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  • FIRST POST
    • MSE Eesha
    • By MSE Eesha 21st Mar 18, 4:21 PM
    • 119Posts
    • 29Thanks
    MSE Eesha
    Martin Lewis: A warning to every UK worker aged...
    • #1
    • 21st Mar 18, 4:21 PM
    Martin Lewis: A warning to every UK worker aged... 21st Mar 18 at 4:21 PM
    This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.





    Please click 'post reply' to discuss below.
Page 1
    • A Phoenix of Tangerine
    • By A Phoenix of Tangerine 21st Mar 18, 5:53 PM
    • 868 Posts
    • 1,218 Thanks
    A Phoenix of Tangerine
    • #2
    • 21st Mar 18, 5:53 PM
    • #2
    • 21st Mar 18, 5:53 PM
    As a relative newbie to the concept of pensions, I wonder how a DB pension would be affected?
  • jamesd
    • #3
    • 22nd Mar 18, 1:35 AM
    • #3
    • 22nd Mar 18, 1:35 AM
    "Don't opt out unless you can possibly help it"

    can?

    "Over a year at this level of saving you'd pay £576 (£432 higher rate) but your pension would have £1,200 added to it. That's unbeatable."

    It's likely to be trounced by VCT, EIS or SEIS where you can repeatedly get tax relief on the same money but it's an excellent deal and should usually be done first. I particularly like the part of my income range where I get 40% income tax saving, 12% NI saving and 6.8% added from employer NI saving, courtesy of taxable income not coming from the job where the sacrifice is. Others paying higher rate tax can by concentrating their sacrifice in as few months as possible.

    "Is there anyone who should be opting out?"

    Missed one:

    If you have a protected higher lifetime allowance and would lose that protection if any contributions are made.

    "This reduces both yours and your employers national insurance contributions"

    Shouldn't that be your?

    "Q. How much should I save towards mypension?"

    mypension needs a space.

    "Pension money can now be taken at 55, but it's better to leave it until you need it. "

    It's normally going to be best to take the 25% tax free lump sum out and recycle it into more pension contributions, within the limits for doing that, because this gets you a second lot of tax relief on the same money.

    "The danger is, if you take too much out in one year, it pushes you up a tax bracket"

    While true, a greater danger for those still working is having the MPAA £4,000 contribution limit imposed if they flexibly take any money. Flexibly doesn't include defined benefit, tax free cash or small pot rule, it means UFPLS or the taxable money from a flexi-access drawdown pot.

    "There's nothing wrong with buying property, though of course you pay for it from your AFTER tax-salary; your employer won't contribute."

    Except if you buy with money from a pension pot on which you've already received employer, income tax and NI gains.

    "Yet that's a confusion. That isn't auto-enrolment. It's a totally different type of pension scheme (a final salary scheme). So rest assured, with auto-enrolment, you save a pot of money, your employer adds to that pot and that cash is held for you by an investment firm - the company has nothing to do with the money."

    A defined benefit pension, including final salary, can be used to meet an employer's auto-enrollment obligation and usually will be if there is a DB scheme. We haven't seen and won't see all public sector employees auto-enrolled into a defined contribution scheme instead of or as well as their usual DB schemes. Nor will we see it for the remaining private sector DB. The difference is not auto-enrollment but whether the scheme is DB or DC.

    Still a good and fundamentally right advocacy blog, though.
    Last edited by jamesd; 22-03-2018 at 1:48 AM.
    • badmemory
    • By badmemory 22nd Mar 18, 3:16 AM
    • 2,584 Posts
    • 4,079 Thanks
    badmemory
    • #4
    • 22nd Mar 18, 3:16 AM
    • #4
    • 22nd Mar 18, 3:16 AM
    As a relative newbie to the concept of pensions, I wonder how a DB pension would be affected?
    Originally posted by A Phoenix of Tangerine
    If you have one of these then you sit back & say wow I am one of the favoured ones. You have a pension that no-one ever in an auto-enrollment pension is ever going to come close to. Auto enrolment at 3% employer 5% employee max will never be enough to provide a reasonable lifestyle (incl state pension) in retirement. When it isn't even payable on the full income (both bottom & top limits) it is the next best thing to a joke - although always better than nothing.

