Pensions

[Alistair Robertson 1Participant @alistairrobertson1]

Hi, All.

Not just relevant to an engineering hobby but may have relevance for a lot of people on this site.

I recently retired and had several personal and works pensions to sort out.

All the personal and most of the works pensions were very good to excellent. One of them pays £125 per month and I worked to them for less that 3 years!

An older one has offered me a monthly plan that will mean I will have to live until I am 98 just to get my money back and if I chose to get 50% for my wife after I am gone she will have to live to 128 years old if I were to die on the day the pension comes in to force!

When I questioned them they said people were living longer and their rates were base on this.

I have tried to move it to other providers but they are much the same.

Has anyone else found a similar situation?

[Alistair Robertson 1Participant @alistairrobertson1]

[Dave HalfordParticipant @davehalford22513]

Drawdown might be your answer

[Mike PooleParticipant @mikepoole82104]

Probably worth taking some professional advice on your options. Good advice costs but making a bad decision could cost a lot more

Mike

[VicParticipant @vic]

Yes, I found the same thing. Annuities were much lower than predicted when I retired. As Dave said, drawdown may be the answer for you. That’s what I’ve done with one of mine. The trick is to avoid paying tax on it!

[SillyOldDufferModerator @sillyoldduffer]

Not exactly, but what you say doesn't surprise me. Most government and private pension schemes are struggling. The issue is weak economic growth and low interest rates coupled with people living much longer. The amount of money needed to pay a decent pension for 30+ years is huge. Many changes are being made – as of now, it's all but impossible to find a Final Salary scheme. Pension providers are protecting themselves in expectation of poor fund performance in the future.

Apart from the strain on the pension system, there are at least two other issues brewing. One is that many UK pension providers have been overcharging illegally. This may result in substantial sums having to be repaid to older pensioners, which is likely to impact what newcomers are made to pay. The sins of the fathers… Overcharging is most serious to individuals with several small pensions because these can be completely eaten by admin charges; this you find out when you try to cash them in. Small pensions are best consolidated, but only if you can get the right deal.

Also largish numbers of people have been persuaded to switch pension provider since that was made possible. There is rising concern that most  people lost out by switching, and a 'Where you mis-sold a pension?' industry is growing like Topsy.

Can't remember the word for it, but yet another issue is the number of pensions being capped relative to any other pensions you might have – a form of means testing. For example, you might find that a increase in the State Pension results in a counter balancing reduction to a Private Pension, so you don't get what you might expect.  Read the small print!

Older pension schemes tend to be much more generous and well protected than new ones. What's happening now to pension schemes is more difficult and hard to understand, whether making the best of what you're about to get, or youngsters investing in the future. I'd recommend anyone with a pension concern to get independent expert help, not from the smooth chap trying to sell you a policy!

Dave

Edited By SillyOldDuffer on 21/02/2019 12:40:00

[BazyleParticipant @bazyle]

The starting calculation is quite simple. You will be lucky to live 20 years into retirement. 100% of your pension divided by 20 is 5%. So if it is just a pot of cash you could just take out 5% each year. Then you will be broke but probably won't have an y brain cells left to notice. So any annuity offering you less than 5% will be laughing when you die in less than 20 years. Most of them only offer about 2% at the moment – so the managers can buy big houses and BMWs.
Unfortunately if you try to get you own cash out of the pension fund you get massively taxed so that the civil servants can buy big houses and BMWs.

[SillyOldDufferModerator @sillyoldduffer]

A little more icing on Bazyle's numbers:

• Average age at death of UK males is 79.2 years
• 1 in 5 live until at least age 90 years.
• 7.1% of over 65s will have some degree of dementia. On average two thirds of the cost is paid by the family.
• Ignoring tax and other complications, over a period of 20 years paying yourself:
  • £10000 per year needs a starting pot of £200,000
  • £15000 – £300,000
  • £20000 – £400,000
  • £25000 – £500,000
  • £27600 (National Average income) – £552,000

In the past annuities and pensions performed better than cash hidden under the bed because the money collected interest and because they get good tax breaks and other incentives. (If you remove money from a tax-protected scheme, don't be surprised to get whacked for tax you would have otherwise paid!) Not so clear about pensions and annuities today, because interest rates etc are in trouble.

My plan is to mortgage the house and max out 30 different credit cards so I can live wild until an an athletic young floosie finishes me off in a Monte Carlo honeymoon suite. All bills will be left unpaid…

Dave

 

 

Edited By SillyOldDuffer on 21/02/2019 13:56:31

[IanTParticipant @iant]

That athletic young Floosie sounds an attractive proposition SoD – but the timing would be absolutely critical.

