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[Bigron]

I've just had my Tax Code notice, and once again I am wondering why, after having paid tax all of my working life on my salary, do the robbing sons-of-bachelors tax me AGAIN on my State Pension?
I know that theres F all I can do about it - they make the rules - but why? 

Ron.

[Lizzie Zoom]

I've just had my Tax Code notice, and once again I am wondering why, after having paid tax all of my working life on my salary, do the robbing sons-of-bachelors tax me AGAIN on my State Pension?
I know that theres F all I can do about it - they make the rules - but why? 

Ron.

Don't worry Ron, you should have a company pension like mine.  They tax me on that, and just include my State pension in the total to be calculated for tax.  It is all because this is "unearned income", and when we were paying into the pension scheme the amount being paid in was not taxed!

So much for encouraging youngsters to pay into a pension scheme eh?

This is why I have no conscience at all about becoming older and costing the State more to look after.  We have, and still are, paying our dues!

[Bigron]

That is just downright fraud - no way was it unearned! I earned every penny and they took it from me without my having any option.
I agree with you about availing myself of the health care due to me, now that I am crumbling away, having reached 29 years of age - but I'm worth it!

Ron.

[Varche]

I am surprised there is tax topay on a UK statepension. I believe it is 70thin the world in amount. Behind the likes ofMexico. Worst in Europe.. Thanks tosuccessive governments.. Cheapskates.

[minifreek]

Is it not because your pension is above a certain tax threshold....?

In other words, you must have a good private pension.... combined with the state pension....?

[STEMO]

I am surprised there is tax topay on a UK statepension. I believe it is 70thin the world in amount. Behind the likes ofMexico. Worst in Europe.. Thanks tosuccessive governments.. Cheapskates.

There is no tax to pay on a state pension. You only pay tax if the value of your state pension plus any occupational pension takes you over the tax threshold.
I will get a full state pension in May, £164 a week, but I won't pay any tax on it.

[Varche]

STEMO, is that a typo?  I have had my paperwork and it is £146. . I thought thatwas the max. If it isntmabe Ineed to query it.........

[Field Marshal Dr. Opti]

The government wants to make it compulsory for all people of working age to pay into a private pension scheme.

What happens when such schemes go 'tits up'? Who is responsible?

[Bigron]

I do have a small occupational pension, but that also was taken out of my salary - so the same applies - I HAVE BEEN ROBBED! 

Ron.

[STEMO]

STEMO, is that a typo?  I have had my paperwork and it is £146. . I thought thatwas the max. If it isntmabe Ineed to query it.........

No.....it's correct. I'm on the new state pension that started last year, 35 years of NI contributions gets you £164.34 from April.

[STEMO]

I do have a small occupational pension, but that also was taken out of my salary - so the same applies - I HAVE BEEN ROBBED! 

Ron.

Yes, Ron, of course you have.
Robbed by the taxman, robbed by paying VED, robbed by speeding fines. No one else....just you.

[Field Marshal Dr. Opti]

I am surprised there is tax topay on a UK statepension. I believe it is 70thin the world in amount. Behind the likes ofMexico. Worst in Europe.. Thanks tosuccessive governments.. Cheapskates.

There is no tax to pay on a state pension. You only pay tax if the value of your state pension plus any occupational pension takes you over the tax threshold.
I will get a full state pension in May, £164 a week, but I won't pay any tax on it.

If TB's cull was to include everybody claiming a pension just think how much money the country would save.

Logan's run could be implemented at 65.

[STEMO]

I am surprised there is tax topay on a UK statepension. I believe it is 70thin the world in amount. Behind the likes ofMexico. Worst in Europe.. Thanks tosuccessive governments.. Cheapskates.

There is no tax to pay on a state pension. You only pay tax if the value of your state pension plus any occupational pension takes you over the tax threshold.
I will get a full state pension in May, £164 a week, but I won't pay any tax on it.

If TB's cull was to include everybody claiming a pension just think how much money the country would save.

Logan's run could be implemented at 65.

A valid contribution....as usual.

[STEMO]

I do have a small occupational pension, but that also was taken out of my salary - so the same applies - I HAVE BEEN ROBBED! 

Ron.

Yes, Ron, of course you have.
Robbed by the taxman, robbed by paying VED, robbed by speeding fines. No one else....just you.

What about council tax? You haven't had a moan about that one yet.

[Bigron]

I do have a small occupational pension, but that also was taken out of my salary - so the same applies - I HAVE BEEN ROBBED! 

Ron.

Yes, Ron, of course you have.
Robbed by the taxman, robbed by paying VED, robbed by speeding fines. No one else....just you.

You're a spiteful bastard on the quiet, aren't you?

Ron.

[Field Marshal Dr. Opti]

I do have a small occupational pension, but that also was taken out of my salary - so the same applies - I HAVE BEEN ROBBED! 

Ron.

Yes, Ron, of course you have.
Robbed by the taxman, robbed by paying VED, robbed by speeding fines. No one else....just you.

What about council tax? You haven't had a moan about that one yet.

Two free months at the moment.

[Viral_Jim]

I do have a small occupational pension, but that also was taken out of my salary - so the same applies - I HAVE BEEN ROBBED! 

Ron.

Surely your occupational pension was taken pre-tax (ie you didn't pay tax on it the first time around), I don't think it will have been taxed twice.

The government wants to make it compulsory for all people of working age to pay into a private pension scheme.

But of course!

The great fallacy is that we contribute to our own state pensions through tax, we don't and never have! We all pay for our parents' generation, UK state pension has never been funded by a "pot". Which is why there is so much rancour from millenials on the subject of private pensions. By pushing people into private pensions and away from the state pension, ours will be a generation that funds the retirement of both ourselves and the generation before  .

