Sunak pension tax raid

[kzb]

6 hours ago, wighty said:

And the care fees takes the pension until you've £23k left

Correct, in fact I think it continues on a taper till there is only about £16k left.  People know this and it is the major reason they don't bother.  There is no reward for saving and doing the right thing in the end.  Might as well piss it up while you can.

[kzb]

8 hours ago, dugsbody said:

I did not win the housing roulette game

Neither did most people.  My house is worth £140k if I did it up.  You are speaking from a London perspective.

[Quicken]

11 minutes ago, kzb said:

It used to be 1/80th.

Now it is a CARE scheme.  However when you think about it, if your pay rises are less than inflation, the CARE pension works out better !  This happened to me.

Member contributions have gone up by over 50 percent since the pre 2011 final salary scheme. Employer contributions have also risen. Employer plus employee only used to total 22.35%. Now it is over 30 percent for cpi (used to be rpi) uprated career average. These cuts were explicity made to reduce a notional deficit. It is much less generous now. https://www.theguardian.com/higher-education-network/2011/mar/22/university-lecturers-pension-dispute

[kzb]

1 minute ago, Quicken said:

Member contributions have gone up by over 50 percent since the pre 2011 final salary scheme. Employer contributions have also risen. Employer plus employee only used to total 22.35%. Now it is over 30 percent for cpi (used to be rpi) uprated career average. These cuts were explicity made to reduce a notional deficit. It is much less generous now. https://www.theguardian.com/higher-education-network/2011/mar/22/university-lecturers-pension-dispute

It's still worth defending.  I guess you are all living too long, but I would much rather have modified DB schemes than DC schemes.  Also, universities are being European in this regard, so you must like it surely.

[Quicken]

11 minutes ago, kzb said:

It's still worth defending.  I guess you are all living too long, but I would much rather have modified DB schemes than DC schemes.  Also, universities are being European in this regard, so you must like it surely.

Eh? USS is thin gruel. I prefer the MRC scheme. 😉

[Insane]

7 hours ago, kzb said:

You lost years of service as well.  Also the salary you would have had.  You lost a LOT more than 40% compared to carrying on working.

No the job was gone. Yes if it had carried on until I was 65 there would have been much more in the pension. But it had gone before I was even 55. I took the money as it gave me the freedom to work part time at 55 which is great . We only live once and I don't see the point of working until you are too old to enjoy a massive pension. 

[papag]

I call myself just an ordinary guy and receive a works final salary pension of 13k which i took at 55 and now a state pension of 6400 (serps reduced ) and manage quite well was looking at the amounts my sons would have to put in to achieve a similar works pension anyone got any ideas they are  40 /41 in age

 

Edited June 26, 2021 by papag

[shackleford]

8 hours ago, kzb said:

Correct, in fact I think it continues on a taper till there is only about £16k left.  People know this and it is the major reason they don't bother.  There is no reward for saving and doing the right thing in the end.  Might as well piss it up while you can.

Not taking advantage of the massive tax breaks to save for retirement because you might have to pay for a care home for the last year or so of your life (and plenty of people never go in to a care home at all!) is absolutely mental.  IMHO.  

[Frugal Git]

24 minutes ago, papag said:

I call myself just an ordinary guy and receive a works final salary pension of 13k which i took at 55 and now a state pension of 6400 (serps reduced ) and manage quite well was looking at the amounts my sons would have to put in to achieve a similar works pension anyone got any ideas they are  40 /41 in age

 

Need more details - is the 13k indexed linked and does it offer spousal cover?

If neither, then at a quick guess, probably around 400-500k given the ‘early’ retirement if going for an annuity. It wouldn’t surprise me if I’m well of the mark though. 

Edited June 26, 2021 by Frugal Git

[Dorkins]

21 minutes ago, Frugal Git said:

Need more details - is the 13k indexed linked and does it offer spousal cover?

If neither, then at a quick guess, probably around 350-400k given the ‘early’ retirement if going for an annuity. It wouldn’t surprise me if I’m well of the mark though. 

