Pensions reform - big draw downs coming soon

[Paul]

I have read about the various pension reforms articles online and in the papers that are coming very soon and people being able to take sizable sums from their pots.

 

Savers over the age of 55 have the option of taking a number of smaller lump sums, instead of one single big lump sum, and in each case, 25% of the sum will be tax-free

 

Me being forever the skeptic - government hardly ever do thing like this to keep the 'great unwashed' happy.  

 

Why are they choosing to do this ?

 

• To keep alive the illusion that all is OK and everyone is happy ?
• To fudge the numbers for growth/recovery etc ?
• To keep the voting masses happy ?
• To boost the stock market?
• To have big money moved back into banks from pension funds ?
• To boost economy?
• To boost and keep the property bubble inflated ?
• To boost car sales/exotic holidays ?
• They know a lot will take the whole pension pot and so increase tax revenues?

 

 

Our beloved Mr Osborne said it was about "trusting those people who have worked hard and saved all their lives" and said it was "patronising " to suggest people might blow the money on an expensive sports car then come back for more when they ran out of cash.

 

Whilst i appreciate most by and large will be sensible but i can be sure down the road there will be much more than expected to blow the lot then it will be down to mr tax payer to foot the bill as they have no more cash.  

 

I can see the daily mail articles already, of a £500,000 pot blew on lottery scratch cards, cheap lager and own brand biscuits and he is now living with a polish/romainian one legged lesbian bisexual dwarf in 30 bedroom purpose built council house that we, the tax payer  pay for 

 

I have been told tales of several folk in my local social club who got redundancy pay offs from the pits and steelworks for  like £20,000-£30,000 in the 1980s.  Always being men living week to week salaries and the only people who saw the benefits from the redundancy were the pub and local bookies.

 

....................And lastly, to sign off with - with this amount untied instant access capital free £££ and loose how do you see it will it help or hinder our beloved gold & silver ???

[HelpingHands]

I know someone who recently had a pen in their hand and almost signed a contract with a cold caller for a product they didn't want.  There will be many people targeted by conmen. 

[Paul]

Yeah - i can see that happening in a big way @HH

 

The greedy ethically challenged with be rubbing their hands ready to part the unwise from their ££££'s

 

This will be the new daily cold call before long, to go along with the daily cash for your crash / new boiler im due / £1000s im due back from PPI claim backs / a quote for new kitchen / for my windows virus i have & removal & cavity wall insulation grant quote im due

[Pete]

The simple response is - FANTASTIC and ABOUT TIME !!

Many people who have saved all their working lives, paying into a pension fund would be offered an annuity when the time came to get their money returned through a guaranteed income for life. The problem with annuities nowadays is the pathetic amount you get and would rapidly be eroded by inflation over your retirement years. Also if you died early, your pot would be lost, not handed over to your family. Bit cruel - after all it is your money. The fat pension companies take your money and get a return for themselves that exceeds the amount they pay you back. In addition, all the money you pay them from a young age is earning them profits before you are even able to make any withdrawals.

The new rules are great news and nothing to do with the election.

There is a risk however that some people might see their pension pot as a nice lump sum to have now and waste it.

That is a personal choice.

Many might be tempted but the larger pots will be taxed at 40% or more on the non tax free part and that would dent your assets at a stroke.

[Keithoil]

I am one of the over 55's in May and I will get my private pension.

 

I have decided to take the 25% tax free lump sum, and we are buying another house with it to boost our income. Oh and don't forget we can hand it down to our children and grandchildren.

 

I think you are correct that those slimy barstewards will target the older people and some will lose money. I know what should be done to them but that is my own personal opinion and it is not pretty.

 

For any one else on here in that category be careful and spend wisely.

[Hookythestacker]

Been reading up on the changes, think iv'e managed to get my head round it   , one area that doesn't affect me but does interest me is the scope for so called "salary washing", opinion on how effective the anti-avoidance measures will be seems divided. Is the exchequer going to lose out in the long run?

[shemyaza]

Biggest tax grab in British history, be really careful. Navigate your drawings carefully and you should be fine but go through the correct processes. I can see the holiday industry doing well though I think we all could do with one.

[shemyaza]

Just wanted to add a little equation for you all thinking of taking out a lump sum, note: Your lump sum forms special taxable earnings!

Remind yourself of that.

Each tax month accumulates tax free allowance, on 1060L this represents £10600 tax free allowance or £883.33 per month (Above £3532 for 40%). You earn over the 883.33, your remaining earnings enter the 20% tax bracket further up, your remaining earnings above 3532 hit the 40% tax bracket. (Above £42385 per year).

Now remind yourself of this, say a 1 month bonus will be hit for tax this will be given back to you slowly as your tax free allowance accumulates under the PAYE system through the year. Now here it comes....

The Pensions drawdown specifically WON'T BE as this is subject to the HMRC Emergency tax rule!

