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1 hour ago, Orb said:

 I opted out from my workplace pension last year.

Where they give you free money. Good one.

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26 minutes ago, Killer Bunny said:

Where they give you free money. Good one.

Not every employer pays into a employees pension. 

I worked for a bank who didn't pay a penny, no employers contribution, not even employers NI.

They'd quote a salary, then after you started  you found out that 15 % of that gross salary was earmarked as your pension contribution. All peer banks I was aware of quoted a salary and then a percentage employers contribution. 

In fact when a change went through about 2-3 years ago increasing some element of the employers NI part of the pension contribution they said they couldn't justify paying the increase and took the increased amount from employees contributions instead 

They paid on a net pay arrangement, but their HR pages showed the calculations for a relief at source. So if you saw a pension deduction of £200, then the HR website would lead you to believe the £200 was net wage and your pension fund would claim the tax and NI back and the pension would receive something like £280... but in fact the £200 was a gross deduction and already included the paye and NI. I complained for two years but they didn't change the HR website. 

Edited by regprentice

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I heard that pensions were basically toast. 

1. They invest in the stock market, and when it collapses pensions collapse. 

2. The pension amount promised will be evicerated by inflation over 30 years. 

3. The whole notion of something for nothing only makes sense with an expanding population and economy. When those are declining, you can't pay in £1 and get £5 later. You'll be lucky to get your money back

 Just what I heard. 

How much will a loaf of bread cost in 30 years? If it's  £300, whatever you've been promised won't be worth much. 

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there are two types of (PAYE) people.

Those who have taken the time to understand that UK private pensions (company - especially when via salary sacrifice or sipps), are the greatest chance you have for managing your marginal tax rate highly efficiently over the course of not only your lifetime but your kids lifetime too thanks to insanely good terms on what happens when you die, and people who have heard (probably a buy to letter) someone financially illiterate saying 'i don't trust pensions', and take it as gospel.

Thanks in part to understanding pensions, our family unit have an effective marginal tax rate of minus 36%. Yes, minus. And perfectly legal.

If you're worried about the stock market, take the money and hold it as cash until it's obviously cheap. You've still made an insane return.

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1 hour ago, regprentice said:

Not every employer pays into a employees pension. 

It is a legal requirement.

search auto enrolment 

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28 minutes ago, 24gray24 said:

I heard that pensions were basically toast. 

1. They invest in the stock market, and when it collapses pensions collapse. 

2. The pension amount promised will be evicerated by inflation over 30 years. 

 

Depends what you, as a pension fund investor, invest in.

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2 minutes ago, Frugal Git said:

 

Thanks in part to understanding pensions, our family unit have an effective marginal tax rate of minus 36%. Yes, minus. And perfectly legal.

If you're worried about the stock market, take the money and hold it as cash until it's obviously cheap. You've still made an insane return.

Good for you - para 1

Not gonna happen - 2

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27 minutes ago, 24gray24 said:

3. The whole notion of something for nothing only makes sense with an expanding population and economy. When those are declining, you can't pay in £1 and get £5 later. You'll be lucky to get your money back

What's wrong with getting your money back? The whole point of a pension is smoothing consumption between lifetime stages.

You are right though that an awful lot of people see investment as a game where you try to get a lot more back than you put in e.g. BTLers, goldbugs, bitcoiners etc.

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4 minutes ago, Frugal Git said:

there are two types of (PAYE) people.

Those who have taken the time to understand that UK private pensions (company - especially when via salary sacrifice or sipps), are the greatest chance you have for managing your marginal tax rate highly efficiently over the course of not only your lifetime but your kids lifetime too thanks to insanely good terms on what happens when you die, and people who have heard (probably a buy to letter) someone financially illiterate saying 'i don't trust pensions', and take it as gospel.

Thanks in part to understanding pensions, our family unit have an effective marginal tax rate of minus 36%. Yes, minus. And perfectly legal.

If you're worried about the stock market, take the money and hold it as cash until it's obviously cheap. You've still made an insane return.

Yes, the tax treatment of pension contributions is pretty much the last economic window of opportunity left for the average wageslave. As TPTB seem determined to steadily erode workers' ability to get any value from their wages I fully expect that window to close after this decade, and Si1 is probably right that NI will be rolled into income tax at some point which will reduce the value of pension wealth, though not so much as to make contributions being made today a waste of time.