If you look at how much you'd have to put away in tax to get £150/week, index linked retiring at 65 (or 67 come to that), it would make your head spin!

EDIT: According to aviva you would need a fund of £260,000 to get you an RPI index linked income of about £150pw, so not even triple locked

[STEMO]

I do have a small occupational pension, but that also was taken out of my salary - so the same applies - I HAVE BEEN ROBBED! 

Ron.

Yes, Ron, of course you have.
Robbed by the taxman, robbed by paying VED, robbed by speeding fines. No one else....just you.

You're a spiteful bastard on the quiet, aren't you?

Ron.

No..just a normal everyday bloke...who gets fed up of listening to whining bastards who blame everyone and everything for their own position in life. We all pay taxes, it's how you get a state pension in the first place. Think yourself lucky you didn't leave uni with £50000 worth of debt.

[Field Marshal Dr. Opti]

I do have a small occupational pension, but that also was taken out of my salary - so the same applies - I HAVE BEEN ROBBED! 

Ron.

Yes, Ron, of course you have.
Robbed by the taxman, robbed by paying VED, robbed by speeding fines. No one else....just you.

You're a spiteful bastard on the quiet, aren't you?

Ron.

No..just a normal everyday bloke...who gets fed up of listening to whining bastards who blame everyone and everything for their own position in life. We all pay taxes, it's how you get a state pension in the first place. Think yourself lucky you didn't leave uni with £50000 worth of debt.

My understanding is that only students who leave university for a well paid job pay back the full amount. Most don't.

In reality it is a 9% tax on earnings of £21000 or over. If you  earn less than £21000 you pay nothing. Debt lasts 30 years.

[LC0112G]

STEMO, is that a typo?  I have had my paperwork and it is £146. . I thought that was the max. If it isn't maybe I need to query it.........

If you reached state pension age on or before 5/4/2016 then your state pension is based on the 'old rules' calculation which is the basic old state pension (£125.95 p/w in 2018/19) plus a SERPS/S2P amount which can be up to £160 p/w. So it is entirely possible to get £280+ p/w from the state pension, which is up to £14900 per annum. The person allowance for 2018/19 is £11850, which means that it IS possible for someone who only gets the SP to be liable for some income tax on it ((14900-11850) * 20%) = £610 p/a

If you reach(ed) SPA after 5/4/2016 then your SP amount is based on the 'new rules', and the maximum SP is/will be £159 p/w, or £8270 p/a for 2018/19. So no-one who retires after 2016 will be liable for income tax on their SP.

Any 'company', 'private' or 'personal' pension income is then added onto your SP amount, and will push you into paying income tax once the total exceeds your personal allowance.

All the above relies on you having enough qualifying NI years (30 under the old system, 35 under the new system)

[LC0112G]

I do have a small occupational pension, but that also was taken out of my salary - so the same applies - I HAVE BEEN ROBBED! 

Ron.

It was either...

1) Taken out of your salary - PRE TAX - so you paid no tax (or NI) on the contributions.
2) Paid into the scheme after tax (and NI) was deducted, and the govt then refunded the tax directly to the scheme.

Pension schemes are the most tax efficient way of saving money for retirement. You pay no tax on money going into the scheme, no tax on growth within the scheme, and can then withdraw 25% of the total tax free after age 55. You pay normal income tax rates on the remaining 75% although some of this may be 0% rated too if your SP amount is less than your personal allowance (£11850 p/a)

[STEMO]

STEMO, is that a typo?  I have had my paperwork and it is £146. . I thought that was the max. If it isn't maybe I need to query it.........

If you reached state pension age on or before 5/4/2016 then your state pension is based on the 'old rules' calculation which is the basic old state pension (£125.95 p/w in 2018/19) plus a SERPS/S2P amount which can be up to £160 p/w. So it is entirely possible to get £280+ p/w from the state pension, which is up to £14900 per annum. The person allowance for 2018/19 is £11850, which means that it IS possible for someone who only gets the SP to be liable for some income tax on it ((14900-11850) * 20%) = £610 p/a

If you reach(ed) SPA after 5/4/2016 then your SP amount is based on the 'new rules', and the maximum SP is/will be £159 p/w, or £8270 p/a for 2018/19. So no-one who retires after 2016 will be liable for income tax on their SP.

Any 'company', 'private' or 'personal' pension income is then added onto your SP amount, and will push you into paying income tax once the total exceeds your personal allowance.

All the above relies on you having enough qualifying NI years (30 under the old system, 35 under the new system)

£164 from April, Malcolm.

[Viral_Jim]

In reality it is a 9% tax on earnings of £21000 or over. If you  earn less than £21000 you pay nothing. Debt lasts 30 years.

Almost exactly correct, except now they wait until you reach 70 to write it off. I'm counting down - 9 more months and I'll be free of it. For the record, I don't begrudge paying it in the slightest, but the extra £400pcm will be most welcome!

All a far cry from the days of student grants and claiming unemployment benefit in the holidays, which some on here will doubtless remember

[LC0112G]

The government wants to make it compulsory for all people of working age to pay into a private pension scheme.

Wrong tense. All employees and employers are now required to pay into PP schemes unless the employee (foolishly IMHO) opts-out.

What happens when such schemes go 'tits up'? Who is responsible?

The scheme can't go bust. The scheme is a wrapper company (like the Prudential, Standard Life, Aviva etc) who hold the investments in your name, but the funds are firewalled from the company funds. You typically use your money to buy units in one or more fund within the pension wrapper. If the wrapper company goes bust, then you still own all the assets that are ring fenced from them. 