Read the small print first, little did you know every penny of your Lump sum is subject not to your tax coding, but the Emergency Tax version of your coding so add a Month1 to that coding requiring a time consuming repayment process. Expect to be filing for a rebate during Tax return time as HMRC will be under immense strain with this.

So expect a high tax hit which won't be given back quickly!

Biggest tax grab in British history, always check the small print!

[shemyaza]

If many papers are now to be believed, also bigger than PPI. Oh dear.

[Scuzzle]

But will this just end up another case of the saver being punished and the squanderer being rewarded.  If you take out all your pension and say you pissed it all away are you still going to be looked after by the state as it's against your human rights to be allowed to starve or be homeless, a bit like having all your debts written off when you overstretch your credit.

[Pete]

But will this just end up another case of the saver being punished and the squanderer being rewarded.  If you take out all your pension and say you pissed it all away are you still going to be looked after by the state as it's against your human rights to be allowed to starve or be homeless, a bit like having all your debts written off when you overstretch your credit.

 

Sounds Greek to me !

[Hookythestacker]

But will this just end up another case of the saver being punished and the squanderer being rewarded.  If you take out all your pension and say you pissed it all away are you still going to be looked after by the state as it's against your human rights to be allowed to starve or be homeless, a bit like having all your debts written off when you overstretch your credit.

Agree with you whole heartedly in principle, but lenders must also lend responsibly as well as borrowers spending responsibly, and those giving away pension pots should also do so responsibly. My views on

irresponsible spending have been tempered somewhat by recent events, an elderly widow asked me for some advice regarding the debt she had got herself into. I explained that I was not qualified to do so but had 

a run through the communications sent to her by various financial institutions, the more I read the more shocked I became. One particular high street bank with close Saudi links had allowed her to run up five figure debt

on credit card interest, only for their in branch financial "adviser" to make a further five figure loan to pay off the debt, and they allowed her to keep the credit card. 

  This elderly ladies income consists of a war widows pension and the state pension, she is confused generally by financial matters and struggles to budget, I do believe that if you gave her pen and paper and asked her to

define monetary interest she would struggle to do so. That she was running up unpayable debt and her general lack of understanding cannot have gone unnoticed by the bank staff, it was only after a noddle credit check was

run that the full extent of this unfortunate widows plight became clear, in this instance I believe the bank deserves to lose everything and as for the staff... well I won't say what I think of them.

 I don't defend the feckless spender running up huge debt at all, but they can only do so because some feckless lender provides them with the funds to do so.

[Scuzzle]

It's the way banks and credit card companies try to find your limit where you are 'stretched' that annoys me.  You get a card with a £1000 limit and you are making your repayments fine and they get nothing from you.  So they double your credit limit and  keep on increasing it in an effort to get you to that point where you are stretched and get you closer and closer to making smaller repayments so they can get their money out of you.

The reckless spender gets what they deserve for falling for it but the banks and credit companies also get what they deserve when the individual goes broke and gets it all written off under a bankruptcy light style arrangement like a Trust Deed.

[a_a]

I think the main point of this is to get the next level of the property ponzi going

[SilverPirate]

I was looking in Scottish widows and they have a nice little bit on retirement,one part said a good figure is to aim for £11,500 per an-um as a pension this included the state pension,private pension and any assets you have coming in,its a general total as your annual income.

So if God willing i live for 20 years after retirement, i aim to retire at 67 that is an amassed or potential amassed including state and other regular payments in those years of £230k.

If you do not have a paid for house you can down size later in retirement that is some serious saving.

So you need 978 Silver Maples from STG for one years income @ £11.76.If it doubles that a free year,you never know.

[HighlandTiger]

Ah but that £11.5k in 20 years won't buy you the same then as it does today. 

 

The current state pension is £115.95 per week, so that's £6029 a year, so you have to find £5.5k a year from other "sources". So assume your 20 years of retirement, (poor old Cilla with all her millions only made it to 5 more years over your 67), You need to have around a £100k in investments minimum to match the £11.5k.

[Melon]

Has this all come into effect already? Wondering whether to panic buy a house before this occurs, or if I've already missed the boat lol

[shemyaza]

Pull money from Pensions, you pull money from the stock market...

I waited for the effect....

[DRooster]

 the only people who saw the benefits from the redundancy were the pub and local bookies.

So err ... don't buy metals, buy a PUB!

[shemyaza]

Defined Benefit - National Insurance - Drawdowns in Pensions, 1 year later the Tax Hike hits, April 6th 2016, the NI allowance for Defined Benefit schemes is to be abolished raising the NI rate on Employees and Employers for those who were eligible with Defined Benefit Schemes. You take your lower taxed money out of your Pot, get taxed on that withdrawal and then get hit for higher National Insurance Tax on future payments into your Pension. Congratulations to the Government on achieving the fabled tax em twice mantra. Giveth with one hand, taketh away with two. Effect, 5.5million people will see NI Contributions rise by an average 15% per year. Employers also face the same hike.