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The Pensioner's Page (updated Feb 2021)

This page concentrates on personal pensions. For State Pensions and Benefits see here



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 saw the amount they contribute to their workplace pension automatically increased, but few realise that they can take control of how it’s invested. This is additional to their National Insurance contributions (which go towards the State Pension).

Scheduled changes to the Government’s flagship pension saving programme, “automatic enrolment”, came into effect from April 2018

Previousy, employers had to contribute 1pc of a staff member’s salary to a pension, and individuals must save an additional 1pc, unless they chose to opt out. From April 6 2018 those minimums rose, reflecting concerns that the country is dramatically under-saving for retirement. Employers now have to add 2pc, while the minimum for individuals’ contributions is 3pc.  Even so, with more people living longer it is thought that this will not be sufficient to provide more than a basic retirement.

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 seemed 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.

IMPORTANT  The Pensions Regulator, which oversees workplace schemes, will argue at the High Court that "pension liberation" schemes  for under 55s should be declared illegal. Currently, liberation schemes are seen as vehicles that cause pension savers to break tax rules, rather than illegal. Savers who are persuaded to transfer their pensions to liberation schemes (before the age of 55) face losing more than half of their savings in tax penalties. But the court case could see liberation operations declared "invalid" pension schemes, which would in effect ban them from operating.
If Google allows the placement of any adverts on this site which suggest taking cash from your pension BEFORE the age of 55 please let me know and do not click on them. Such adverts will be blocked forthwith.

Interesting 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 (including the National Insurance surplus*) 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..

* Didin't know the government pension had surpluses ?  In fact there are some each year and they are 'lent' to the government to pay down the growing National Debt. What in fact happens to the billions of surplus cash is that it is 'invested' in government stock at a pitfil rate of return (normally less than the inflation rate.  If this sum had been wisely invested in stocks over the years it would have exceded the inflation rate many times over.

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

The triple lock (State) 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.

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