I'd have to be sure to kick the bucket before the Wife caught up with us – or she might help me to do so !

IanT

[HOWARDTParticipant @howardt]

How would you know you were with a floosie in the Monte Carlo honeymoon suite if the dementia had kicked in 15 years previously?

[john fletcher 1Participant @johnfletcher1]

Alistair talking from experience, be jolly careful when taking financial advice, those experts have a % sign in their head for their reward before any thoughts for you. How do you think they can spend two days a week on the golf course arriving in the top of the range BMW.I 'm sure there must be some good ones. There is great temptation when handling some one else's money. I suggest you read document papers very very carefully before signing, wait two or more weeks have a friend read the documents talk about them and sign. Oh and ask the sales person what is their commission and is there any trail. Oh and I've been to Monte Carlo and saw the Vintage grand prix. John

[Steve NeighbourParticipant @steveneighbour43428]

I too am rapidly approaching that magic age – I have already converted one pension into a 'draw-down' account, and used some of the money to purchase 2 properties with my 'investment' in each being around 40-50% the return or yield can be very tax efficient and you can apportion in different %'s between you and your spouse as required to use all or your tax free allowances (and its way better than ISA's and other traditional saving methods.

I like the max out the credit card and floosie idea that 'SOD' proposed – will I need to make sure my epitaph has a 'sponsored by visa and mastercard' footnote

(better go, the wife wants to know what I'm typing )

[Martin ConnellyParticipant @martinconnelly55370]

According to a financial advisor I spoke to recently managed funds are earning about 4% per year. For the privilege of managing these funds the manager tajkes 3%. Where I live at the moment rental income from property runs about 5% and your capital doesn't get used up. Buy to let looks like a sensible option but doesn't suit every investor.

Martin C

[Iain DownsParticipant @iaindowns78295]

I'm either too close to retirement age or too far away depending on whether I consider my actual age or how many more bloody years of work there are…

The guys I've been speaking to recently seem content that they can provide a 6% return on my pension funds before retirement and that's after all charges. That's not a zero risk option, of course, that probably pays close to bugger all.

We're going to be making a decision on an IFA and pension shift fairly soon (like by next week) who will then want reams of paper from us.

No doubt the claimed return will drop for some very plausible reason once we sign up.

Sigh.

Iain

[Former MemberParticipant @formermember19781]

[This posting has been removed]

[Tony Pratt 1Participant @tonypratt1]

Loads of 'good' advice, I'm just going to do my due diligence & pick an option[s], I don't really need an independent advisor to ask me what I want & then charge me for it.

Tony

[AdrianRParticipant @adrianr18614]

Shop around for financial advise, 3% is high, I am paying 0.5% to the adviser and 0.4% to the investment plan.

Re estimating your longevity, look at your parents and relatives.

My plan after my wife dies is to buy a barrel of single malt whisky, and pop speed. I will have plenty of energy till I burn out.

[thomas oliver 2Participant @thomasoliver2]

I would advise all to look into the powers of the local Social Security Services regarding your Savings and house. If you succumb later to dementia or ill health and need to be placed in a care or nursing home you will have to pay if you have more than £14500 in savings ( Not £25000 as you are usually informed by the government) Current cost of care is around £550 per week. When your savings are used up they can confiscate your house and sell it. The authority can access your bank details going back seven years and if they think you have fiddled your money away to say your family, they can still claim it back. If you get dementia your solicitor will be unable to arrange for one of your family to have "Power of Attorney" to conduct your affairs. So investigate this and make all arrangements before it is too late.

[SillyOldDufferModerator @sillyoldduffer]

Posted by Martin Connelly on 21/02/2019 17:01:38:

According to a financial advisor I spoke to recently managed funds are earning about 4% per year. For the privilege of managing these funds the manager tajkes 3%…

Indeed, see my mention of a brewing overcharging scandal in the pension industry . Good news, they're not all at it. Bad news, it's currently hard to find out who is, but changes are in the pipeline.

[AlaninOzParticipant @alaninoz]

You have to consider all your options for retirement.

I have done reasonably well out of my pension funds. I originally retired from the Northern Rhodesia Government in 1964 on a 10 pounds per month pension which I cashed in for a lump sum ( I did not trust them to continue paying monthly, and I was right ) That lump sum paid for my block of land and a new car when I came to Australia in 1966

The latest pension ripoff in Oz is "superannuation" where you supposedly get a lump sum on retirement. My employer changed to a "super" scheme about 1991 but existing pension fund members did not have to change. I stayed in the pension fund as I would have been much worse off to change.