The fund(s) you invest in buy shares in many hundreds of UK and worldwide companies. Some of these may boom and some may go bust but since each company only represents a fraction of the shares held by the fund, it is vanishingly unlikely that you will lose all your money. The only way you could lose all your money is if you don't buy funds, but instead only buy shares in one company (such as Carillion, Northern Rock etc) and that company goes bust. However investing in a single company is suicidially high risk investing, and no normal person should do it..   

[Field Marshal Dr. Opti]

In reality it is a 9% tax on earnings of £21000 or over. If you  earn less than £21000 you pay nothing. Debt lasts 30 years.

Almost exactly correct, except now they wait until you reach 70 to write it off. I'm counting down - 9 more months and I'll be free of it. For the record, I don't begrudge paying it in the slightest, but the extra £400pcm will be most welcome!

All a far cry from the days of student grants and claiming unemployment benefit in the holidays, which some on here will doubtless remember

Grammar school for me but no university place presumably because I was 'too fick'

Mind you in the mid-seventies only about 4% went to university which meant great career prospects for all who attended. These days everyone and the cats mother goes to 'Uni' which sounds good but in reality is the exact opposite.

[Field Marshal Dr. Opti]

The government wants to make it compulsory for all people of working age to pay into a private pension scheme.

Wrong tense. All employees and employers are now required to pay into PP schemes unless the employee (foolishly IMHO) opts-out.

What happens when such schemes go 'tits up'? Who is responsible?

The scheme can't go bust. The scheme is a wrapper company (like the Prudential, Standard Life, Aviva etc) who hold the investments in your name, but the funds are firewalled from the company funds. You typically use your money to buy units in one or more fund within the pension wrapper. If the wrapper company goes bust, then you still own all the assets that are ring fenced from them. 

The fund(s) you invest in buy shares in many hundreds of UK and worldwide companies. Some of these may boom and some may go bust but since each company only represents a fraction of the shares held by the fund, it is vanishingly unlikely that you will lose all your money. The only way you could lose all your money is if you don't buy funds, but instead only buy shares in one company (such as Carillion, Northern Rock etc) and that company goes bust. However investing in a single company is suicidially high risk investing, and no normal person should do it..

Are you saying it is impossible for a company to dip into the pension scheme with the intention of 'paying it back at a latter date'?

[STEMO]

The government wants to make it compulsory for all people of working age to pay into a private pension scheme.

Wrong tense. All employees and employers are now required to pay into PP schemes unless the employee (foolishly IMHO) opts-out.

What happens when such schemes go 'tits up'? Who is responsible?

The scheme can't go bust. The scheme is a wrapper company (like the Prudential, Standard Life, Aviva etc) who hold the investments in your name, but the funds are firewalled from the company funds. You typically use your money to buy units in one or more fund within the pension wrapper. If the wrapper company goes bust, then you still own all the assets that are ring fenced from them. 

The fund(s) you invest in buy shares in many hundreds of UK and worldwide companies. Some of these may boom and some may go bust but since each company only represents a fraction of the shares held by the fund, it is vanishingly unlikely that you will lose all your money. The only way you could lose all your money is if you don't buy funds, but instead only buy shares in one company (such as Carillion, Northern Rock etc) and that company goes bust. However investing in a single company is suicidially high risk investing, and no normal person should do it..

Are you saying it is impossible for a company to dip into the pension scheme with the intention of 'paying it back at a latter date'?

It's not a company pension scheme and, as Malcolm stated, it is ringfenced. The teachers pension scheme is administered by the Prudential, but they certainly can't 'dip into it'.

[LC0112G]

The government wants to make it compulsory for all people of working age to pay into a private pension scheme.

Wrong tense. All employees and employers are now required to pay into PP schemes unless the employee (foolishly IMHO) opts-out.

What happens when such schemes go 'tits up'? Who is responsible?

The scheme can't go bust. The scheme is a wrapper company (like the Prudential, Standard Life, Aviva etc) who hold the investments in your name, but the funds are firewalled from the company funds. You typically use your money to buy units in one or more fund within the pension wrapper. If the wrapper company goes bust, then you still own all the assets that are ring fenced from them. 

The fund(s) you invest in buy shares in many hundreds of UK and worldwide companies. Some of these may boom and some may go bust but since each company only represents a fraction of the shares held by the fund, it is vanishingly unlikely that you will lose all your money. The only way you could lose all your money is if you don't buy funds, but instead only buy shares in one company (such as Carillion, Northern Rock etc) and that company goes bust. However investing in a single company is suicidially high risk investing, and no normal person should do it..

Are you saying it is impossible for a company to dip into the pension scheme with the intention of 'paying it back at a latter date'?

I'd be reluctant to use the word 'impossible' but basically yes - the rules were changed after the Robert Maxwell/Mirror scandal in the early 1990's.

For Defined Contribution/Private Pensions/SIPPS etc, the company has no access to the funds held in the scheme once they have been paid in. And the pension regulator gets involved if the company falls more than a month or two behind with payments.

For Final Salary/Defined benefit schemes, the trustees of the scheme are supposed to ensure that the main company pays in enough money each year to meet the predicted future liabilities. If the main company goes bust and if the pension fund is then unable to meet the liabilities it goes into the Pension Protection Fund, and the vast majority of pensioners are paid 90% of their entitlement.

[Viral_Jim]

Are you saying it is impossible for a company to dip into the pension scheme with the intention of 'paying it back at a latter date'?

I don’t know how it works with company DB schemes (can’t access one, so of no interest to me) but my DC schemes are more like a savings account in my name. They’re held by aviva, my employer pays into it each month, some taken from my salary, some their contribution. They can’t access, or even see what’s in there and under client money rules, it’s also ringfenced from aviva should they go under.

