When is everyone planning on retiring

chrispy108

Again. You seem obsessed they didn't pay enough, without considering that the fact their pension is something they worked for, and isn't a charity.

Teachers were underpaid for years, and the pension factored into the decision to do the job. They did the job, so they should get what they were told they'd get.

BTW, Drew and I are both in our late 20s, so we aren't baby boomers defending other baby boomers...

quarky

ToneControl said:

mellowsun said:

quarky said:

Wait, so I could get a mortgage on my house, (say £120k @ 1% above BOE), so have £100k extra in the bank, and then do what? Put that £40k/year of that into a private pension over three years?

Where do I save the tax though? I am not (at the moment) self-employed?

Yes I'd like @ToneControl to explain this one too! 

I don't get the link with remortgaging and pension contributions

if  you are on higher rate tax it works well, if you are  a director, it's easiest, e.g. 
take £100k from house
you would need  nearly double that in your company to give you £100k in your hand,
since there is  employers NIC of 13.8% above £43k, and employees,  etc, and income tax
if you run the company, you'd write £40k company cheques to your pension pot , probably  £160k to £185k in total, not sure of the exact amount

Thanks. I am seriously considering going self-employed in sex months or so, so will definitely consider that.

ToneControl

quarky said:

Thanks. I am seriously considering going self-employed in sex months or so, so will definitely consider that.

best typo of the month

Axe_meister

So what happens to your pension pot if you die early?
I will have a nice amount tucked away in a private pension (Every time I leave a company pension Inhave my money transferred to the private one).
So let say I hit 68 with $1m in a pension pot and I buy an annuity and then die on my 69th birthday.
Can my kids inherit what's left? Or is that how pension companies make their money?

octatonic

Axe_meister said:

So what happens to your pension pot if you die early?
I will have a nice amount tucked away in a private pension (Every time I leave a company pension Inhave my money transferred to the private one).
So let say I hit 68 with $1m in a pension pot and I buy an annuity and then die on my 69th birthday.
Can my kids inherit what's left? Or is that how pension companies make their money?

It depends on the policy but often your beneficiaries receive a lump sum tax free.

quarky

octatonic said:

Axe_meister said:

So what happens to your pension pot if you die early?
I will have a nice amount tucked away in a private pension (Every time I leave a company pension Inhave my money transferred to the private one).
So let say I hit 68 with $1m in a pension pot and I buy an annuity and then die on my 69th birthday.
Can my kids inherit what's left? Or is that how pension companies make their money?

It depends on the policy but often your beneficiaries receive a lump sum tax free.

Or your wife could get a widows pension (or whatever the politically correct term is).

littlegreenman

I work for the Civil Service so I'm just coasting towards a fucking amazing pension.

Oh wait, no I'm not! Public service pensions are now absolute balls. Final salary went ages ago, I'll be working 'til I die.

ToneControl

quarky said:

octatonic said:

Axe_meister said:

So what happens to your pension pot if you die early?
I will have a nice amount tucked away in a private pension (Every time I leave a company pension Inhave my money transferred to the private one).
So let say I hit 68 with $1m in a pension pot and I buy an annuity and then die on my 69th birthday.
Can my kids inherit what's left? Or is that how pension companies make their money?

It depends on the policy but often your beneficiaries receive a lump sum tax free.

Or your wife could get a widows pension (or whatever the politically correct term is).

it depends how old you are, and if you have started taking a pension yet
if you take an annuity for just yourself,  you'd have got your 25% tax free into your estate, but the rest would be lost, Annuity looks a bit crap for most people at the minute. Draw down is better

https://www.pensionwise.gov.uk/when-you-die

Inheritance	Your age when you die	Tax they pay
Unused cash you took from your pot	Any age	Inheritance Tax based on the size of your estate
Money still in your pot	Under 75	Zero, if they take it within 2 years
Money still in your pot	75 or older	Income Tax
Adjustable income	Under 75	Zero
Adjustable income	75 or older	Income Tax
Joint, guaranteed period or capital protected annuity	Under 75	Zero
Joint, guaranteed period or capital protected annuity	75 or older	Inc

Nitefly

Axe_meister said:

So what happens to your pension pot if you die early?
I will have a nice amount tucked away in a private pension (Every time I leave a company pension Inhave my money transferred to the private one).
So let say I hit 68 with $1m in a pension pot and I buy an annuity and then die on my 69th birthday.
Can my kids inherit what's left? Or is that how pension companies make their money?