According to the Aviva annuity calculator a £400k pension fund will buy a single male aged 55 with no dependents a £13k annuity with no index linking so your guess was remarkably close. If you want a 3% pa increase then a £400k fund will buy you £7k pa. I didn't test what it drops to if you want your spouse on the annuity too, I would guess in that case £400k will get you <£5k pa.

Not sure how much pension provision papag's sons have already built up but a 40 year old starting from nothing and aiming to get a £400k pension pot by age 55 would probably have to put £2k/month into a DC pension.

Edited June 26, 2021 by Dorkins

[Clarky Cat]

15 hours ago, Mikhail Liebenstein said:

 

I often wonder what would happen if people saved more into pensions, might it rebalance the economy a little and stop the foolish ploughing of everything into housing?

If the pension firms were encouraged to invest in business development too.

I despair at how much better the UK could have been today if the money splurged on housing over the past 2 decades had instead have been directed into starting and developing businesses. Not BTL "business".. obviously!

[Frugal Git]

44 minutes ago, shackleford said:

Not taking advantage of the massive tax breaks to save for retirement because you might have to pay for a care home for the last year or so of your life (and plenty of people never go in to a care home at all!) is absolutely mental.  IMHO.  

Agreed. It’s completely ridiculous. My dad passed away last year. Just before he died, the hospital *thought* he might be able to go into a care home before his condition worsened.

But despite having a fantastic pension and considerable assets, he’d not have paid a penny in a care home because of his underlying problems. 

to be clear, we/he would absolutely have funded it if needed, but it wasn’t. 

anyway, far from his assets being swallowed up:

….my mum has inherited his private pension and her state pension was upped after. mum now has a take home of £2500 p/m on outgoings of £1100. She’s giving part of surplus income to the grandchildren each month. 

….My sibling got his third pension, his SIPP. A very substantial drawdown fund they can take from at their marginal rate right now, despite not even being 40. And the SIPP - IHT exempt. 

….not to mention the rest of the assets - the house and ISAs etc which add up to knocking the IHT threshold already - which are now being strategical gifted. And they’d already gifted lots. 

That he did this running the family as a sole earner, a first gen immigrant (pre boomer), who’s max earnings were (inflation adjusted) 3/5th of my current salary is just another near unbelievable example of the gilded times. 

fortunately him and mum knew it, and as a family we managed the finances accordingly. A Great man, he was fully aware the whole final salary schemes/HPI world was ********, and so he made sure his kids would get the excess. They lived simply, but not without what they wanted when they wanted it. And they always knew we would back them up because they backed us up too.  
 

I was incredibly lucky to have him, and he put the fire in my belly to earn more and look after myself because despite all of the above, he didn’t get nearly what he was worth at work. He should have been earning twice what I am. 

 

Edited June 26, 2021 by Frugal Git

[jiltedjen]

30 minutes ago, Frugal Git said:

Agreed. It’s completely ridiculous. My dad passed away last year. Just before he died, the hospital *thought* he might be able to go into a care home before his condition worsened.

But despite having a fantastic pension and considerable assets, he’d not have paid a penny in a care home because of his underlying problems. 

to be clear, we/he would absolutely have funded it if needed, but it wasn’t. 

anyway, far from his assets being swallowed up:

….my mum has inherited his private pension and her state pension was upped after. mum now has a take home of £2500 p/m on outgoings of £1100. She’s giving part of surplus income to the grandchildren each month. 

….My sibling got his third pension, his SIPP. A very substantial drawdown fund they can take from at their marginal rate right now, despite not even being 40. And the SIPP - IHT exempt. 

….not to mention the rest of the assets - the house and ISAs etc which add up to knocking the IHT threshold already - which are now being strategical gifted. And they’d already gifted lots. 

