Pension advice / suggestions please

EdInvestor

Dithering_Dad wrote: »

I must admit that if I had the security of a Final Salary pension

The remaining F/S pension is very small. The ISA is much larger, as is the SIPP.They are both invested in the same way and neither of them are guaranteed.The PR pension will join them in October.It's not guaranteed either.

Retired IFA will be amused to hear that the SIPP (which was once an F/S pension) now pays a pension approx double the size of that guaranteed under the s32, so he's quite right in saying that it can be a good move to transfer out. But I'd say it depends on having no need of spouse benefits, and being willing to take your chances with long term investing as opposed to an annuity to cover the index linking aspect. Some would say a helpful investment climate/ good investment skills are essential plus you need to cut costs right down (which means effectively DIY investing).

IMHO this is an unlikely collection of circs for most people, hence my view they are better to stick with their guaranteed to rise with inflation forever preseved f/s pension, looking at it as a top up to the state pension as they aim at the 10k tax free retirement income allowance.

Basically a pension is just a tax wrapper these days, so in the absence of free money from an employer, use it to the extent it's helpful in tax avoidance (not nearly as much as is put about).For non higher rate taxpayers this will be to accumulate a fund to top up their state pension to the old age allowance of 10k.Depending on the size of their state pension that will be between 5k and zero income, fund size of around 75k max. HRTs should just use pensions to get the higher rate tax relief.


All the rest will be much more flexible in ISAs, direct investments and letting property.

EdInvestor

Dithering_Dad wrote: »

I dare say that your OH also has a similar portfolio?

This is the kind of thinking that gets a lot of people into trouble, both men and women.

Dithering_Dad

EdInvestor wrote: »

Basically a pension is just a tax wrapper these days, so in the absence of free money from an employer, use it to the extent it's helpful in tax avoidance (not nearly as much as is put about).For non higher rate taxpayers this will be to accumulate a fund to top up their state pension to the old age allowance of 10k.Depending on the size of their state pension that will be between 5k and zero income, fund size of around 75k max.

But this isn't what you have been advising. In fact, this is what I was advising to one of your [strike]victims[/strike] advisee's. Your usual approach is to rubbish pensions and advise people to put all of their cash into S&S ISAs. I had to bring in a load of statistical info (from the Pru) showing that the average pension pot is 40k and the average state pension is 6k (does this ring a bell - of course it does, it's what you're now advising!!!) and so people should take advantage of the tax free money to accumulate a larger pension pot.

So really, what you're now saying with your "75k max in a pension" is that the majority of people who come to MSE and say "I am thinking of starting a pension, what should I do?" should ALWAYS get a pension rather than use S&S ISAs because it is unlikely they will reach the 75k max without employer contributions, and even then it could take years.

Thanks for clearing that up, I'm glad you took on board my advice and I look forward to reading your 'pro pension' posts in future.

Dithering_Dad

EdInvestor wrote: »

This is the kind of thinking that gets a lot of people into trouble, both men and women.

Not sure what you mean? I was simply stating that I assumed that your OH is in a similar situation to yourself, pension wise. My OH doesn't have as good retirement provision as myself, mainly due to giving birth interrupting her employment, but we're actively re-dressing that by investing a decent amount into her stakeholder pension. This includes the tax free money that [strike]you always[/strike] you used to always dismiss. We're hoping that she will reach your 75k pension pot ideal.

I don't see how this is "getting into trouble"?

EdInvestor

I'll draw your attention to my post on the ISA vs Pensions thread nearly 18 months ago

Note also that it was only a short time before that when the Govt announced the big increases in the old age allowance to 10k by 2010.Before then the old age allowance was only around 7k.

The average figure for the state pension you quote doesn't really tell you much.In fact pensioners tend to be divided into 2 main groups - those who have company pensions and thus are contracted out and only get the basic state pension - these people will already be using up the excess tax allowance because of the company pension - and those who are contracted in and get the both state pensions .They will be receive around the 10k mark, and again use up the full allowance.

The people with a gap who could usefully get a pension to fill it are the self employed, SAHMs and other people with a broken or incomplete pension record, perhaps because they have spent years working abroad. It's not really applicable to the mainstream working population..The position will be even more clear-cut after contracting out is abolished for PPs and D/C schemes after 2012.

I am glad to hear that DD is dealing with the imbalance of allowances that so often crops in families with dependant wives, where the husband has a very large pension and the wife has virtually no income. This was not so bad before, but since the arrival of the 10k old age allowance, thousands of pounds can easily be wasted in unused tax allowances if the imbalance continues.