    Any pension is better than no pension, but none of us should think that because we have a pension through our company that it will be enough.
    Last edited by badmemory; 22-03-2018 at 3:20 AM.
  • jamesd
    • #5
    • 23rd Mar 18, 5:32 AM
    • #5
    • 23rd Mar 18, 5:32 AM
    You have a pension that no-one ever in an auto-enrollment pension is ever going to come close to.
    Originally posted by badmemory
    Anyone else who is in a defined benefit auto-enrolment pension can come close.

    Someone getting just the minimums from next year can expect a very useful boost to their pension.

    none of us should think that because we have a pension through our company that it will be enough.
    Originally posted by badmemory
    The defined contribution pensions I've had with my employers have easily been enough. Early on I was making total contributions above 30% of base pay and at times recently above 80%, mostly from me. You don't have to stick to just the legal minimum. Sometimes the scheme is so bad, like NEST, that getting just the maximum employer matching and adding another pension of your own for extra money is the way to go.
    Last edited by jamesd; 23-03-2018 at 5:45 AM.
    • Coupe Racing
    • By Coupe Racing 28th Mar 18, 8:59 AM
    • 1 Posts
    • 0 Thanks
    Coupe Racing
    • #6
    • 28th Mar 18, 8:59 AM
    Extra contributions ?
    • #6
    • 28th Mar 18, 8:59 AM
    Hi

    I have just read this article , and my company contributes up to 8% ( their ceiling figure ) and I elect to contribute 10%.

    I note the following from the article and need some clarity please ..........

    Quote
    In other words, even if you do NOTHING, some of your salary will be put towards saving for a pension rather than be part of your take home pay. Plus if you are saving in a pension (ie unless you opt out), the firm must also contribute to this pension fund – on top of your salary.

    Does this mean that I need to inform my company that I also contribute to an external private pension , and that the company should contribute to this , or have I misread the paragraph that I quoted.

    Many thanks
    • AndyPK
    • By AndyPK 28th Mar 18, 11:40 AM
    • 3,847 Posts
    • 1,129 Thanks
    AndyPK
    • #7
    • 28th Mar 18, 11:40 AM
    • #7
    • 28th Mar 18, 11:40 AM
    Are the % in the article correct?


    Arh I see. It's year per £10,000 salary
    • MerlinMags
    • By MerlinMags 28th Mar 18, 1:49 PM
    • 92 Posts
    • 129 Thanks
    MerlinMags
    • #8
    • 28th Mar 18, 1:49 PM
    • #8
    • 28th Mar 18, 1:49 PM
    My best friend was specifically told by his employer "I cannot afford to give you a pay rise this year, as the new government pension rules mean I'm forced to contribute to that instead."

    My mate was asking me if he had been 'shafted'. It does seem rather unfair, but he's kinda getting the same money either way if you ignore the have-it-now-or-later aspect...... isn't he?
    • hugheskevi
    • By hugheskevi 30th Mar 18, 5:05 PM
    • 2,293 Posts
    • 3,022 Thanks
    hugheskevi
    • #9
    • 30th Mar 18, 5:05 PM
    • #9
    • 30th Mar 18, 5:05 PM
    Quote
    In other words, even if you do NOTHING, some of your salary will be put towards saving for a pension rather than be part of your take home pay. Plus if you are saving in a pension (ie unless you opt out), the firm must also contribute to this pension fund – on top of your salary.

    Does this mean that I need to inform my company that I also contribute to an external private pension , and that the company should contribute to this , or have I misread the paragraph that I quoted.
    You do not inform your company of an external pension.