That he did this running the family as a sole earner, a first gen immigrant (pre boomer), who’s max earnings were (inflation adjusted) 3/5th of my current salary is just another near unbelievable example of the gilded times. 

fortunately him and mum knew it, and as a family we managed the finances accordingly. A Great man, he was fully aware the whole final salary schemes/HPI world was ********, and so he made sure his kids would get the excess. They lived simply, but not without what they wanted when they wanted it. And they always knew we would back them up because they backed us up too.  
 

I was incredibly lucky to have him, and he put the fire in my belly to earn more and look after myself because despite all of the above, he didn’t get nearly what he was worth at work. He should have been earning twice what I am. 

 

He sounded like a fantastic guy, he starting without much and kept that knowledge/Experience in his mind and with that he lived sensibly and then helped his kids out. Kids who themselves otherwise would of been in a much worse economic situation. 

Shame the boomer generation only knew the gilded times and didn’t have the same insight, plenty just never think of helping their kids out in such a way, never went without, and just kept spending lavishly, just thinking their own kids were failures and lazy instead of economically crushed. 

world would be a kinder nicer place for all if everyone was like your relative, leaving the world a better place than they found it.

[Frugal Git]

10 minutes ago, jiltedjen said:

He sounded like a fantastic guy, he starting without much and kept that knowledge/Experience in his mind and with that he lived sensibly and then helped his kids out. Kids who themselves otherwise would of been in a much worse economic situation. 

Shame the boomer generation only knew the gilded times and didn’t have the same insight, plenty just never think of helping their kids out in such a way, never went without, and just kept spending lavishly, just thinking their own kids were failures and lazy instead of economically crushed. 

world would be a kinder nicer place for all if everyone was like your relative, leaving the world a better place than they found it.

Thank you so much - yes he was. And fully onboard with BTC too - sending me articles about it in 2011! 

 

Unfortunately we both decided to stick with buying more gold back then until 2016 🤦‍♀️😂

[kzb]

1 hour ago, shackleford said:

Not taking advantage of the massive tax breaks to save for retirement because you might have to pay for a care home for the last year or so of your life (and plenty of people never go in to a care home at all!) is absolutely mental.  IMHO.  

Possibly but nevertheless this is how people think.   Enjoy your money now because you are going to end up in the same place with no money left in the end, either way.  It galls people there is no reward for "doing the right thing".

[hurlerontheditch]

17 hours ago, scottbeard said:

I think closing private sector DB schemes is correct (even though it will eventually put me out of a job).  It makes no sense for (for example) supermarkets to take on investment and life expectancy risks on the pensions of people who worked for them decades ago, nor is it reasonable to expect someone's retirement income to depend upon the security of someone who they worked for years ago.  DB pensions are just a bad thing.  What we need are more generous DC ones.

You can take early retirement - it used to be from 50, but now 57, subject to an actuarial reduction.

Typical reductions are between 3%pa and 5%pa.  So a person with a £10,000 pa pension payable from age 65 who retires at 55 would have got something like £5,000pa to £7,000pa instead. 

why would anyone buy an annuity these days?

[shackleford]

35 minutes ago, kzb said:

It galls people there is no reward for "doing the right thing".

Then people should stop being galled by utter scaremongering ******** that they hear from the bloke down the pub (or the online equivalent).  Frugal Git's story is probably closer to how later life will play out for most people sensible enough to save for retirement.  

[kzb]

1 hour ago, papag said:

I call myself just an ordinary guy and receive a works final salary pension of 13k which i took at 55 and now a state pension of 6400 (serps reduced ) and manage quite well was looking at the amounts my sons would have to put in to achieve a similar works pension anyone got any ideas they are  40 /41 in age

 

Are they only starting paying in at the age of 40/41?

If so they have missed out on a lot of growth they could've had if they'd started earlier.

The rule of thumb used to be pay half your starting age as a percentage, but that is predicated on retiring at 65 so that is not enough.

One thing in their favour is they should get the new state pension (although it is not a given that they will have 35 years contributions by age 55 -need to check that), whereas presumably you are on the old state pension.  The difference is currently £2184 pa so the amount of pension they need to make up the equivalent of £13000 is actually £10816.