EDIT: ^^ wot e sed ^^ 

[Mister Rog]

I am surprised there is tax topay on a UK statepension. I believe it is 70thin the world in amount. Behind the likes ofMexico. Worst in Europe.. Thanks tosuccessive governments.. Cheapskates.

There is no tax to pay on a state pension. You only pay tax if the value of your state pension plus any occupational pension takes you over the tax threshold.
I will get a full state pension in May, £164 a week, but I won't pay any tax on it.

Maybe not directly, but your tax code will reduce significantly, so you are much more likely to get taxed on any other income, including any income from a private pension.

[STEMO]

In reality it is a 9% tax on earnings of £21000 or over. If you  earn less than £21000 you pay nothing. Debt lasts 30 years.

Almost exactly correct, except now they wait until you reach 70 to write it off. I'm counting down - 9 more months and I'll be free of it. For the record, I don't begrudge paying it in the slightest, but the extra £400pcm will be most welcome!

All a far cry from the days of student grants and claiming unemployment benefit in the holidays, which some on here will doubtless remember

Plan 2 loans are written off after 30 years.

[LC0112G]

It's not a company pension scheme and, as Malcolm stated, it is ringfenced. The teachers pension scheme is administered by the Prudential, but they certainly can't 'dip into it'.

The Pru couldn't dip into the Teachers pension "fund" even if they wanted to, because there is no "fund". The TPS is simply a promise by the government to pay teachers a pension in the future, and the govt and and will simply tax people to meet that commitment. The same goes for all public sector pensions (Police/Forces/Firemen/NHS/Teachers). These are the so called un-funded public sector schemes. The only exception is the public sector AFAIK is the Local Government Pension Scheme (LGPS) which is "funded" and does have a "pot" of money.

And yes - NSP is £164 p/m from April. Thanks for the correction.

[Mister Rog]

I've just had my Tax Code notice, and once again I am wondering why, after having paid tax all of my working life on my salary, do the robbing sons-of-bachelors tax me AGAIN on my State Pension?
I know that theres F all I can do about it - they make the rules - but why? 

Ron.

I'm in exactly the same boat. My tax code reduced to 2??? something or other. Grrrrr   

[STEMO]

It's not a company pension scheme and, as Malcolm stated, it is ringfenced. The teachers pension scheme is administered by the Prudential, but they certainly can't 'dip into it'.

The Pru couldn't dip into the Teachers pension "fund" even if they wanted to, because there is no "fund". The TPS is simply a promise by the government to pay teachers a pension in the future, and the govt and and will simply tax people to meet that commitment. The same goes for all public sector pensions (Police/Forces/Firemen/NHS/Teachers). These are the so called un-funded public sector schemes. The only exception is the public sector AFAIK is the Local Government Pension Scheme (LGPS) which is "funded" and does have a "pot" of money.

And yes - NSP is £164 p/m from April. Thanks for the correction.

Ah, yes...you've told me that before but, being near pension age and all, I must have forgotten. 

[aaronjb]

I'm in exactly the same boat. My tax code reduced to 2??? something or other. Grrrrr   

Mine starts with a K.. I'm definitely paying for several people's state pensions at this point

[STEMO]

I'm in exactly the same boat. My tax code reduced to 2??? something or other. Grrrrr   

Mine starts with a K.. I'm definitely paying for several people's state pensions at this point

Thanks, mate 

[LC0112G]

STEMO, is that a typo?  I have had my paperwork and it is £146. . I thought thatwas the max. If it isntmabe Ineed to query it.........

Varche  - are you due to reach UK SPA soon? If yes, and if your entitlement is less than the maximum (£159.55 p/w) then you should take a good look at your NI record as you may be able to buy extra years.

For example have you paid NI for 2016-17, or 2017-2018? If not these cost about £735 per year to "buy", and each will boost your pension by about £4.50 p/w (£235 p/a) per year of credit, so it'll only take about 4-5 years to break even.

If your current forecast is £146 then buying 2016-17 and 2017-2018 will boost that to about £155. If your SP date is after 5 April 2019 then you can also buy 2018-19 (rate not published yet but will likely be £750-£800), and add another £4.50 ish p/w taking you up to the current maximum of £159 p/w.

You can also buy pre 2016 years if required, but that can be a minefield depending on your NI contribution record (do you already have 30+ years prior to 2016?) so best ask for qualified advice if that's the case.

https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions

[ronnyd]

I,m certainly glad that i stayed in SERPS when the idiots who ran my companies pension scheme "advised" me otherwise.
When i finally retired 10 years later my state pension was more than my salary on retirement, (albeit working for a different company). But this did take my state pension over the tax due threshold but that,s life. Coupled with my smallish company pension my tax bill now,to me seems excessive but is ,dammit, correct.
 

[Varche]

Thanks for that link.

Yes I am "middle aged" as my 91 year old father calls it, later this month. I saw you could make extra contributions but thought I was getting the maximum. I think I had 33 years when I calculated it. Somewhat surprisingly, I didn't receive the pack you are supposed to get a few months before so I think I had better have a phone call to pensions . It might be because I was contracted out while I worked for a Blue Chip company. I asked for my S1 at the same time and that hasn't arrived yet( A DVD bought on UK ebay on 11th Jan turned up today........)   

[Lizzie Zoom]

I am surprised there is tax topay on a UK statepension. I believe it is 70thin the world in amount. Behind the likes ofMexico. Worst in Europe.. Thanks tosuccessive governments.. Cheapskates.

There is no tax to pay on a state pension. You only pay tax if the value of your state pension plus any occupational pension takes you over the tax threshold.
I will get a full state pension in May, £164 a week, but I won't pay any tax on it.

I have had a DWP letter this morning STEMO stating this has gone up by £13 per week to £177

[LC0112G]

Thanks for that link.