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9 hours ago, CaptainCymru said:

Here's one to ponder , who here thinks the retirement age for private pensions and SIPP's will rise to the age of 70 or above? I'm in my late 20's currently squirrelling away a few percent into a private pension with the company I work for matching it . Here's the thing though, i'm not entirely sure I will ever see it.As the Government becomes more desperate for funds I can imagine the age at which I can withdraw it rising until its basically too late,that or it being raided as demonstrated previously by a certain Scottish Chancellor.

Thoughts?

To date governments have always tried to allow access to private schemes around 10 years before the state pension.So the rise to 67 moved the private schemes to 57.

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1 hour ago, 24gray24 said:

I heard that pensions were basically toast. 

1. They invest in the stock market, and when it collapses pensions collapse. 

2. The pension amount promised will be evicerated by inflation over 30 years. 

3. The whole notion of something for nothing only makes sense with an expanding population and economy. When those are declining, you can't pay in £1 and get £5 later. You'll be lucky to get your money back

 Just what I heard. 

How much will a loaf of bread cost in 30 years? If it's  £300, whatever you've been promised won't be worth much. 

I wouldn’t take that advice.

My pension fund from my first proper job was around £70k when I left. Probably around £55k had been paid in and the intrinsic growth looks worse as I started on zero and so only over half the funds were in for more than 4 years when I left, but that fund is now worth £250k ten years later.

I will admit I pulled a binder with Covid, selling out in late 2018 and buying back when the DOw crashed to 18k. So up 20% this year, when most are down 30%, but most of the real gains are from dividend compounding.

 

 

Edited by Mikhail Liebenstein

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27 minutes ago, Frugal Git said:

there are two types of (PAYE) people.

Those who have taken the time to understand that UK private pensions (company - especially when via salary sacrifice or sipps), are the greatest chance you have for managing your marginal tax rate highly efficiently over the course of not only your lifetime but your kids lifetime too thanks to insanely good terms on what happens when you die, and people who have heard (probably a buy to letter) someone financially illiterate saying 'i don't trust pensions', and take it as gospel.

Thanks in part to understanding pensions, our family unit have an effective marginal tax rate of minus 36%. Yes, minus. And perfectly legal.

If you're worried about the stock market, take the money and hold it as cash until it's obviously cheap. You've still made an insane return.

I don't trust anybody. 

I don't trust that in 26 years workplace pensions won't be means tested against the standard state pension rate, and that state pension payments will only top up workplace pensions to that rate. Remember, the government are working decades ahead as well as currently. After seeing how ordinary working people are living a daily scam and con, it wouldn't surprise me if after paying NI til my retirement AND a workplace pension, come retirement I will see only the worth of a state pension. 

I don't trust employers. I know 2 people who saw deductions in their weekly pay packets for pension contributions, and when their company folded they realised there was no pension. The company were simply underpaying them. Ok, it was partly the employees' fault for not verifying the authenticity of their pension company, but for all I know false and convincing paperwork may have been sent to the employees. 

I don't trust my money going into speculative markets, nor managers of investment companies. They always seem to come away unscathed. I've read numerous accounts of these people, often prominent ones too, circumventing regulations and finding technical loopholes to trade in very risky assets. I can do without that. 

With me it's not necessarily financial illiteracy, it's a trust issue. 

 

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42 minutes ago, Killer Bunny said:

It is a legal requirement.

search auto enrolment 

The pension was 15% of  the gross salary. I started in 2008 and left last year. you could opt just to take the 15% in cash, and make no pension contribution. Most people under 30 did this because the final salary scheme had just closed and the new pension was awful by comparison. As and when auto enrollment came along they started to mandate that 11% could be taken as cash but 4%, Iirc, was to be paid into a pension. 

They way it functionef it was entirely staff contribution, in my opinion at least, but they felt, because it was part of the wage they were paying you, and they had designated it as for a pension, that the full 15% was the employers contribution. People would normally assume that the employers pension contribution would only be available to you if you paid the required employees contribution into the pension seperately, and that you wouldn't be able to take the employers pension contribution as cash instead... But at this bank this wasn't the case. 

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I work in the pensions industry, so interested by the thoughts here and keen to respond!  Note that I'm not on commission, and nor do I have "inside info" about the government's future plans.  The views set out below are mine alone, and not financial advice.

