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marigold

Joined: 02 Sep 2005
Posts: 12458
Location: West Sussex

Posted: Sun Oct 30, 05 9:23 am Post subject:

Treacodactyl wrote:

I'm not sure of the exact numbers but unless you force everyone to stay in this country you cannot rely on the workforce to support the retired. I dare say it could be done but tax would have to go up considerably. If places like Ireland, France, Canada etc take different steps and ensure people save for retirements then their taxes will stay about the same. Result would be mass migration of all the wealth and no one left to fund the ageing population.

I'm sure there are many other problems as I can see no one in the political arena saying we don't need to do far more to save for our retirement.

Retired people pay tax too!! And a lot of taxation is now indirect, so even people on benefits pay taxes.

I agree though that peops should save more, but it needs to be combined with a general lowering of expectations and I can't see any politician touting that idea with any enthusiasm.....

wellington womble

Joined: 08 Nov 2004
Posts: 15051
Location: East Midlands

Posted: Sun Oct 30, 05 10:03 am Post subject:

marigold wrote:

a large proportion of old peops simply drop dead with minimal call on NHS resources.

yes - the ones that don't smoke, drink excessivley, eat properly and get plenty of excercise - healthy people die quickly (and cheaply!) of big events. Unhealthy people die slowly and expensively in hospital and cost us all a fortune.

I also think this culture of living off your property is unhelpful - ie remortgages to spend on consumer goods. We plan to pay off our mortgage over the next few years (long before we retire, and hopefully before any children get to the consumable age!) and then start paying off the mortgages on our rented house. I have a pension as well (eggs in different baskets) but that should give us a reasonable income for retirement if there is still a market for rented houses.

We reckon that without a mortgage we can have a similar standard of living for about 12K a year between us, especially considering all the outgoings related to work (two cars, himselfs tools, my professional fees etc) we both have trades where we can do bits and pieces for luxuries if we need to, but I anticipate the rented house bringing in approximately what we need to live on at our current standard of lving. So, yes, we will be living off our property in the long term - but not the one that we live in, and not for short term consumables.

Treacodactyl
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Joined: 28 Oct 2004
Posts: 25795
Location: Jumping on the bandwagon of opportunism

Posted: Sun Oct 30, 05 12:05 pm Post subject:

marigold wrote:

Retired people pay tax too!! And a lot of taxation is now indirect, so even people on benefits pay taxes.

Yes they do, and those with a private pension will pay income tax & NI. However they will pay less due to lower income but probably use more services which the government has to pay for with reduced income.

I certainly agree people should get used to using less and living off a smaller income. If you can afford to save it makes sense to me to do so, regardless of what you hope the government will be doing when you retire.

jema
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Joined: 28 Oct 2004
Posts: 28238
Location: escaped from Swindon

Posted: Sun Oct 30, 05 12:13 pm Post subject:

Treacodactyl wrote:

If you can afford to save it makes sense to me to do so, regardless of what you hope the government will be doing when you retire.

But a pension scheme of this nature for people who can afford little, is totally crazy as the pittance it returns will work against benefits recieved from the government

Treacodactyl
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Joined: 28 Oct 2004
Posts: 25795
Location: Jumping on the bandwagon of opportunism

Posted: Sun Oct 30, 05 12:35 pm Post subject:

jema wrote:

Treacodactyl wrote:

If you can afford to save it makes sense to me to do so, regardless of what you hope the government will be doing when you retire.

But a pension scheme of this nature for people who can afford little, is totally crazy as the pittance it returns will work against benefits recieved from the government

As I've said before using a pension is *only one* way of saving for your retirement. There's ISAs, property, pensions, bonds, shares, VCTs etc.

A pension can be a good way but I'd never rely on my pension fund in the same way I will not rely only on the government. Have plenty of eggs and plenty of baskets.

jema
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Joined: 28 Oct 2004
Posts: 28238
Location: escaped from Swindon

Posted: Sun Oct 30, 05 1:50 pm Post subject:
But if you can only afford one basket. Do not ever make it a "proper" pension scheme. Unless you can put a small fortunie into one of these, it is going to be a very poor investment.

Treacodactyl
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Joined: 28 Oct 2004
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Location: Jumping on the bandwagon of opportunism

Posted: Sun Oct 30, 05 2:34 pm Post subject:

jema wrote:

But if you can only afford one basket. Do not ever make it a "proper" pension scheme.

Unless you can put a small fortunie into one of these, it is going to be a very poor investment.

