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The Pensioner's Page


Read the latest on State Pensions:  https://www.independentage.org/information/what-does-new-financial-year-mean-for-me?

From April 2018, millions of employees will see the amount they contribute to their workplace pension automatically increased, but few realise that they can take control of how it’s invested.

Scheduled changes to the Government’s flagship pension saving programme, “automatic enrolment”, come into effect at the start of the new tax year in April.

Currently, employers have to contribute 1pc of a staff member’s salary to a pension, and individuals must save an additional 1pc, unless they choose to opt out.
From April 6, those minimums will rise, reflecting concerns that the country is dramatically under-saving for retirement. Employers will have to add 2pc, while the minimum for individuals’ contributions will be 3pc.

All kinds of promises were being made by the various parties in the run up to the election.  But how to pay for them is the often unanswered question. More on that later. It seems likely that the Winter Heating payment may well be taxed.  It does seem reasonable that all kinds of allowances should be taken into account, including things like Child benefits

There was a  rapid U-turn on the proposal to let people who were forced to buy annuities (up until the 2015 budget) to offer them for sale.  A number of companies were rubbing their hands with glee at the prospect of buying up annuities from cash-strapped pensioners at half their value. So, not only would  they have been ripped off once by having to buy poor paying annuities, they would be ripped off again and left in an even worst state in their old age. HM Gov. suddenly realised that they (or someone else) would have to pick up the bill for supporting old people above the bread line (and not trusting the financial sector to give fair value), have stopped the bill in its tracks. After all, they will already have to pick up the pieces of the decision to let people splurge their pension pots. I say again, the worst political decision of the century - so far.

The Autumn Budget 2017
Click the link to see the rather optimistic summary of the UK economic situation

The next budget will be in November 2018.  The Spring Budget is being dropped

Managing money when the banks don't pay
Article by Hargreaves Lansdowne. What happens to your pension when you die

Hargreaves Lansdown have excellent aricles to help you make decisions e.g. Annuities, drawdown, retirement options, pension calculator, SIIPs

Pension pots What happened to folk who opted to invest their pension pot in 2015, when that became possible ?  It must have been worrying, initially, as the markets fell almost immediately after but have recovered since.  If someone put 100,000 in stocks and shares in 2015 and decided to cash in 4% per annum, after the initial fall the extra punch of shares exposure helped these pots recover when markets rallied by the end of the two years, to 105,475, so they would have done better than if they had bought an annuity (and would still have their capital intact).

So, one does wonder why the expression "Pension Black Hole" has become so commonplace.  Wisely invested, such pension funds should be overflowing like a cornucopia !  Could it be that companies, particularly those sailing close to the financial wind, have found such funds to be a cheap way to find cash ? Names such as BHS, Carilion and Tata Steel come to mind.

Interesting articles from this group:  https://www.ageing-better.org.uk

The triple lock Pension.
Things have changed  since the 2016 Budget. George Osborne is no longer Chancellor and Baroness Altman is no longer chief honcho on pensions,  Since leaving the position she has indicated that the Triple Lock Pension guarantee may not be sustainable in the long term,   Since 2010, the "triple-lock" policy has meant state pensions rise by the inflation rate, average earnings or 2.5% - whichever is highest.

Although Downing Street has reiterated its commitment to the Triple Lock, Baroness Altman pointed out that in a low, nil or negative inflation rate, promising a 2.5% increase would cost billions, which might not be justifiable. But by 2018 inflation was ahead of wages.
However, the latest Autumn Statement by Philip Hammond in 2016 indicated that the Triple Lock will remain for the current parliament (i.e. until 2020.)
Also proposed was a 2.2% government bond (from Spring 2017) but only up to 3,000. It is available to anyone over 16. But at 66 (net) per annum interest it only looks good against the paltry sums being offered for cash savings. However the 'Pensioner's Bond', which finished in February 2018 has now been reinstated for three more years but at 2.2% rather than the 4% rate.  Still better and more secure than any other cash alternative and with a much higher limit.  With withdrawal costing just 3 month's interest and the amount withdrawn this is about as good as it gets for cash in 2018.

GENERAL ADVICE (Citizens Advice Bureau) http://www.adviceguide.org.uk/

Excellent advice on the new pension freedoms from the Age Action Alliance

Ageuk.org.uk - Expert help and advice you can now  be obtained every day of the year from 8am to 7pm on a local number, 024 7643 3043.

SIPPS
I have frequently mentioned that the biggest investment bargain of all time has been the  SIPP  Self Invested Personal Pension which allows someone up to the age of 75 to add to a pension pot (up to 40,000 of their annual salary if they can afford to do so) with the help of the taxman. Up to three years of unused SIPP can be invested.  In fact, the wealthier the worker (employer of employee) the more the taxman contributes, up to 45% of the amount invested. There was a hint that Mr Osborne might restrict this particular gravy train, which, on its own, would diminish his deficit by many billions.  NOT SO !  Under pressure from his colleagues he dropped this idea, although the total amount that could be put away has been reduced to a piffling 1 million. But the whisper that the tax relief might be reduced to a standard 25 - 30 percent resulted in a massive, sudden, increase in pension savings (according to one source as much as a 65% increase )  Why not?  This is a gift from everyone to you !
Withdrawals from the investments can be made from the age of 55. But one needs to look into the tax aspects.

Incidentally, many do not realise that, up to the age of 75, almost anyone can contribute to a SIPP (and get tax contributions), even non-earners and children, although the amount they can add each year may be less. Check the complicated rules.

The following chart demonstrates clearly how this scheme benefits the wealthy