Yes I am "middle aged" as my 91 year old father calls it, later this month. I saw you could make extra contributions but thought I was getting the maximum. I think I had 33 years when I calculated it. Somewhat surprisingly, I didn't receive the pack you are supposed to get a few months before so I think I had better have a phone call to pensions . It might be because I was contracted out while I worked for a Blue Chip company. I asked for my S1 at the same time and that hasn't arrived yet( A DVD bought on UK ebay on 11th Jan turned up today........)

If you have 30 or more pre 2016 NI years then there is absolutely no point in trying to buy more pre 2016 years because you are already at the maximum of 30 years. DWP will happily take the money if you attempt to pay, but it won't increase your entitlement, and they won't refund it when you realise your mistake.

Buying post 2016 years is generally worth it though. They add 1/35th of the full amount per year purchased, so £4.56 per week (£237 p/a). You should be able to buy 2016-17. You cannot buy the year you actually reach SPA though, so if you reach SPA before 6/4/2018 you cannot buy 2017-18. If your birthday is on/after 6/4/2018 you can buy 2017-18 as well, which will add another £4.56 per week.

If you live to the same age as your father you'll get and extra 1352 payments ((91-65)*52) of £4.56 in that period, which is over £6K, for a cost of £735 ish.

[Varche]

A dice worth throwing. If you die within five years then it is the least of your worries. I have a sneaky feeling I cannot match my Dad's lifestyle (no alcohol, excess food though I do get exercise etc). So maybe 80 is achievable.

[LC0112G]

I,m certainly glad that i stayed in SERPS when the idiots who ran my companies pension scheme "advised" me otherwise.

I'm certainly glad I did opt out of SERPS, and I wish I'd opted out for longer. I'm on target for the full state pension of entitlement £159.55, and have an opted out pot of £76K+ which I can start to take in 2 years if I want. So as things turned out that's £76K of free money.

From memory the FSA did some research and found that fewer than 5% of people would be worse off because they had contracted out of SERPS. Hence there are virtually no successful "Ambulance Chasing" companies suing pension co's for mis-selling SERPS opt-outs (unlike PPI claims). So whilst it's possible you are in that 5%, it is vastly more likely someone would be worse off because they had opted out of the company pension scheme (AKA turning down free money).

[ronnyd]

I,m certainly glad that i stayed in SERPS when the idiots who ran my companies pension scheme "advised" me otherwise.

I'm certainly glad I did opt out of SERPS, and I wish I'd opted out for longer. I'm on target for the full state pension of entitlement £159.55, and have an opted out pot of £76K+ which I can start to take in 2 years if I want. So as things turned out that's £76K of free money.

From memory the FSA did some research and found that fewer than 5% of people would be worse off because they had contracted out of SERPS. Hence there are virtually no successful "Ambulance Chasing" companies suing pension co's for mis-selling SERPS opt-outs (unlike PPI claims). So whilst it's possible you are in that 5%, it is vastly more likely someone would be worse off because they had opted out of the company pension scheme (AKA turning down free money).

Must add that i was subsequently advised to remain in SERPS by another adviser when i queried the first ones advice. I then still had a pot of over 80k from my company pension on retirement. This was even after the pension being dormant for about 5 years after leaving the company and the firm i went to had a crap scheme so didn,t bother to join. In fact it made more when it was dormant than when i was making contrubutions. Must say that the the tax free lump sum was a godsend at the time too

[LC0112G]

I,m certainly glad that i stayed in SERPS when the idiots who ran my companies pension scheme "advised" me otherwise.

I'm certainly glad I did opt out of SERPS, and I wish I'd opted out for longer. I'm on target for the full state pension of entitlement £159.55, and have an opted out pot of £76K+ which I can start to take in 2 years if I want. So as things turned out that's £76K of free money.

From memory the FSA did some research and found that fewer than 5% of people would be worse off because they had contracted out of SERPS. Hence there are virtually no successful "Ambulance Chasing" companies suing pension co's for mis-selling SERPS opt-outs (unlike PPI claims). So whilst it's possible you are in that 5%, it is vastly more likely someone would be worse off because they had opted out of the company pension scheme (AKA turning down free money).

Must add that i was subsequently advised to remain in SERPS by another adviser when i queried the first ones advice. I then still had a pot of over 80k from my company pension on retirement. This was even after the pension being dormant for about 5 years after leaving the company and the firm i went to had a crap scheme so didn,t bother to join. In fact it made more when it was dormant than when i was making contrubutions. Must say that the the tax free lump sum was a godsend at the time too

In the early noughties, the advice (for men) was usually to contract back into SERPS at around age 43. However this advice only applied to private pension plans. Many (most?) company pension plans were also opted out, and in order to join the company pension schemes you had to opt out. Even if the company pension was "carp" it was still free money, so joining the scheme (and thus opting out of SERPS) still usually made sense. Contracting out into private pension plans ended in 2012, and into company schemes in 2016.

The FSA research was actually 1.5% (not 5%) were worse off by opting out. And since that research the change to the new state pension means that virtually everyone whose SPA is after 2022 will be better off if they had contracted out - although that is said with hindsight. IFA's couldn't possibly have known in the early noughties that the govt were going to change the state pension rules in 2016.

[Mister Rog]

God, I bloody hate everything to do with pensions except getting the money.

I get a basic State Pension, but I also have two private pension funds, not vast but not bad. Do I buy annuities with one or both ? Or what ? If I take any cash I will get taxed, I've already taken a smallish lump sum. Yes I know the choices, but I don't really like anyof them     Al working life you're told to save in pensions etc, and then when the time comes you almost have to play roulette with the money.

[LC0112G]

God, I bloody hate everything to do with pensions except getting the money.