Don't buy an annuity!  

You can take up to 25% of your pension "pot" as a TAX-FREE lump sum.

You can take the rest of it and EITHER buy an annuity OR put it onto a draw-down plan.  From that you draw down as much as you need, when you need it, but you pay tax on what you draw down, at your marginal rate.  

The draw-down plan is usually a managed fund, which will/should grow as per the fund manager's skill.  Whatever is left in the draw-down plan when you die is part of your estate, and is therefore inherited by the beneficiaries under your will.  (You do have a will, don't you?).  If it's a sufficiently large sum it may attract inheritance tax, as @ToneControl pointed out above. 

If you buy an annuity instead of a draw-down plan, what happens when you die depends on the terms of the annuity.  Some of them will continue to pay a reduced amount to your surviving partner until that person dies, then they keep whatever is left.  Others don't, they just take whatever is left in the pot when you die.

The one good thing about an annuity is that it will give you a guaranteed (and possibly index-linked) income for life, whereas the draw-down pot could be exhausted before you die.

How long do you plan to stay alive after you retire? 

ToneControl

Nitefly said:

Don't buy an annuity!  

You can take up to 25% of your pension "pot" as a TAX-FREE lump sum.

How long do you plan to stay alive after you retire? 

yes,  and the other reason is not just that an annuity vanishes when you die, it's that current rates give a small fraction  of an income from what you would have got 15 years ago

There is a 3rd option, UFPLS:
http://adviser.royallondon.com/technical-central/pensions/benefit-options/ufpls-explained/

I would not recommend this for everyone
Basically : if you have not already started to take from your pot, you can elect to  take UFPLS
With this, you basically take cash out. Each withdrawal is 25% tax free (like the lumpsum you normally get),  and the rest is taxed as income, so if you took  all of a large fund out,  75% of the amount about £150k  would be taxed  at 45%
I'd say this is good for people who are:

1. holding a smaller pot that is pointless to stretch over  20 years:  £70k now could buy  a BTL investment , or a holiday home, or help move house, etc
2. terminally ill
3. people with very firm ideas about how better to invest it (e.g. BTL, businesses, world cruises, wine, women, song)
4. those who want to  give money to their kids now

for anyone else reading, there are other little-known constraints and options:
you now cannot have over £1m in your pension pot without paying extra tax. This is a massive, recent change.
Imagine you were 40, and had saved  £350k: growth might take it over £1m before you retire, and the govt reduced the limit, so don't assume it will go up with inflation.
For people on £80k plus with a  final salary pension, this may well affect you: they multiply your pension by 20 or 25, if it's over  £1m, you get hammered for extra tax
https://www.gov.uk/tax-on-your-private-pension/lifetime-allowance
this also affects being able to do UFPLS

If you plan to live outside the UK for a while, or retire abroad, you need to read about QROPS:
https://en.wikipedia.org/wiki/Qualifying_Recognised_Overseas_Pension_Scheme
"QROPS are increasingly popular with British expats due to currency and investment flexibility, the tax advantages they offer when drawing pension benefits and their ability to be transferred to beneficiaries of choice in the event of death. Pension funds left in the UK are taxed on income at up to 45% and taxed on death after 75 years old at up to 45%. Transferring a UK pension fund into a QROPS can reduce taxation and avoid UK taxation as long as the pensioner remains tax resident outside the UK."
Also, AFAIK the £1m limit does not apply once the money is offshore
read this:
http://www.hansard.com/~/media/Files/H/Hansard-V2/documents/qrops-lifetime-allowance-planning.pdf

having said all that, I think the companies running QROPS are not as  reliable as  the onshore UK ones, and charges will be higher

I think you can just take the whole amount out at the tax level of where you are living:
https://harrisonbrook.co.uk/qrops-transfer-out-switch-back-service/

this would be how I'd think you'd prepare  for a return to the UK

you do have to resident outside the UK for 5 years before  getting the pension:
http://www.pensionsforexpats.co.uk/budget-2014-new-2015-hmrc-tax-rules/

mellowsun

ToneControl said:

you now cannot have over £1m in your pension pot without paying extra tax. This is a massive, recent change.

