New Pension Proposals Explained 1

This is exactly how I pictured the partners lounge

The most talked about and biggest surprise in the Budget was the announcement on changes to pensions.

Under the current system three quarters of those retiring had to buy an annuity with only very small or very large pensions having flexibility.

Old Pension

From April 2015 the system for accessing defined contribution pensions at retirement will be….

New Pension

Under the current tax system, people are charged 55% if they choose to withdraw all of their defined contribution pension savings at the point of retirement. This means the majority of people instead purchase an annuity and receive taxable income over the course of their retirement. Under the new system, an individual will be able to withdraw their savings at a time of their choosing subject to their marginal rate of income tax. The government anticipates that under these circumstances some people will choose to draw down their pension sooner in order to suit their personal situation. This will increase income tax revenue in the short to medium term.

…. Budget Report 2014

steve@bicknells.net

Do you think it should be compulsory to pay into a pension? 2

Pension Scheme

A government think thank, Policy Exchange, have urged the government to make it compulsory that people save for their retirement. Their proposal the ‘Help to Save’ Scheme is aimed at avoiding 11 million people ending up in ‘Pension Poverty’. In a BBC article….

James Barty, author of the report, said the lack of people saving for their retirement was putting an “intolerable burden on the state” which “needs to be addressed sooner rather than later”.

He said: “With an ageing population, putting money aside for later life should be seen in the same context as National Insurance contributions, taxes and even education – an obligation that falls on everyone in society.

“‘Help to Save’ will prevent the state from having to pick up the tab for people who haven’t put aside enough money for later life.”

Under the plans, the opt-out in the Government’s auto-enrolment scheme would be removed making it obligatory for people to save for their retirement

Individual pension contributions would also increase as incomes rise over time.

According to the report, someone earning the average wage – £27,000 – will need to save over six and a half times more than they currently do to generate the Government’s recommended retirement income of £16,200.

The average pension pot is estimated to be just £36,800, which on current annuity rates is enough to generate a retirement income of £1,340.

The paper said that an average earner would need a pot of £240,000, assuming they receive the full single tier pension.

Are you saving enough for your retirement? should saving be compulsory?

steve@bicknells.net

 

Are you a Business Owner with No Private Pension? Reply

You’re not alone its estimated that 1.3 million business owner have no private pension that’s approx one in two UK Business Owners (according to Prudential).

https://www.moneyadviceservice.org.uk/en/articles/uk-business-owners-lack-pension-savings

Nearly one in three business owners (or 792,000 people) say they will be entirely reliant on the State Pension when they come to retire, compared with twice as many people across all employment types retiring this year in the UK.

Other self-employed workers will supplement their retirement incomes with money from a mix of alternative sources:

  • half will draw on other savings and investments
  • one in four will use equity from their properties or plan to use their partners’ pensions, and
  • one in five plan to use funds from the eventual sale of their businesses.

Most of us know we should be saving more for retirement and the government knows that we need to save more too. That’s why they give pensions tax breaks and employers are being forced to auto enrole staff into pension schemes and make payments.

But how many of us stand a chance of saving £400k into our pensions? it’s a huge amount of money and yet it only buys a modest pension. Work out your strategy now before its too late.

https://stevejbicknell.com/2012/07/29/what-is-the-minimum-pension-fund-you-will-need-to-retire-400k/

steve@bicknells.net

 

What is the minimum Pension Fund you will need to retire? £400k? 2

Most of us know we should be saving more for retirement and the government knows that we need to save more too. That’s why they give pensions tax breaks and employers are being forced to auto enrole staff into pension schemes and make payments.

But how many of us stand a chance of saving £400k into our pensions? it’s a huge amount of money and yet it only buys a modest pension.

And it doesn’t sound like you can rely a on state pension or credit either, article below from Investors Chronicle…

A pensioner couple needs a weekly budget of £231 to meet a minimum income standard (£12,000 a year) that allows them to participate fully in society, according to the Joseph Rowntree Foundation. That £12,000 will enable them to eat out once a month and holiday away from home once a year on a half-board coach-tour package.

This may seem quite a modest amount. In fact, the income level guaranteed for pensioners by Pension Credit in 2012 is just over what is needed to meet the minimum income standard, and the proposed universal pension will be more. But don’t let that lull you into complacency.

The universal pension is just a proposal at the moment, and if you have investments, you are unlikely to qualify for the current Pension Credit, meaning £12,000 becomes a significant ball-park figure on which to base your investment plans.

http://www.investorschronicle.co.uk/2012/07/12/comment/smart-money/the-price-of-a-decent-retirement-MAnT9XzYoD1yOO5Xg4wr2N/article.html

Breakdown of minimum income standard for pensioner couple

 

Item £ per week
Food £60.46
Alcohol £8.67
Tobacco 0
Clothing £12.09
Water rates £6.44
Household insurances £1.82
Fuel £13.72
Other housing costs £4
Household goods £13.56
Household services £8.23
Personal goods and services £20.33
Other travel costs £13.51
Social and cultural participation £49.53
Total £213.48

Source: Joseph Rowntree Foundation, July 2012

 

steve@bicknells.net