I get a basic State Pension, but I also have two private pension funds, not vast but not bad. Do I buy annuities with one or both ? Or what ? If I take any cash I will get taxed, I've already taken a smallish lump sum. Yes I know the choices, but I don't really like anyof them     Al working life you're told to save in pensions etc, and then when the time comes you almost have to play roulette with the money.

Do NOT take the annuity offer from whoever the pension supplier is. Go to a good local IFA - Must be an IFA not a FA. You should be able to can find a local one from www.unbiased.co.uk . It's probably the most important financial decision you'll ever take so you either have to learn everything yourself, or get a professional to advise you. If you DIY and stuff it up you're on your own. If a professional messes up you do have some comeback.

IFAs can almost always get a better annuity quote than you will get from talking directly to an insurance company. The IFA will be able to analyse your current pension and other provision and give you the required advice. You will have to pay for this advice, but this should be compensated for by the annuity quote being better.

Generally you can take 25% cash from all your pots completely tax free. The remainder can be used to buy an annuity, and you will then be taxed on any income above your personal allowance from that annuity. There are many annuity options and the IFA can explain them too you. They can also get increased rates if you have health problems - smokers, diagnosed complaints etc.

There are other options apart from annuities (drawdown, UFPLS etc) but these are advanced options and carry significant investment risk, so if you don't understand annuities then they probably aren't suitable for you. You should also note that some older pensions have very valuable guaranteed benefits - things like Guaranteed Annuity Rates (GAR) sometimes 8 or 9%. You'll struggle to get half that on the open market, so if you have a policy with a GAR it is very important you follow the rules to the letter to avoid losing it.

[Doctor Gollum]

What about investing privately as an alternative to auto enrollment schemes?

Is the growth taxed annually or only upon drawdown?

[Viral_Jim]

Depends on how you wrap it up I would imagine. Eg invest via an isa and there’s no tax until drawing it out I believe.

Just investing eg. Holding shares directly and the dividends are taxed as income. No tax on the growtg in investment value until you sell.

Not sure why you would do it that way though, you lose the tax advantage and even under auto enrolment I think the employer will also contribute.

[Migv6 le Frog Fan]

The policy of mandatory private pensions for employers is a very good one imo. The country cant afford to pay the pensions it is committed to paying, but no politician can admit it. They fund it by borrowing money, that future generations will somehow, have to pay back.
At some point in the future (decades overdue) private pensions will be the major income for retired people and the state pension can be quietly put to sleep. Thankfully, long after Ive had mine. 

[LC0112G]

What about investing privately as an alternative to auto enrollment schemes?

Is the growth taxed annually or only upon drawdown?

If you auto enrol then eventually (from 2019) you'll pay in 4% of salary, the govt pays in 1% and your employer pays in 3% (making 8% total). Nothing to stop you opting out and investing your own 4% in a different pension and the govt will pay in their 1%, but there is nothing to make your employer pay in their 3%. So you are throwing away 3% of your salary, plus you'll have to pay NI on your 4% which the govt doesn't refund.

Also, some pension co's will refuse to open a private pension for you if you have opted out of your employers auto enrolment scheme for fear of being sued by you at a later date for advising you to opt out of a better scheme.

The "growth" isn't taxed at all. When you come to retire (under current rules) you can take 25% of the pot completely tax free, and the income you take from the remaining 75% is taxed in the same way as income from a job - currently £11850 tax free, and then any extra at your normal rate (20% for most).

[LC0112G]

Depends on how you wrap it up I would imagine. Eg invest via an isa and there’s no tax until drawing it out I believe.

No tax drawing it out, but the money you pay in has already been taxed at whatever rate you pay (20%/40%/45%), and most likely had NI deducted too (13%/2%). Also your employer can't contribute to your own ISA, whereas they MUST contribute to an auto enrolment plan.

Just investing eg. Holding shares directly and the dividends are taxed as income. No tax on the growtg in investment value until you sell.

Holding large amounts of shares outside an ISA/PP wrapper is very tax inefficient and generally a messy affair. Capital Gains tax gets quite messy very quickly and as you say dividends are now taxed as income.

Not sure why you would do it that way though, you lose the tax advantage and even under auto enrolment I think the employer will also contribute.

Correct - nothing is going to beat a scheme where govt and employer contributions effectively double your initial stake from day one.

[Migv6 le Frog Fan]

What about investing privately as an alternative to auto enrollment schemes?

Is the growth taxed annually or only upon drawdown?

I may be wrong, but I believe its possible to take control of your pension investment and diy for at least part of it.
Seem to remember a couple of people at work doing something along those lines. 

[Mister Rog]

What about investing privately as an alternative to auto enrollment schemes?

Is the growth taxed annually or only upon drawdown?

If you auto enrol then eventually (from 2019) you'll pay in 4% of salary, the govt pays in 1% and your employer pays in 3% (making 8% total). Nothing to stop you opting out and investing your own 4% in a different pension and the govt will pay in their 1%, but there is nothing to make your employer pay in their 3%. So you are throwing away 3% of your salary, plus you'll have to pay NI on your 4% which the govt doesn't refund.

Also, some pension co's will refuse to open a private pension for you if you have opted out of your employers auto enrolment scheme for fear of being sued by you at a later date for advising you to opt out of a better scheme.

The "growth" isn't taxed at all. When you come to retire (under current rules) you can take 25% of the pot completely tax free, and the income you take from the remaining 75% is taxed in the same way as income from a job - currently £11850 tax free, and then any extra at your normal rate (20% for most).

 . . . . unless you are already drawing a state pension, in which case the tax free amount (£11,850) is reduced by the annual amount of that state pension. And THAT is what's pissing me off   

[Doctor Gollum]

OK, so I leave the auto enrollment running and invest the difference upto 15 ish% gross... Considering moving personal stakeholder and two small auto enrolled plans into a third auto enrollment scheme and then investing £250-300 a month into a spread of mutual funds and let compound interest do its thing... 