I took early retirement in 1995, built a new house, doing all internal work myself and also living on part of my savings as my private pension was not quite enough to live comfortably until 2003 when I was eligible for a part Centrelink age pension. My private pension is cost of living adjusted every July and Centrelink reduces my age pension by 70% of that increase. I also receive a magnificent 22 pence per week from the time I worked in England – about $20 paid in December.

If you can afford to take early retirement I recommend you do so. I was asked to go back to work for 4 months and was pleased to refuse as I was going to the Eastern States in my caravan for 3 months.

Alan

[The Novice EngineerParticipant @thenoviceengineer]

Hi,
I took early retirement 4 years ago and spent a lot of time crunching numbers with spread sheets, before taking the plunge.

What I noticed was that the pension companies gave me a default option of an Index Linked Pension with 50 % to my spouse upon my demise. This had the lowest starting sum [around 2.5% per year of the money pot with index linked increase every year ~2.5% of the 2.5% !! ]. Reading the smaller print there was up to 5 alternative options.

I chatted to a number of relatives and older friends, their consensus was take the highest payout so that you have the most money to use whilst you still can. As they aged they could do less and spent less. No one in our family has ever made it to living in care … they just kept going at home then pegged it.

I took the option that gave me the highest starting sum [around 5% per year of the money pot with no increases]].

Running the numbers though the spreadsheet showed that all the options paid out the roughly the same total amount after 22-25 years. The index linked pension with the lowest starting sum would beat the payout of the highest starting pension after this, by which time I would be 83 …. if I was still around!

To maximise my return from my pension pot I took the Tax Free cash [25% of the pot] and put the money into Shares within an ISA [invested with high Dividend shares] which gives tax free returns.

I have another pension yet to take , I shall probably do drawdown with this.

My 2p worth

Good luck

[Martin Shaw 1Participant @martinshaw1]

Some interesting stuff, although I would question thomas oliver 2 costs for care homes. My late father who died almost a year ago was paying £900 a week, for perfectly satisfactory but not outstanding care. Thankfully he didn't have to avail himself of it for too long. Thomas does make the very valid point that should you have need of care and have any significant savings they disappear rapidly, and my question to my accountants as to what I should do with my fathers bequest was, spend it otherwise you'll give it away to the government, directly or otherwise.

The state pension is also under some scrutiny by me. I received a letter from the DWP last week inviting me to claim my state pension, I was 65 at the beginning of January and I am informed I can claim state pension from May this year, thus far so good and in checking my NI contributions I find I have 47 fully paid up contributing years so you would imagine that apart from a small period of contracted out SERPS, I would get most of the £165 a week. Apparently not, prior to 2010 you needed 44 years NI contributions, after then the contributing years were reduced to 30, so I was still ahead, however in 2016 the period was increased to 35, and since at that time nobody by decree had more than 30, I find at 65 with 47 years of contributions I am only entitled to 33/35ths of the state pension, less my contracted out SERPS. On this basis it is going to be 2021 before anyone will have enough NI contributions for a full state pension by which time retirement age will be what, 67? Am I alone in thinking that the contract between myself and the government established in 1972, of which I have fulfilled my side, has just been thrown away for political expediency.

Right that's purged the spleen, I feel better now, if no less disgruntled.

Mr Angry of Glasgow

Edited By Martin Shaw 1 on 21/02/2019 21:36:15

[BazParticipant @baz89810]

I can confirm that care homes are charging £900 + a WEEK, about fifty grand a year, mother in law is paying this for a room about the size of a prison cell in a care home in Salisbury.

[Former MemberParticipant @formermember32069]

[This posting has been removed]

[HopperParticipant @hopper]

Posted by Mike Poole on 21/02/2019 11:47:31:

Probably worth taking some professional advice on your options. Good advice costs but making a bad decision could cost a lot more

Mike

+1 on this suggestion. Make sure your financial advisor works for a fee paid by YOU so he is not trying to sell you financial products that HE makes a commission on. And ask him straight up front if he receives any kind of commission or other payment from financial firms or anyone other than yourself. If he does receive such commissions or payments, go elsewhere.

Also there are plenty of good books at the local book shop on retirement planning etc. Well worth making yourself "financially literate" at this stage in life as one mis-step can cost you many thousands of pounds in the long run. But there are also many dodges and workarounds that can add thousands of pounds to your retirement income.

One thing all those books tell you is to avoid word of mouth advice from well meaning but unqualified friends. That would include me! So go and book yourself an appointment with a fee-only financial adviser. Will be the best money you can spend right now. (I went through this experience myself in recent years.)

Edited By Hopper on 21/02/2019 23:25:27

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