A modern day pension is simply a wrapper with a few laws around them. Yes they will not suit everyone and there are all sorts of laws that seem to be constantly changing. But they are not something that is bound to lose money.

For example, a stakeholder personal pension should have changes around 1%. Assuming you are a normal rate tax payer then you pay in net and the government pays an amount equivalent to the tax so you only pay about 80p for every pound invested.

Once the money is in the stakeholder personal pension you can choose where it is invested so it can go into a cash fund if you wish which is about as safe as anything but will not pay much. Yes you can risk it all in the stock market but that is *your* choice. A mix of savings should produce a much better return than a cash savings account while minimising risks.

There are still many company schemes where your employer will make contributions, with tax relief you may pay about half of the contribution.

What are the downsides? Well, it is a complex area so you either need to do a large amount of research or pay an adviser (a whole new topic which I know nothing about). You cannot get your hands on the money until you retire and if there's not a large fund you may lose out in benefits. You may also be forced to buy an annuity which has its own problems. And there are probably several more I've missed.

In summary they do suit some people and they may not suit others, but you do need to look into them and remember retirement planning is one of the biggest decisions you will make.

jema
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Joined: 28 Oct 2004
Posts: 28238
Location: escaped from Swindon

Posted: Sun Oct 30, 05 3:11 pm Post subject:
The main drawback is that when you come to use the pension a lot of it is classified as "income" that works against benefits. The bank of underthemattress on the other hand attracts no 1% fees and what gets declared is up to you

Will

Joined: 30 Jun 2005
Posts: 571
Location: Grenoside, Sheffield

Posted: Mon Oct 31, 05 9:39 am Post subject:

jema wrote:

The bank of underthemattress on the other hand attracts no 1% fees and what gets declared is up to you

It also pays interest (at the moment) at a rate of about minus 2.5% annually.

Equitable was a tragedy. It doesn't mean that all pensions are guaranteed losers. A combination of high interest savings and government bonds in the pension tax relief wrapper won't give a huge return, but the risks involved are tiny.

One of the major problems is that the providers have persuaded investors that they should be left alone to handle the investing of pension funds. A bit of active interest in the activities of your provider can improve returns and the ethicality of the investments made considerably. It's dry but worthwhile.

jema
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Joined: 28 Oct 2004
Posts: 28238
Location: escaped from Swindon

Posted: Mon Oct 31, 05 9:54 am Post subject:

Will wrote:

jema wrote:

The bank of underthemattress on the other hand attracts no 1% fees and what gets declared is up to you

It also pays interest (at the moment) at a rate of about minus 2.5% annually.

I wouldn't recommend the mattress long term

But keeping your money in an interest bearing account until near retirement and then removing it to a tax invisible status would make a lot of sense. e.g. buying some things that are liable to gain in value. Then selling them to use up captial gains allowance as need arises.

Treacodactyl
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Joined: 28 Oct 2004
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Location: Jumping on the bandwagon of opportunism

Posted: Mon Oct 31, 05 12:35 pm Post subject:
Or perhaps the rather daft benefit situation should be overhauled to stop the ludicrous situation of penalising people who save and rewarding people who spend? For people some way off from retirement this may happen, or rather benefits will be reduced.

ele

Joined: 05 Sep 2005
Posts: 814
Location: Derby

Posted: Mon Oct 31, 05 12:46 pm Post subject:
As a matter of interest which retirement benefits are means tested? Income Support obviously yes, but what about the others? pension credit, attendance allowance etc?

jema
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Joined: 28 Oct 2004
Posts: 28238
Location: escaped from Swindon

Posted: Mon Oct 31, 05 12:51 pm Post subject:

Treacodactyl wrote:

Or perhaps the rather daft benefit situation should be overhauled to stop the ludicrous situation of penalising people who save and rewarding people who spend? For people some way off from retirement this may happen, or rather benefits will be reduced.

I would say that all pensioners should be given a living pension by default, so people can live without poverty and without having to worry most their working lives about how they are going to survive in retirement.

This would remove the whole issue of a complex benefits system

Treacodactyl
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Joined: 28 Oct 2004
Posts: 25795
Location: Jumping on the bandwagon of opportunism

Posted: Mon Oct 31, 05 1:04 pm Post subject:

jema wrote:

I agree with that. Why a house wife/husband doesn't qualify for the same pension as someone working is a little strange (I know it's due to NI contributions but ethically why).

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