Just been TUPEd so await the new pension scheme with baited breath

[LC0112G]

What about investing privately as an alternative to auto enrollment schemes?

Is the growth taxed annually or only upon drawdown?

If you auto enrol then eventually (from 2019) you'll pay in 4% of salary, the govt pays in 1% and your employer pays in 3% (making 8% total). Nothing to stop you opting out and investing your own 4% in a different pension and the govt will pay in their 1%, but there is nothing to make your employer pay in their 3%. So you are throwing away 3% of your salary, plus you'll have to pay NI on your 4% which the govt doesn't refund.

Also, some pension co's will refuse to open a private pension for you if you have opted out of your employers auto enrolment scheme for fear of being sued by you at a later date for advising you to opt out of a better scheme.

The "growth" isn't taxed at all. When you come to retire (under current rules) you can take 25% of the pot completely tax free, and the income you take from the remaining 75% is taxed in the same way as income from a job - currently £11850 tax free, and then any extra at your normal rate (20% for most).

 . . . . unless you are already drawing a state pension, in which case the tax free amount (£11,850) is reduced by the annual amount of that state pension. And THAT is what's pissing me off   

As I showed earlier, it is entirely possible for someone to receive almost £15K in (old rules) state pension. If you allow this not to count for income tax purposes, then the £11850 would be available for other income from private pensions. This would mean some pensioners take home pay could be £26850 (plus winter fuel, free bus pass, free TV license etc) without paying any tax or NI. That's more than the national average wage and miles more than the average take home pay.

[LC0112G]

I may be wrong, but I believe its possible to take control of your pension investment and diy for at least part of it.
Seem to remember a couple of people at work doing something along those lines. 

Correct. Most modern pension plans allow you to chose from a range of investment options with varying levels of investment growth potential and associated risks. If you are prepared to do the learning and research the options then DIY is the way to go. If you can't DIY, then once your 'pot' reaches a certain level (circa £40K typically) then it's probably worth getting an IFA involved to manage your funds. However, initially and with small pot values its probably worth sticking with safe default funds and just letting it grow.

The above only applies to defined contribution/personal pensions. If you have a final salary, average salary or other defined benefit type scheme then the above doesn't apply.

[Bigron]

It seems that my original, tongue-in-cheek posting/rant was taken too seriously by some, but be grateful, because it has opened up a very useful and informative debate about pensions and how to get the most (least tax) out of them.
Is there anything that I can do, having been retired for over 10 years, or is it way to late and/or no options anyway?

Ron.

[Viral_Jim]

Ron:

I think if you have already purchased an annuity then you are probably in it for the long haul. I think you can “sell” your annuity in exchange for a lump sum, but it would be hard to know if that’s a good deal or not without seeking an IFA’s advice (instinctively though I think you might get shafted).

If you haven’t then I think you probably have more investment options, but an IFA maybe the way to go.

[Bigron]

Just to demonstrate how ignorant I am in these matters, what's an annuity and how would I know if I've got one?
All I know is that I have a State Pension and a small occupational one.
All the complex manipulations talked about in the posts above leave me bemused/confused and way out of my depth. 

Ron.

[LC0112G]

Ron:
I think if you have already purchased an annuity then you are probably in it for the long haul. I think you can “sell” your annuity in exchange for a lump sum, but it would be hard to know if that’s a good deal or not without seeking an IFA’s advice (instinctively though I think you might get shafted).

No - that idea was mooted by the govt in about 2012 but then firmly booted into the long grass. The return values were going to be laughably small and the number of people who would 'benefit' vanishingly small. If you have bought an annuity then that's it - booked and bound.

Is there anything that I can do, having been retired for over 10 years, or is it way to late and/or no options anyway?

No-one can tell without knowing a lot more personal details. However, most pension decisions need to be taken before you start drawing your personal/work pensions. Once you've started taking the money then the decisions are cast in stone.

One thing you may be able to do (if you reached SPA before 2016) is defer your state pension. You can do this even if you have already started taking it. The govt will increase your SP by 1% for every 5 weeks you defer, which works out at 10.4% per year. So if your current weekly pension is (say) £100 and you defer for (say) 5 years, when you restart it you will receive £164 p/w.

Obviously you need to have enough money in savings or income to live during that deferred period, but 10.4% from the govt versus what? 1%-2% from savings interest usually makes deferring and  using savings instead preferable.

[Bigron]

Thanks, LC, but that last bit is not an option - I need all the pennies I can get, being as poor as a church mouse!
It's what you get from a lifetime of hard graft and being financially inept.....

Ron.

[Mister Rog]

Just to demonstrate how ignorant I am in these matters, what's an annuity and how would I know if I've got one?
All I know is that I have a State Pension and a small occupational one.
All the complex manipulations talked about in the posts above leave me bemused/confused and way out of my depth. 

Ron.

Join the club. Me too.

This is exactly my point in an earlier comment. It should be easy and simple.

[Bigron]

Thanks Rog - not just me then? 

Ron.

[Viral_Jim]

Just to demonstrate how ignorant I am in these matters, what's an annuity and how would I know if I've got one?

An annuity is what your man in the street refers to as a pension, i.e. a monthly/weekly payment which is made to you. The pension is the pot of money you build up during your working life.

For example, let's say you reach retirement age and have built up a pension "pot" of £50,000. This pot will be held on your behalf by a pension provider (eg. Aviva, Standard Life, The Pru etc) and will usually be made up of your contributions and your employer contributions (plus the tax savings). At that point you have a number of options, you can take some of it as a tax free lump sum (typically max 25% although I think you can take more if your pot is small), you can take that money and put it into a Self Invested Pension Plan (SIPP), or you can do what most people seem to do, and buy an annuity with it.

