The 'Pension Changes''

LamieRobertson · Mar 21, 2015

2 weeks Monday (bank holiday so effectively Tuesday) reforms to non state pensions come into being for those over 55 and who are able.
Will you be raiding your pension fund and if so spending it or investing elsewhere?

dejavuatbtn · Mar 21, 2015

The new rules are just a big ploy by the government to encourage unadvised people to cash in their pension pots so that they end up spunking 25% of the non tax free allowance in tax. Some will use the balance wisely, others will spend it and then rely on their state pensions, and other handouts, to fund their retirement.
On the basis that the government has effectively contributed to these pension pots in the form of tax relief, I was surprised they pulled this one out of the hat. I think, long term, it is a bit of a naive strategy.

Tom Hark Preston Park · Mar 21, 2015

dejavuatbtn said:
The new rules are just a big ploy by the government to encourage unadvised people to cash in their pension pots so that they end up spunking 25% of the non tax free allowance in tax. Some will use the balance wisely, others will spend it and then rely on their state pensions, and other handouts, to fund their retirement.
On the basis that the government has effectively contributed to these pension pots in the form of tax relief, I was surprised they pulled this one out of the hat. I think, long term, it is a bit of a naive strategy.

Got to be a welcome move to release people from the shackles of pitiful levels of annuity. If nothing else, you can leave your pot to your kids. On the other hand, pretty sure the main Tory thinking is that huge numbers of qualifying pensioners will go out and pump money into the economy by blowing large chunks of their pension pot on kitchens, cruises and cars, thereby artificially making the underlying figures look much more healthy than they actually are. Sadly though, large numbers of pensioners will be robbed of their entire pot by scammers. There's enough of those cleaning out the gullible even before the April changes.

Hastings gull · Mar 21, 2015

dejavuatbtn said:
The new rules are just a big ploy by the government to encourage unadvised people to cash in their pension pots so that they end up spunking 25% of the non tax free allowance in tax. Some will use the balance wisely, others will spend it and then rely on their state pensions, and other handouts, to fund their retirement.
On the basis that the government has effectively contributed to these pension pots in the form of tax relief, I was surprised they pulled this one out of the hat. I think, long term, it is a bit of a naive strategy.

This is also what worries me about it. Of course in theory it is good to give people control of their own money, which I presume is one of the intentions. Most will spend it wisely with an eye to the future, and some will inevitably spend it foolishly, knowing that there is always the good old State to pay them all sorts of benefits when they fall on "hard times". Not sure about this at all -I can see it from both sides, so to speak.

Rugrat · Mar 21, 2015

dejavuatbtn said:
The new rules are just a big ploy by the government to encourage unadvised people to cash in their pension pots so that they end up spunking 25% of the non tax free allowance in tax. Some will use the balance wisely, others will spend it and then rely on their state pensions, and other handouts, to fund their retirement.
On the basis that the government has effectively contributed to these pension pots in the form of tax relief, I was surprised they pulled this one out of the hat. I think, long term, it is a bit of a naive strategy.

Time bomb, but will be someone else who has to clear up the mess

Rugrat · Mar 21, 2015

Hastings gull said:
Most will spend it wisely with an eye to the future,

From my 30 years of dealing with people and their money I'm not so sure

Lord Bracknell · Mar 21, 2015

A lot of the released cash will no doubt go into buy-to-let housing, jacking up house prices and making house purchase even more unattainable for young first-time buyers.

beorhthelm · Mar 21, 2015

dejavuatbtn said:
...I think, long term, it is a bit of a naive strategy.

i think the naivety is believing large numbers of people who went to the trouble of saving in a pension will spunk it all away as soon as they can. for most people, the second they realise they'll be taxed on most of it, they'll leave it be. those with smaller pensions wont be paying tax either way.

Tom Hark said:
...pretty sure the main Tory thinking is that huge numbers of qualifying pensioners will go out and pump money into the economy by blowing large chunks of their pension pot on kitchens, cruises and cars, thereby artificially making the underlying figures look much more healthy than they actually are.

that would be the anti-Tory thinking. the Tory think is that people can and should be allowed to behave responsibly with their own money. some will blow it all of course, but then some would blow their lump sum and/or get a poor annuality. on balance this is a bloody sensible policy, one of the better ones we've had for years.

Rugrat · Mar 21, 2015

Tom Hark said:
pretty sure the main Tory thinking is that huge numbers of qualifying pensioners will go out and pump money into the economy by blowing large chunks of their pension pot on kitchens, cruises and cars, thereby artificially making the underlying figures look much more healthy than they actually are.

Dreamed up by the same bloke who spotted the PPI opportunity - a very nice way to shove £10BN+ into the pockets of people who would rush out and spend it

Blackadder · Mar 21, 2015

I may cash in my AVCs and buy Premium bonds instead. Just thinking about it at the moment. The annuity they will buy is pitiful.

