Wednesday, Apr 29, 2020

How many people will have to downsize ?

Moneywise: Coronavirus: Nine in ten pension funds suffer losses and annuities hit record lows

Even before anyone had heard of Coronavirus, I thought Defined Contribution Pensions will end up being the new endowment mortgages.
If so I wonder how many people will end up having to downsize when they get to retirement and find out how little their Pension is worth.

Posted by tenyearstogetmymoneyback @ 08:40 PM (1352 views)
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1. mombers said...

Time to see if the 'my house is my pension' malarky comes to pass. If house prices don't keep going up, people are surely better off downsizing. Even with very the regressive council tax, a more valuable home is generally more expensive to run, i.e. higher energy bills, insurance and maintenance for a bigger home in the same area. The incentives to under-occupy is free money from rising prices and lower IHT for housing wealth

Thursday, April 30, 2020 02:01PM Report Comment

2. jack c said...

"Anyone looking to transfer from a DB to a DC pension during the COVID-19 crisis will get a letter from trustees telling them it is not in their best long-term interests"

More drivel served up by the Government and regulators - The trustees have neither the knowledge of the member's overall personal finances nor the regulatory permissions to advise on a transfer. If they included the wording "unlikely to be in their long term interests" I could live with that.

Friday, May 1, 2020 11:48AM Report Comment

3. mombers said...

DB to DC is a huge risk. You're basically taking on investment, inflation and longevity risk. If you die younger than expected, that's hardly a win.

That said, the sooner DB pensions are abolished or reduced by DC conversion, the better. They are a yoke around the neck of the economy, companies are forced to pour funds into them instead of investing or raising wages. The state pension is a gigantic £3.8tn liability but provides a basic income for pensioners. Any additional private pensions above a modest amount should be a considered a luxury and certainly not funded to the extent that they are. This from someone who works in pensions and tucked into five figures of pension tax relief last year by the way :-)

Friday, May 1, 2020 01:06PM Report Comment

4. tenyearstogetmymoneyback said...

Mombers. I suspect you are forgetting about all the "Pensions Holidays" large companies took during the 1990s. The company I work for was owned by a household name back then. I'm sure that when they sold us on after about five years they made far more money from the pensions fund than they did from the day to day business. After the Dot Com bust the next company to own us then had to increase employee contributions from 6% to 11% to maintain the same benefits. There was actually a huge sigh of relief when that happened as we did retain our final salary benefits (although the scheme is now Career Average and closed to new members).

The problem is that so many people expect to pay little in then retire in style. Less than a year after complaining how little his pension will be a colleague bought a £40K car on PCP !

This comment "If you die younger than expected, that's hardly a win" made me laugh. Unless he lives to his 90s I'm sure a different colleagues last words will be "This shows why it is so important to take your 25% lump sum" (from your final salary pension).
The silly thing is he doesn't seem to have any plans for it either. As you work in pensions I would be interested in hearing your opinion of that.

Monday, May 4, 2020 08:35PM Report Comment

5. mombers said...

@4, to quote the great Yogi Berra:

'It's tough to make predictions, especially about the future'

The backstop that pension tax credit gives to people presents quite a moral hazard - roll the dice and the worst that can happen is you live really long and have to see out your days on a small, taxpayer funded income. My preference in an ideal world would be no state subsidy for private pension accumulation and no preferential taxation of pension age income (i.e. national insurance applies to all or is abolished). But as a quid pro quo, a flat rate, unconditional universal basic income for pensioners at a significantly higher level than present. Luxury retirements should be a private matter, and pensioner poverty should not be a thing in a rich country like ours with vast subsidies for some pensioners. Would not be a good move at all for my company but better for society in my opinion...

Monday, May 11, 2020 11:21AM Report Comment

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