An annuity is basically a contract between you and an annuity provider (which could be the same company that holds your pension pot, but it typically pays to shop around). The contract says that, in exchange for your £50,000 they will pay you an amount (say £75) per week/month for the rest of your life. The annuity provider will take into account a number of factors (age, weight, smoker, general state of health etc) to make a guess at when you'll die and then calculate how much money it'll pay you based on that. Basically, if they think you'll be dropping off the perch before the end of the decade, you'll get more money than if they think you'll see 100.

[LC0112G]

Just to demonstrate how ignorant I am in these matters, what's an annuity and how would I know if I've got one?

An annuity is what your man in the street refers to as a pension, i.e. a monthly/weekly payment which is made to you. The pension is the pot of money you build up during your working life.

For example, let's say you reach retirement age and have built up a pension "pot" of £50,000. This pot will be held on your behalf by a pension provider (eg. Aviva, Standard Life, The Pru etc) and will usually be made up of your contributions and your employer contributions (plus the tax savings). At that point you have a number of options, you can take some of it as a tax free lump sum (typically max 25% although I think you can take more if your pot is small), you can take that money and put it into a Self Invested Pension Plan (SIPP), or you can do what most people seem to do, and buy an annuity with it.

An annuity is basically a contract between you and an annuity provider (which could be the same company that holds your pension pot, but it typically pays to shop around). The contract says that, in exchange for your £50,000 they will pay you an amount (say £75) per week/month for the rest of your life. The annuity provider will take into account a number of factors (age, weight, smoker, general state of health etc) to make a guess at when you'll die and then calculate how much money it'll pay you based on that. Basically, if they think you'll be dropping off the perch before the end of the decade, you'll get more money than if they think you'll see 100.

For clarity's sake perhaps the following should be made clear :

During the accumulation stage of your pension 'life', someone (you, your employer and/or the govt) pays into your pension "pot". As you change jobs you may accumulate several different "pots" with different employers. You can usually keep these all separate, or opt to merge them into one larger pot - it's up to you. The value of the pots will grow or fall in line with the assets held in the pots - stocks and shares, funds, bonds, cash etc)

When you come to retire, you can chose to buy an annuity with some or all of the assets contained in some or all of the pots.  An annuity is a contractual promise (usually with a big insurance co) to pay you an income for the rest of your life. Once you buy an annuity, the money/assets in the "pot" is gone - to the insurance company. You can't get the money/assets back, and you can't sell or surrender the annuity for cash in the future either. On the other hand, the insurance co can't stop paying you the promised income till you drop off the perch. 

Prior to about 2006, just about everyone had to convert their pension pots into annuities. However, nowadays there are many more options, and many more flavours of annuity too. AIUI less than 50% of people now buy an annuity with their pension pots. However, it's still true that once you've bought an annuity that's it - your pot of money/assets is gone.

[Varche]

Thanks, LC, but that last bit is not an option - I need all the pennies I can get, being as poor as a church mouse!
It's what you get from a lifetime of hard graft and being financially inept.....

Ron.

Rog/Ron Don't forget that your zimmer frames and the like are VAT exempt (or can be) . I know it isn't much but all savings are welcome.

[Migv6 le Frog Fan]

Another option now available (although probably an unwise one for many) is to withdraw all or part of your private pension pot as cash, once you are over the age of 55 iirc.
You will be taxed on it as income though if you do.

[LC0112G]

Thanks, LC, but that last bit is not an option - I need all the pennies I can get, being as poor as a church mouse!
It's what you get from a lifetime of hard graft and being financially inept.....

Ron.

Ok - how about this one. Open a low cost SIPP pension with someone. Pay in £2880 between now and 6/5/2018. The pension provider will reclaim 20% tax from the govt, and top the £2880 up to £3600 (may take a couple of months). Then when the tax refund lands, withdraw the whole £3600. 25% (£900) will be tax free, and the remainder (£2700) will be taxed as income at 20% so you'll pay £540 tax and get £2160 back. Add that to the tax free cash, and you'll get £3060 back from your £2880 initial stake - £180 profit.

If you have any of your £11850 personal allowance remaining then some/all of the remainder (£2700) will be tax free too. There is a whole thread on it over on MSE, and it gets you up to £720 "free" money every year.  http://forums.moneysavingexpert.com/showthread.php?t=5580163

Then rinse and repeat in 2018/19, 2019/20 etc. All perfectly legit and above board.

[Bigron]

Coo - too good to be true? Any pitfalls, especially for an ignoramus like me?

Ron.

[LC0112G]

Coo - too good to be true? Any pitfalls, especially for an ignoramus like me?

Ron.

You need to be more than 55yo, but less than 75yo. The pension provider may make some charges for opening/closing the account, and HMRC can get their knickers in a twist if you take the (£2700) balance out in one lump. If you read the MSE thread they'll help you chose the best suppliers and show you how to keep HMRC from making a Horlicks of it.

Other than that - no real issues. You can also do the same for SWIMBO - assuming there is one and she is 55-75. £180/£360 should keep you in Wurthers Originals for a while 


Oops - just noticed - the Tax year is 6/4/2017 to 5/4/2018, so you need to make the £2880 payment before 6/4/2018 (not 6/5/2018)

[Bigron]

Thanks LC, very much worth pursuing. I am 29, going on 74!
My Wurthers Originals have to be the sugar-free version these days - diabetes. 

Ron.

[Viral_Jim]

My Wurthers Originals have to be the sugar-free version these days - diabetes.

That’s just cruel!