If you save you might end up in a home next to someone who is local authority funded but you should have more choice and be much less likely to be in the badly run one that smells perpetually of wee.

If you own your own house you can have things the way you want them and you have choice.  If you live in private rented accommodation you can be moved out at the whim of the landlord and you probably have limitations on how you decorate etc. I know people who don't buy things they want like books because they don't want to have to move them at short notice. If you do manage to get into council accommodation you have the reverse problem, if you get nightmare neighbours moving can be more of a problem than it would be selling up and moving if you own your own home.

If you rely on benefits, you are blowing in the political wind, recent rises have been far short of inflation and much worse than, say, many capped annuities.

coyrls

I find it more productive to concentrate on my own financial situation, rather than concern myself with the theoretical position of others measured against some nebulous concept of fairness.