    The employer has an obligation to make mandatory pension contributions for eligible workers, and this obligation is usually met by providing an employer-arranged pension scheme into which they place all employees. The employer must contribute at least a minimum amount to the pension scheme, unless the eligible workers decides to opt-out of the pension. Any external pensions the individual chooses to contribute toward are their own affair.

    My best friend was specifically told by his employer "I cannot afford to give you a pay rise this year, as the new government pension rules mean I'm forced to contribute to that instead."

    My mate was asking me if he had been 'shafted'. It does seem rather unfair, but he's kinda getting the same money either way if you ignore the have-it-now-or-later aspect...... isn't he?
    As your best friend had one element of their remuneration set at statutory minimum levels, automatic enrolment statutory minimum has meant that element of their remuneration has increased. Your best friend's employer decides the amount of remuneration your best friend is worth, and also how that remuneration is distributed, subject to the various statutory minima which apply to the different components of remuneration.

    Your best friend has not been 'shafted.' His remuneration package has been enhanced due to the increased statutory minimum, but presumably not by as much and/or not in the way your friend would like. If he is unhappy with the level or distribution of remuneration he needs to renegotiate his remuneration package or seek alternative employment. Regardless of automatic enrolment, his salary may not have been increased, the employer may be using that as a convenient excuse to limit his remuneration. As all employers are subject to the same rules, his actual concern here is that he does not think he is being paid enough.
    • alan74
    • By alan74 4th Apr 18, 10:21 AM
    • 4 Posts
    • 2 Thanks
    alan74
    Are pensions really the priority?
    All this about pensions. I want to enjoy my life now while I am fit and healthy. I am not so concerned about when I am old as I intend to continue working as long as I can and my mortgage is paid off anyway (first priority, as I can imagine property rental or mortgage payments into retirement is best avoided). Is it sensible to advise people to restrict themselves while they are young and able to enjoy their money or at least pay off their mortgages when they might not even live long enough to benefit from a pension and they will have fewer living costs then unless they want to go on holidays and live an expensive lifestyle? I can imagine people in future regretting that they have more than they need when they reach retirement and be regretful that they sacrificed lots of good opportunities to enjoy their money and secure home ownership when they were young enough to enjoy it more.
    • Ectophile
    • By Ectophile 19th Apr 18, 8:48 PM
    • 3,659 Posts
    • 2,376 Thanks
    Ectophile
    All this about pensions. I want to enjoy my life now while I am fit and healthy. I am not so concerned about when I am old as I intend to continue working as long as I can and my mortgage is paid off anyway (first priority, as I can imagine property rental or mortgage payments into retirement is best avoided). Is it sensible to advise people to restrict themselves while they are young and able to enjoy their money or at least pay off their mortgages when they might not even live long enough to benefit from a pension and they will have fewer living costs then unless they want to go on holidays and live an expensive lifestyle? I can imagine people in future regretting that they have more than they need when they reach retirement and be regretful that they sacrificed lots of good opportunities to enjoy their money and secure home ownership when they were young enough to enjoy it more.
    Originally posted by alan74
    I think you may have a rather optimistic view of how large most people's pensions are going to be.

    When you're living on state pension and not much else. When the gas, electricity and water have gone up again, the phone and broadband have gone up again, the council tax has gone up again. When it's cold outside, but you're not sure if you can afford to turn the heating on because you spent the last of your money on food. Will you really think everything is great because 30 years ago you bought a really nice car rather than putting money into a private pension?
    If it sticks, force it.
    If it breaks, well it wasn't working right anyway.
    • badmemory
    • By badmemory 20th Apr 18, 12:59 AM
    • 2,584 Posts
    • 4,079 Thanks
    badmemory
    When you are living on your state pension of about £160 a week & luckily you have bought your house so no rent to pay, what do you do when your boiler breaks down or the washing machine dies of old age & public transport is your only option because you can't afford to run a car? That isn't retirement, that's sitting in the waiting room!
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