This is a big deal. £1m sounds a lot but it is in fact what most private sector workers would need in their pension pot to get the same pension as a mid-level teacher.

It is massively discriminatory against private sector workers.

mellowsun

littlegreenman said:

I work for the Civil Service so I'm just coasting towards a fucking amazing pension.

Oh wait, no I'm not! Public service pensions are now absolute balls. Final salary went ages ago, I'll be working 'til I die.

It's not absolute balls, it is still a very, very good deal.

I spent 5 years working for the NHS. I just those 5 years, my pension entitlement is better than the projected pension I will receive from a defined contribution private sector pension that I will have been paying into for 25 years.

viz

rlw said:

Our neighbours, both ex teachers, have a pension income of over £60K (paid for by us of course, although they will not admit it).  These days, that's a pension pot of at least £1M, if not more.

Exactly - if you want to retire at 65 with 50k pa from a DC pension, you need 1M in there, which means 25k into the pot every year over a 40-year career, which is pretty unachievable for 99% of the population. 

ToneControl

mellowsun said:

ToneControl said:

you now cannot have over £1m in your pension pot without paying extra tax. This is a massive, recent change.

This is a big deal. £1m sounds a lot but it is in fact what most private sector workers would need in their pension pot to get the same pension as a mid-level teacher.

It is massively discriminatory against private sector workers.

I thought so originally, since there was no mention at the start of final salary pensions, but anyone on a final salary pension over £40k-£45k will be hit too,  55%tax on the excess (which can be everything past £40k)

thomasross20

WOAH, is that true? I never stopped to figure it out. Actually, earlier in the thread I wrote that I put in £12k a year (life can change, I'm lucky right now) and expect a pot of about £400k so that sort of tallies, to first-order. I never knew there was a £1m cap.............!? How much extra tax and is it only on the amount over £1m? That is definitely a shocking revelation!

ToneControl

thomasross20 said:

WOAH, is that true? I never stopped to figure it out. Actually, earlier in the thread I wrote that I put in £12k a year (life can change, I'm lucky right now) and expect a pot of about £400k so that sort of tallies, to first-order. I never knew there was a £1m cap.............!? How much extra tax and is it only on the amount over £1m? That is definitely a shocking revelation!

they brought the cap down this year to £1m
55% tax on proceeds  above that
if your fund is worth  £1.25m, you pay 55%  tax on 20% of your pension
if your fund grows after retirement, it gets worse too
If you take 20% out, then it grows to £1m, you pay tax as if it was £1.25m, since you already took 20% out  

ToneControl

and the other big thing recently that changed is intestacy law
now if you die and you have kids, your spouse only gets some of your estate, not all of it

Now, in England and Wales:

The husband, wife or civil partner keeps all the assets (including property), up to £250,000, and all the personal possessions, whatever their value.

The remainder of the estate will be shared as follows:

• the husband, wife or civil partner gets an absolute interest in half of the remainder
• the other half is then divided equally between the surviving children

If a son or daughter (or other child where the deceased had a parental role) has already died, their children will inherit in their place.

boogieman

ToneControl said:

and the other big thing recently that changed is intestacy law
now if you die and you have kids, your spouse only gets some of your estate, not all of it

Now, in England and Wales:

The husband, wife or civil partner keeps all the assets (including property), up to £250,000, and all the personal possessions, whatever their value.

The remainder of the estate will be shared as follows:

• the husband, wife or civil partner gets an absolute interest in half of the remainder
• the other half is then divided equally between the surviving children

If a son or daughter (or other child where the deceased had a parental role) has already died, their children will inherit in their place.

Blimey. A(nother) very good reason to make a will then. 

thomasross20

This is absolutely ridiculous. Honestly, it's absolutely mad. 
Do others countries have similar policies? 

hotpot

The private pension (which under performed over the 30 years I paid into it) I enquired about after i had to  finish work on medical grounds had just over £21000 in it , I took it as a lump sum and the tax man took £6400 out of that.