[Misc] Retirement

[Carlos BC]

Today's the day.

Let's see how the retirement landscape changes.

I'm praying he has to give notice of increasing the Normal Minimum Pension Age from 55 - surely the pension companies would need to time to implement any changes. Hopefully my summer isn't ruined.

Beyond that they've certainly trial-ballooned bringing forward the age at which state pension kicks in to 68. Just a question of when the new date is.

Increasing the MPAA to £10K looks like a potential positive change.

12:30 today.

I don't think he will change the current minimum age of 55. This is already scheduled to rise to 57 from April 2028, a mere five years away. It would cause an admin nightmare across all pension providers and piss off a huge number of people looking to access pensions in the next 5 years.

Part of the reason for not having a flat rate of tax relief on contributions (for example 30% rather than higher rate tax payers getting 40% and basic 20%) is that it is is not simple to put in place by providers. Particularly in public sector pensions.
Can't see them scrapping the ability to access at 55 with all the nightmares that will bring for what would be a relatively small gain for government coffers.

 

[nicko31]

From what I’ve read, a middle ranking teacher could easily retire on a pension of 40k pa at 60. That requires a 1.5m+ pot for anyone on a DC scheme….well over the current LTA.

Really? Mid rank teacher is about £40k salary, so on an 80th's scheme its about £20k (assume 40 years service). A £500k pot would do it ...

 

[A mex eyecan]

Couple of grand in your pension every month from about the age of 30, should do it

so that would be another 24k on top of the salaries of the teachers …… mmmm

 

[GOM]

...

I'm praying he has to give notice of increasing the Normal Minimum Pension Age from 55 before 2028 - surely the pension companies would need time to implement any changes. Hopefully my summer isn't ruined.

..

It's not happening until 2028 so plenty of time to update their software to 57 instead of 55 and change any documents.

 

[Tim Over Whelmed]

I'm going to talk to the bank but always good to get advice.
Looking at trying to save about £750 pm (paid off mortgage) is it best to stick in an ISA or put in my pension?
I've got a draw down pension but reluctant to pay too much tax pa. I'm 59 and wanting to go part time in two years or so.
Any advice is welcome before I speak to the bank.

I've a blend of the two but have always maxed the ISA first, there's not the tax benefit going in but I like the idea of tax free coming out!

 

[A mex eyecan]

Duplicate sorry

 

[sparkie]

Bloody hope so I want to tap into one of my pensions when I'm 55. 26 days away.

I'm pretty certain any change would be too complicated to implement "overnight" but it has been something I've been worrying about and researching a lot.

 

[nicko31]

I'm going to talk to the bank but always good to get advice.
Looking at trying to save about £750 pm (paid off mortgage) is it best to stick in an ISA or put in my pension?
I've got a draw down pension but reluctant to pay too much tax pa. I'm 59 and wanting to go part time in two years or so.
Any advice is welcome before I speak to the bank.

If you are a higher rate payer putting in at 59 seems attractive as you 25% will be tax free on drawdown. Rest at your marginal rate.

Maybe try and find an IFA and they can look at your whole situation

 

[nicko31]

Well so much for the increase from £1.08m to £1.8m in lifetime allowance, they've abolished the limit entirely.

Proper tax cut for the 1%

 

[dazzer6666]

Really? Mid rank teacher is about £40k salary, so on an 80th's scheme its about £20k (assume 40 years service). A £500k pot would do it ...

I had a projected pension of 12.5k, the quoted transfer value was almost 500k. Agree what I read doesn’t look right though…..

 

[Doonhamer7]

95% of people in this country would give anything for a £1m pension pot.

Giving £250,000 tax free and at a very conservative 4% giving annual income of £30,000 for decades. Add the £20,800 state pension for a couple at 66 or 67. In a non-mortgaged home in retirement.

Wealthy individuals also have vast sums in stock and shares ISA’s.

Meanwhile millions worry about heating their home, buying sufficient food.

I thought the rule of 4% was widely now discredited (it’s certainly not conservative) as it was based on a veray high percentage of USA stocks in the 1980s

 

[dazzer6666]

I thought the rule of 4% was widely now discredited (it’s certainly not conservative) as it was based on a veray high percentage of USA stocks in the 1980s

Projected rates are capped by the FCA in marketing material, forecasts etc I think - but at 2% for low risk, 5% for medium and 8% for high. Historically 4% is conservative even for a medium risk fund.