It is important that wives themselves wake up and check out things from the pension pov, not only their own state and work pensions but also the terms of their husband's pensions.Many don't seem to realise that their pension after a husband's death will either disppear completely or be cut in half - unlike the gas bill, the cost of running the car etc. No wonder we have so many poverty stricken elderly women around.

On the other hand, men should consider whether it is worth spending money on spouse benefits if they have working wives fully equipped with good pensions themselves, and working women with dependant husbands need to check out the rules affecting them too (many will be shocked, particularly in re state pensions and benefits)..

Retired_I.F.A.

"Retired IFA will be amused to hear that the SIPP (which was once an F/S pension) now pays a pension approx double the size of that guaranteed under the s32, so he's quite right in saying that it can be a good move to transfer out."

Double is that all ! at a guess you chose a deposit fund with a micky mouse bank if you diversified into america but if a patriot you must have chosen an English one that was pretty naff, perhaps the toytown bank, you know the one, between Noddys and Big Ears houses.

Dithering_Dad

After reading that sensible post ED, I'm at a loss as to why your more recent ones - certainly since I joined MSE, have all been pretty much anti pensions.

You regularly make snipey comments such as Pensions lock away your money and you pay tax on the cash when they come out. When clearly, with the £10k tax free age allowance for income, and given that the average pension pot is just 40k, more than half of the people you're advising to drop pensions and use S&S Isas instead simply will not have enough retirement earnings to pay tax - especially when they have taken out their 25% tax free.

In fact, you're badly advising 100% of the people who come on here saying "I am thinking of starting a pension, my employer won't contribute, what should I do". Throwing in the old chestnut "Your money is lost when you die" to people who have so little pension savings that they would have long exhausted their ISA savings before they die anyway, just makes matters worse.

You're advising people to lose the valuable 20% tax rebate (it was 22% during most of your bad advice) that would help them build their pensions to a greater level and at a faster rate than investing in S&S ISAs would, in the knowledge that they won't be paying income tax anyway and also secure in the knowledge that it's not something you would do yourself.

It's appalling Ed, it really is.

Dick_here

Dithering_Dad wrote: »

After reading that sensible post ED, I'm at a loss as to why your more recent ones - certainly since I joined MSE, have all been pretty much anti pensions.

Well said, DD :T

I get the impression that Ed enjoys an ongoing love-hate squabble with dunston more than offering helpful advice.

EdInvestor

Dithering_Dad wrote: »

Pensions lock away your money and you pay tax on the cash when they come out.

Quite correct.Many people don't realise this, so it's useful to remind them so they make decisions on the basis of all the facts, not just a selection (often made by someone who wants to flog them a product).

The ISA vs Pension thread is the place to look for a balanced assessment of the issues with plenty of posts written by people who are well-informed about the pros and cons of pensions.

Dithering_Dad

!!!!!!_here wrote: »

I get the impression that Ed enjoys an ongoing love-hate squabble with dunston more than offering helpful advice.

I think so to and have for a long time. The fact that she adds "(often made by someone who wants to flog them a product)" reveals the prejudice she has against professional advisers.

EdInvestor wrote: »

Quite correct.Many people don't realise this, so it's useful to remind them so they make decisions on the basis of all the facts, not just a selection (often made by someone who wants to flog them a product).

But you're not supplying all of the facts, you're just using alarmist language in an attempt to put people off - and I fear that this may be based purely on a sad power struggle with Dunstonh than based any real conviction in the advice given.

The truth is that most people won't be able to generate a large enough pension pot in an S&S ISA to worry about 'having the money locked away', and are more likely to run out of money early in retirement - leaving them in dire straights and no 'legacy' for anyone to inherit.

For people who are going to struggle putting together a personal pension pot of more than 60k, the very fact that they can't get at their pension money to spend on crap and that they get a guaranteed income for life instead of taking too much out of their pension pots and running out of money, is an ASSET, not a liability.

I'm sorry but it just winds me up when I see recommendations made with either no attempt to gain knowledge of the person's background/circumstances or that are just based purely on someone's political or prejudicial viewpoint. These are real people who don't have a great deal of money, don't have a great deal of trust in financial advisors or in pensions and who will therefore act on advise they see from a trusted resource - namely MSE. If people offer advise then it must be tailored to specific requirements, not just just off-hand comments aimed at having a dig at someone they don't particularly like or for pushing a particular hobby-horse.