stakeholder pensions

EdInvestor

Distinguishing between capital and income seems to be a bit of a problem for some contributors to this site. :rolleyes:.


And then there's this problem as well:

Of course I pick 65 as the example. Its the state retirement age. More retire at 65 than at 60.

Err, hello?

Most pensioners are women.

Most women retire at 60, which is their current state retirement age.

Add on the minority of men who retire at 60 and you have an overwhelming majority of people retiring at 60.


[I would not be surprised to hear that most IFA clients are men aged 65, but I don't think we can regard IFA clients as reflective of the whole population, can we?]

dunstonh

Please can you produce facts which show that there is an overwhelming majority of people retiring at 60? and that its likely to continue with the womans retirement age going up to 65? and that a state retirement age of 70 is going to potentially happen some years in the future?

As it stands you wont be able to. The average retirment age for me in 63.8 and there are over 1 million people in work over the age of 65. Since the 1950s the trend was for earlier retirement. However, since 1995 (until 2004 when the stats were produced) the retirment age was increasing again. - figures from DWP.

People with personal pensions are less likely to have occupational pensions. This makes them even less likely to retire early. With the reduction of final salary occupational schemes, the reliance upon personal saving is going to increase. This will put further upward influences on the average retirement age.

If I was to put, say, £3,000 into a SHP am I not kissing goodbye to my capital forever - apart from the 25% ? I can claw back as a lump sum upon retirement ?

Pensions mature in a certain manner. Are you kissing goodbye to your capital forever? Yes and no. Its terminology and lets not get mixed up in that. Money is money. If you put £3600 in a pension ,its cost you £2808. Ignoring growth you get £900 back so you have lost £1908. Purchase an annuity with the remaining £2700 at 6% and you get £162 a year. Live for 21 years (DWP life expectency for men aged 65) and 21 x £162 = £3402. Therefore you get your money back and more. Income, Capital, doesnt matter. Its money.

And ed, I assume you are referring to the invesment thread about the income/capital comment. I cannot see how MJSW can treat the reduction of age allowance against the capital as being the correct way to look at it. Age allowance is an income tax allowance and reduction of it should be treated against the income. Hmm, maybe you were referring to yourself when you said some didnt know. Here is a clue; the IR refer to it as "Income tax personal and age related allowances". Spot the magic word?

Place your money in the ISA and you will get the capital available but you will see a lower income and no guarantees on that income. Its just part of the list of pros and cons you have with both methods. And not the list of pros that we always see. All we are asking is for balance in your posts.

Personally i have a combination of pensions and investments and wouldnt solely rely on one or another.

carnet

dunstonh wrote:

Pensions mature in a certain manner. Are you kissing goodbye to your capital forever? Yes and no. Its terminology and lets not get mixed up in that. Money is money. If you put £3600 in a pension ,its cost you £2808. Ignoring growth you get £900 back so you have lost £1908. Purchase an annuity with the remaining £2700 at 6% and you get £162 a year. Live for 21 years (DWP life expectency for men aged 65) and 21 x £162 = £3402. Therefore you get your money back and more. Income, Capital, doesnt matter. Its money.

Whichever way it is dressed up the capital is lost forever - and one must live a very long time after retirement in order to get it all back as income - which many people will never do.

No, I'll continue to invest my money for capital growth and in accumulation units/shares until a few years before I "retire" - then gradually start switching it into income producing products and income units/shares - and all the while retain access to my capital, thanks.

DavidLaGuardia

EdInvestor wrote:

Distinguishing between capital and income seems to be a bit of a problem for some contributors to this site. :rolleyes:.

A person has to provide for an "income" in retirment and to optimise this income they can mak this up out of investment income and capital. Thy can do this DIY or through the annuity route. The former unfortunately carries the risk of them lving longer and not having the benefit of cross subsidy. Models often used to demonstrate the benefits of DIY reliy on comparing funds based on equities with guaranteed annuities -like comparing apples ith oranges. The risk of an equity baced annuity is less than an equity backed DIY for the individual. The risk of early loss is offset by the guarantee of lifetime income whatever that is.

EdInvestor wrote:

Most pensioners are women.

Most women retire at 60, which is their current state retirement age.

Add on the minority of men who retire at 60 and you have an overwhelming majority of people retiring at 60.

Since we are talking about saving for the future, the majority of women in the current work force were born after 1955 making their retirement age 65 (those born in te previous 5 years have it tapering from 60 to 65.

It doesn't matter if they retire at 55 or 60, they do not have to buy an annuity immediately they can use income drawdown or whatever and wait until an annuity is worthwhile to them.

EdInvestor wrote:

[I would not be surprised to hear that most IFA clients are men aged 65, but I don't think we can regard IFA clients as reflective of the whole population, can we?]

What a strange assumption. Why?. I am sure that there are a lot of IFAs out there dealing with very different client profiles.

derekoak

First I agree that investment versus pension is very much dependant on individual circumstance.
David LaGuardia said halfway through this thread that pensions turned £1 into £1.28 plus growth and that this could be affected by Salary sacrifice and work credits.
I have a post under the Smart Pension thread showing how our business turned £1 into £1.65 plus growth, using only Salary sacrifice into a Stakeholder Pension. Of course this is only available to you if your employer will co-operate.

Iguana

If I belong to a LGPS and pay the maximum I can in with AVCs can I have a stakeholder as well?