Hastings gull · Mar 21, 2015

Rugrat said:
Dreamed up by the same bloke who spotted the PPI opportunity - a very nice way to shove £10BN+ into the pockets of people who would rush out and spend it

You mention earlier about your experience of working with people and their money, though do not elaborate. I am sure you are right in that it is a golden opportunity to spend like mad, but whether the majority would think like this, is doubtful, particularly, as another post points out, that they will be clobbered, tax-wise. Most people - or at least more than half - can think for themselves and by and large do make sensible decisions, and should be given credit for that.

LamieRobertson · Mar 21, 2015

Lord Bracknell said:
A lot of the released cash will no doubt go into buy-to-let housing, jacking up house prices and making house purchase even more unattainable for young first-time buyers.

Given that the average pension pot from one article I read is 35k I'm not so sure that will be the case.
Sure some may but will the numbers be significant to actually have the effect you are stating? Personally I wouldn't be so sure

LamieRobertson · Mar 21, 2015

Tom Hark said:
Got to be a welcome move to release people from the shackles of pitiful levels of annuity. If nothing else, you can leave your pot to your kids. On the other hand, pretty sure the main Tory thinking is that huge numbers of qualifying pensioners will go out and pump money into the economy by blowing large chunks of their pension pot on kitchens, cruises and cars, thereby artificially making the underlying figures look much more healthy than they actually are. Sadly though, large numbers of pensioners will be robbed of their entire pot by scammers. There's enough of those cleaning out the gullible even before the April changes.

You make a valid point about annuities ..the companies who sell them have had it far too cushy for too long and perhaps now will be more innovative with the products they offer..although I've seen little evidence so far..maybe that will change when next years changes take place.
As regards to the tax take on money spent you also have to think about the immediate amount people will pay at there marginal rate when taking money out

theboybilly · Mar 21, 2015

Blackadder said:
I may cash in my AVCs and buy Premium bonds instead. Just thinking about it at the moment. The annuity they will buy is pitiful.

My sister-in-law has a fair few Premium Bonds and regularly wins something as a result. Her bank manager has told her she could never get that sort of return via the usual investments. It's not guaranteed of course but at the moment she says she's doing very well

Alex Alex Dawson oo! oo! · Mar 21, 2015

LamieRobertson said:
You make a valid point about annuities ..the companies who sell them have had it far too cushy for too long and perhaps now will be more innovative with the products they offer..although I've seen little evidence so far..maybe that will change when next years changes take place.
As regards to the tax take on money spent you also have to think about the immediate amount people will pay at there marginal rate when taking money out

Don't buy an annuity is my take on this and has been for years; I'm not forced to do so.

happypig · Mar 21, 2015

I may be being dense here but I don't understand which pension is it we can cash in ?

I have 2/3 pensions to come: a state pension and a BT pension which is split into 25 years of a final salary pension and (IIRC) a bit from 2009 onwards which is a "money purchase" thingy (dependant on overall contributions rather than salary). I also get a lump sum on retirement which I'm hoping will be in 5-6 years when I'm 58.

So which one can I sent to Mr Obasanjo of Lagos ?

Garage_Doors · Mar 21, 2015

Alex said:
Don't buy an annuity is my take on this and has been for years; I'm not forced to do so.

What are the option? I thought that was all you could do with the pension pot when you retire?

Steve Foster · Mar 21, 2015

As an.Independent Financial Adviser, we have found that whilst a number of our clients have expressed an interest in releasing their pension funds, most people won't. When they realise how much tax they will pay, if funds are needed relinquishing other assets is usually more tax efficient. For those with no net relevant earnings, withdrawing funds up to the personal allowance is sensible. For those who are in poor health & want to enjoy their monies, rather than passing the funds on, there is a case.

What these new reforms do, is to give the policyholder empowerment as to do what they want with their pension funds. Even annuities are an option & appropriate for many, especially those who are risk averse & require a guaranteed income.

For those who do not need their pension funds, death benefits have been improved too.

The reforms are welcomed & without being political the opposition have no answer or plans to change the new legislation as far as I am aware.

LamieRobertson · Mar 21, 2015

Alex said:
Don't buy an annuity is my take on this and has been for years; I'm not forced to do so.

''
I manage my pension pot via a SIPP and currently take income under ''capped income drawdown'' which will change to ''flexi income''..i manage my own pension pot and have generated a better return than an annuity would have given me when i first entered into this arrangement and haven't been tied into any arrangement. Of course if someone bought an annuity when interest rates were high they might be more than happy. I guess i have an interest in financial markets and managing my small pot is almost a hobby.

LamieRobertson · Mar 21, 2015

Steve Foster said:
As an.Independent Financial Adviser, we have found that whilst a number of our clients have expressed an interest in releasing their pension funds, most people won't. When they realise how much tax they will pay, if funds are needed relinquishing other assets is usually more tax efficient. For those with no net relevant earnings, withdrawing funds up to the personal allowance is sensible. For those who are in poor health & want to enjoy their monies, rather than passing the funds on, there is a case.

What these new reforms do, is to give the policyholder empowerment as to do what they want with their pension funds. Even annuities are an option & appropriate for many, especially those who are risk averse & require a guaranteed income.

For those who do not need their pension funds, death benefits have been improved too.

The reforms are welcomed & without being political the opposition have no answer or plans to change the new legislation as far as I am aware.

Nicely and concisely put.

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