9 hours ago, CaptainCymru said:

Here's one to ponder , who here thinks the retirement age for private pensions and SIPP's will rise to the age of 70 or above? … As the Government becomes more desperate for funds I can imagine the age at which I can withdraw it rising until its basically too late,that or it being raided as demonstrated previously by a certain Scottish Chancellor.

Honestly?  No I don't think minimum pension age would rise above 70.  Let's imagine hypothetically the government set it at 80.  What would happen?  Firstly they'd have to support pensioners even more between ages 70 and 80.  Secondly they'd delay getting tax income, because pensions in payment are taxed but aren't taxed until drawn.  Thirdly, many people would die before receiving anything, which in DC pensions usually means the whole fund goes straight to their kids.  Nothing in it for the government to do any of that.

8 hours ago, Bluestone59 said:

I did ponder whether the 25% tax free might be heading for the exit, either by total abolition or cut to 20%

My personal prediction?  It won't be scrapped, but it will be changed from a % to a fixed £ amount (that then reduces in real value over time).  Kind of like the ISA limit is £20,000 per person so would the maximum tax free cash become some figure like that, rather than 25% of whatever (possibly £1 million+) fund you have built up.   

8 hours ago, CaptainCymru said:

So here's the thing , do I take the money as cash , taking the tax hit (i'm in the 40% bracket), and save that into my diversified portfolio ISA knowing that sometime during the coming economic depression, I can draw on that should the proverbial hit the fan, OR do I save it into a pension hoping that I might make it to the age that I could draw on it anyway ., Tough decision really. I just do not trust the Government moving the goalposts or capping the pension limit,effectively raiding it anyway.

If you are in the 40% tax bracket and you get both tax relief and employer contributions into your pension there is potentially a HUGE benefit to being in the scheme.  If the employer matches your contribution (say) then £60 of net pay into your ISA could become £200 in your pension fund.  Even with that pension taxed one day you need to think very carefully before you turn £200 down to take £60.

1 hour ago, 24gray24 said:

I heard that pensions were basically toast. 

1. They invest in the stock market, and when it collapses pensions collapse. 

2. The pension amount promised will be evicerated by inflation over 30 years. 

3. The whole notion of something for nothing only makes sense with an expanding population and economy. When those are declining, you can't pay in £1 and get £5 later. You'll be lucky to get your money back

 Just what I heard. 

Please don't plan your financial future based upon rumours and heresay.  In a DC pension you pick the investments.  The value of shares has booms and busts sure but over the long term generally DOES keep pace with inflation once you factor in dividends.  No.3 is a more complex question, but at the very least you should note that (COVID and the odd recession aside) both population and GDP are increasing - particularly in some other parts of the world (that you could invest in - you don't have to invest in UK assets).  Do you own research - don't just believe what you hear.

22 minutes ago, Mikhail Liebenstein said:

To date governments have always tried to allow access to private schemes around 10 years before the state pension.So the rise to 67 moved the private schemes to 57.

Agreed.  That may or may not continue this SPA-10 policy, but it's hard to imagine a State Pension Age above 70 or a private pension one above 60.

8 minutes ago, Orb said:

I don't trust anybody. 

I don't trust that in 26 years workplace pensions won't be means tested against the standard state pension rate, and that state pension payments will only top up workplace pensions to that rate.

... 

I don't trust my money going into speculative markets, nor managers of investment companies. 

...

With me it's not necessarily financial illiteracy, it's a trust issue. 

There's healthy cynicism, and then there's unhealthy cynicism.  I fear you are in the latter.  If you take the attitude of "I don't trust anybody" one day a doctor will prescribe you life-saving medicine and you will refuse it, or a fireman will offer you a ladder from a burning building and you will turn it down.

I cannot tell you that the government won't do what you describe, or that you will make money out of a pension, or that investment company XXX plc will look after your money.  I can't guarantee that because there are no guarantees in life.  

However, I can say that in my view the key to life is learning who you can trust, rather than simply taking an attitude of "I don't trust anybody" which in the long run surely must mean you miss out on all sorts of important beneficial circumstances.  