The annuity rate for comparable pension conditions as yours (some inflation protection and 50% pension for surviving spouse) is 2.302% (just googled it).

Therefore the pension pot needed is £10816/0.02302  =  £470,000

They've only got 14/15 years to save this amount, which is a tough ask for someone on medium income.

 

 

 

[Mikhail Liebenstein]

4 hours ago, Dorkins said:

According to the Aviva annuity calculator a £400k pension fund will buy a single male aged 55 with no dependents a £13k annuity with no index linking so your guess was remarkably close. If you want a 3% pa increase then a £400k fund will buy you £7k pa. I didn't test what it drops to if you want your spouse on the annuity too, I would guess in that case £400k will get you <£5k pa.

Not sure how much pension provision papag's sons have already built up but a 40 year old starting from nothing and aiming to get a £400k pension pot by age 55 would probably have to put £2k/month into a DC pension.

 

That is why annuities are a big con.

£400k/13k would last 30 years on a drawdown with no interest and no growth. At 55, that might get you to 85, but if you factor in growth, then a 7% return on equities over 30 years would increase the value of the last money you take our by a factor of 7.6 over that time. And how many 55 year olds live past 85 anyway.

 

 

 

[papag]

Thanks for the replies to my query , very enlightening would imagine a real storm is brewing and begin raining sooner rather than later, very few people i know could even begin to save the amounts needed. 

[Mikhail Liebenstein]

3 hours ago, kzb said:

Are they only starting paying in at the age of 40/41?

If so they have missed out on a lot of growth they could've had if they'd started earlier.

The rule of thumb used to be pay half your starting age as a percentage, but that is predicated on retiring at 65 so that is not enough.

One thing in their favour is they should get the new state pension (although it is not a given that they will have 35 years contributions by age 55 -need to check that), whereas presumably you are on the old state pension.  The difference is currently £2184 pa so the amount of pension they need to make up the equivalent of £13000 is actually £10816.

The annuity rate for comparable pension conditions as yours (some inflation protection and 50% pension for surviving spouse) is 2.302% (just googled it).

Therefore the pension pot needed is £10816/0.02302  =  £470,000

They've only got 14/15 years to save this amount, which is a tough ask for someone on medium income.

Future sum  =

[ P(1+r/n)^(nt) ] + [ PMT×(((1 + r/n)^(nt) - 1)/(r/n))]

where

P = the principal investment amount (the initial deposit or loan amount)

PMT = the monthly payment

r = the annual interest rate (decimal)

n = the number of times that interest is compounded per unit t

t = the time (months, years, etc) the money is invested or borrowed for

 

Edited June 26, 2021 by Mikhail Liebenstein

[winkie]

5 hours ago, shackleford said:

Not taking advantage of the massive tax breaks to save for retirement because you might have to pay for a care home for the last year or so of your life (and plenty of people never go in to a care home at all!) is absolutely mental.  IMHO.  

Luck of the draw......some will be clever with finances, others with their health and relationships......none are good as they could be without the other ones.

[hotblack42]

2 hours ago, winkie said:

ome will be clever with finances, others with their health and relationships

Really hard to do all 3 well, especially the 3rd.  1 & 2 are somewhat under your own control, especially 2, whereas 3 by definition requires both parties to make an effort.  I'll be the first to admit I should invest more time in my relationships.

[winkie]

3 minutes ago, hotblack42 said:

Really hard to do all 3 well, especially the 3rd.  1 & 2 are somewhat under your own control, especially 2, whereas 3 by definition requires both parties to make an effort.  I'll be the first to admit I should invest more time in my relationships.

It is hard, but to some relationships might be easier than earning and using money well, others might not have control over their health, be it mind or body but might earn and/or invest well......time is a valuable finite commodity, to be used well.......a balancing act where mistakes are made.

[scottbeard]

6 hours ago, hurlerontheditch said:

why would anyone buy an annuity these days?

They generally wouldn’t - but I’m confused as I never mentioned annuities in my post??