 

[Mancgull]

A sustainable income level of 4% had recently been discredited but who knows going forwards with the recent increases to interest rates and inflation.
The most important thing is to keep the level of income being taken, under review.
So if in the previous 12 months the fund goes down, reduce your income level ( if possible) to say 4% of the reduced fund value and continue to review.... or increase if it’s gone up.
The key aspect is to continuously review.
Interesting that the Budget yesterday announced the abolishment of the Lifetime Allowance but Labour are saying they will reverse this ( apart from doctors) if they get into power. Lifetime Allowance planning is now in limbo for those fortunate enough to have this as an issue.
Frustrating scenario for people like myself who are Financial Advisers.

 

[Tim Over Whelmed]

Having thought about my ISA plan, i.e. maxing it out for the Wife & I for the past few years, aren't the Govt gaining today but facing a massive downside tomorrow? I just wonder if they can ever remove the tax free benefit from these plans? I guess not, but guess they may withdraw the ability to do this later?

 

[dazzer6666]

Having thought about my ISA plan, i.e. maxing it out for the Wife & I for the past few years, aren't the Govt gaining today but facing a massive downside tomorrow? I just wonder if they can ever remove the tax free benefit from these plans? I guess not, but guess they may withdraw the ability to do this later?

That would be my guess - and gov v unlikely to retrospectively tax them, but may perhaps limit future contributions. I imagine the upcoming relaxation in pension taxation may actually lead to a bit less flowing into ISAs.

 

[Tim Over Whelmed]

That would be my guess - and gov v unlikely to retrospectively tax them, but may perhaps limit future contributions. I imagine the upcoming relaxation in pension taxation may actually lead to a bit less flowing into ISAs.

I'm not actually drawing down on my pension pots at the moment, and haven't, as yet, taken the 25% lump sum, I'm just wondering whether people convert pensions to an annuity anymore or do they just draw down from the pots?

 

[A mex eyecan]

I'm not actually drawing down on my pension pots at the moment, and haven't, as yet, taken the 25% lump sum, I'm just wondering whether people convert pensions to an annuity anymore or do they just draw down from the pots?

chatting with my advisor a few weeks back he said there had been a bit of an uprise in people taking annuities again. He estimated them providing the 25% tax free then an annual return circa 4 to 4.5k per 100k pot per year. That would be offering an annual increase of 3% per year and on a joint life basis.

It’s all a gamble really as to how long you’re going to live. My D has been retired now for 33 years. His annual increase on his annuity was nearly 6%!. He had a good but not obscenely massive pot. It generated him a nice retirement, nothing flash but comfortable with 2 average type holidays a year. However, now at the grand age of mid nineties his annual income is quite frankly incredible, the compound of the annual increases has really started to kick in, but at a time of life when he spends very little, so it pays majority of his nursing home fees.

If he had only lived to say late 70’s he would have had an poor return, if he had taken draw down, had there been such a thing back then, he would have run out of money quite some while back. Pays your money, takes your chance.

However as I’m now at the stage of having to decide in the next 2-3 years which way I will go it’s just highlighting the risks of what to do. Heads you win, tails you loose.

 

[Weststander]

Duplicate sorry

Accepted.

On this occasion

 

[Weststander]

I'm not actually drawing down on my pension pots at the moment, and haven't, as yet, taken the 25% lump sum, I'm just wondering whether people convert pensions to an annuity anymore or do they just draw down from the pots?

I've read quite a bit on this.

Headline annuity rates look good, but recheck for index-linked (a must) and spousal continuation on death, and the rates look modest at best.

 

[banjo]

chatting with my advisor a few weeks back he said there had been a bit of an uprise in people taking annuities again. He estimated them providing the 25% tax free then an annual return circa 4 to 4.5k per 100k pot per year. That would be offering an annual increase of 3% per year and on a joint life basis.

It’s all a gamble really as to how long you’re going to live. My D has been retired now for 33 years. His annual increase on his annuity was nearly 6%!. He had a good but not obscenely massive pot. It generated him a nice retirement, nothing flash but comfortable with 2 average type holidays a year. However, now at the grand age of mid nineties his annual income is quite frankly incredible, the compound of the annual increases has really started to kick in, but at a time of life when he spends very little, so it pays majority of his nursing home fees.

If he had only lived to say late 70’s he would have had an poor return, if he had taken draw down, had there been such a thing back then, he would have run out of money quite some while back. Pays your money, takes your chance.

However as I’m now at the stage of having to decide in the next 2-3 years which way I will go it’s just highlighting the risks of what to do. Heads you win, tails you loose.

I thought you could split your pot between drawdown and/ or an annuity? Some clever bod will be along soon and put me right.