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1 hour ago, Killer Bunny said:

Good for you - para 1

Not gonna happen - 2

Agreed (that the stock market may not be cheap for a while). But still worth pointing out to those who think you automatically have to put the money into stocks/bonds/whatever that the option to hold as cash is there. And you still get the uplift.

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44 minutes ago, Orb said:

I don't trust anybody. 

I don't trust that in 26 years workplace pensions won't be means tested against the standard state pension rate, and that state pension payments will only top up workplace pensions to that rate. Remember, the government are working decades ahead as well as currently. After seeing how ordinary working people are living a daily scam and con, it wouldn't surprise me if after paying NI til my retirement AND a workplace pension, come retirement I will see only the worth of a state pension. 

I don't trust employers. I know 2 people who saw deductions in their weekly pay packets for pension contributions, and when their company folded they realised there was no pension. The company were simply underpaying them. Ok, it was partly the employees' fault for not verifying the authenticity of their pension company, but for all I know false and convincing paperwork may have been sent to the employees. 

I don't trust my money going into speculative markets, nor managers of investment companies. They always seem to come away unscathed. I've read numerous accounts of these people, often prominent ones too, circumventing regulations and finding technical loopholes to trade in very risky assets. I can do without that. 

With me it's not necessarily financial illiteracy, it's a trust issue. 

 

1) open sipp.

2) get your tax relief and employer contributions into their scheme.

3) do a partial transfer annually out of company scheme into said sipp.

4) invest however you like, relax and understand that because you are doing something that 90% (or probably 99%) of the population are not, you are very unlikely to be the tax target. Check out just how damn good pension death benefits are. The reason people don't understand it is informational appartheid for the benefit of rich people. Property investment on the other hand...

Edited by Frugal Git

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1 hour ago, Dorkins said:

Yes, the tax treatment of pension contributions is pretty much the last economic window of opportunity left for the average wageslave. As TPTB seem determined to steadily erode workers' ability to get any value from their wages I fully expect that window to close after this decade, and Si1 is probably right that NI will be rolled into income tax at some point which will reduce the value of pension wealth, though not so much as to make contributions being made today a waste of time.

Exactly this..make hay whilst the sun shines.

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Just now, Frugal Git said:

Exactly this..make hay whilst the sun shines.

That's the strategy, max out the pension contributions for most of this decade before the 40% window slams shut. Millennials had it bad on housing but at least they still have this chance to stuff the pension pot during their peak earning years, TPTB really will leave nothing on the table for GenZ.

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1 hour ago, Dorkins said:

What's wrong with getting your money back? The whole point of a pension is smoothing consumption between lifetime stages.

You're describing a bank account, not a pension.

Most people would say a pension was something more than that. I think the majority of people would tell you that a pension is for tucking away a little every month, and magically it will turn to a nice pile for your retirement. People think they can save £50 a month and retire on £2k a month. 

Pick up any older pensions quide and they talk about the miracle of compounding. But in a low interest rate environment, 12 years and counting now, those days are gone. 

- If you pay £500 a month for 40 years and get a 1% return you will build up a pot of around £275k

- Pay the same amount in at 5% and that pays £750k

- I worked in a building society when I left school in 1996, they didn't have projections then, but they spoke about returns of 13% - for the same £500 a month investment that would pay £6mn

This generation is going to end up with a pot significantly smaller than the previous generation, and that's before you consider the erosion of the value of annuities. To be honest, for anyone under 30, the word pension simply doesn't mean the same thing as it does to people over 50. 

My last pension statement gave a range of possible values for the fund to pay out at.... One third of that range is less than I pay in each month. That isn't the promise in the glossy pension brochures and it's not an incentive to save Into a pension.

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1 minute ago, regprentice said:

People think they can save £50 a month and retire on £2k a month. 

Yes, I think most people are pretty deluded about how much future income they are buying with their pension contribution. A friend of mine pays £100 a month into his autoenrolment one, basically means his retirement income will be little more than the state pension but I don't think he's done the maths to work that out.

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12 minutes ago, regprentice said:

You're describing a bank account, not a pension.

...

This generation is going to end up with a pot significantly smaller than the previous generation, and that's before you consider the erosion of the value of annuities. To be honest, for anyone under 30, the word pension simply doesn't mean the same thing as it does to people over 50. 

My last pension statement gave a range of possible values for the fund to pay out at.... One third of that range is less than I pay in each month. That isn't the promise in the glossy pension brochures and it's not an incentive to save Into a pension.

Don't forget that you no longer have to buy an annuity - you can dip into your pension pot via "drawdown" in retirement just as you would a bank account.

Pension companies are obliged by law to provide you with a projection of what annuity-type income you might receive if you buy one, but you don't actually have to buy one.

I do agree that Gen X and Y will end up with, on average, much lower pensions than the boomer generation, though that's in part because many (not all, but many) boomers had final salary pensions that have ended up being way more generous than is sustainable.

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1 hour ago, scottbeard said:

There's healthy cynicism, and then there's unhealthy cynicism.  I fear you are in the latter.  If you take the attitude of "I don't trust anybody" one day a doctor will prescribe you life-saving medicine and you will refuse it, or a fireman will offer you a ladder from a burning building and you will turn it down.

I cannot tell you that the government won't do what you describe, or that you will make money out of a pension, or that investment company XXX plc will look after your money.  I can't guarantee that because there are no guarantees in life.  

However, I can say that in my view the key to life is learning who you can trust, rather than simply taking an attitude of "I don't trust anybody" which in the long run surely must mean you miss out on all sorts of important beneficial circumstances.  

In your professional experience, are you able to guesstimate the likelihood of a positive experience come pension time from schemes such as auto-enrol workplace pensions? 

1 hour ago, Frugal Git said:

1) open sipp.

2) get your tax relief and employer contributions into their scheme.

3) do a partial transfer annually out of company scheme into said sipp.

4) invest however you like, relax and understand that because you are doing something that 90% (or probably 99%) of the population are not, you are very unlikely to be the tax target. Check out just how damn good pension death benefits are. The reason people don't understand it is informational appartheid for the benefit of rich people. Property investment on the other hand...

SIPP is where I plan to explore next. I hear positive things about that route. I must add, I've only recently opted out from workplace pensions after paying in since their inception. So am in a stepping stone phase. 

Edited by Orb

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14 hours ago, CaptainCymru said:

Essentially its 40% plus the company matching my contributions up to a limit , but the point was wondering if the hike in private pension age would be worth it. I don't particularly wont to live past 70 (no offence to anyone that is that age already), wouldn't be able to deal with the vultures circling round me in the care home 😂 , by the sounds of it though I best stick with it!

Everyone says that before whatever age they believe is end of life - if in good health in 100% of the cases once they get there they have a remarkable change of mind 😉😂

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6 hours ago, regprentice said:

You're describing a bank account, not a pension.

Most people would say a pension was something more than that. I think the majority of people would tell you that a pension is for tucking away a little every month, and magically it will turn to a nice pile for your retirement. People think they can save £50 a month and retire on £2k a month. 

Pick up any older pensions quide and they talk about the miracle of compounding. But in a low interest rate environment, 12 years and counting now, those days are gone. 

- If you pay £500 a month for 40 years and get a 1% return you will build up a pot of around £275k

- Pay the same amount in at 5% and that pays £750k

- I worked in a building society when I left school in 1996, they didn't have projections then, but they spoke about returns of 13% - for the same £500 a month investment that would pay £6mn

This generation is going to end up with a pot significantly smaller than the previous generation, and that's before you consider the erosion of the value of annuities. To be honest, for anyone under 30, the word pension simply doesn't mean the same thing as it does to people over 50. 

My last pension statement gave a range of possible values for the fund to pay out at.... One third of that range is less than I pay in each month. That isn't the promise in the glossy pension brochures and it's not an incentive to save Into a pension.

It’s quite hard to lose investing in a pension compared to other types of saving though because those projections never add in your tax relief effectively free money 

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5 hours ago, Orb said:

In your professional experience, are you able to guesstimate the likelihood of a positive experience come pension time from schemes such as auto-enrol workplace pensions? 

SIPP is where I plan to explore next. I hear positive things about that route. I must add, I've only recently opted out from workplace pensions after paying in since their inception. So am in a stepping stone phase. 

In general as my other post it is like a very tax enhanced savings plan as anyone with a business knows your goal financially is to do as much as possible pre tax - that flight ? It was a business conference, that car black out windows and it’s a van ( bit more complicated than that but ..)

SIPP’s offer a tremendous way of doing that surprised more people aren’t actively thinking like you 

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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