Pension Info

[Hightower]

Is there a good Web site that explains pensions in lay-mans terms?

I've always had a pension of one sort or the other, but at 41 years old should start to understand the system and identify if I'm putting enough away to retire on.

[peterb]

Call me a cynic if you will - but the sad truth is that you wont be putting enough away Hightower.

Work out the very basics. A good annuity pays around 5% these days (blinking disgusting but there you are).

So if you want to have (say) £30 grand a year (and that is before tax) then you need to have £600,000 in your fund at the time you purchase the annuity.

Can anyone save £600 grand in their working lives? Very few...........

[Poly]

Andy - try here: http://business.timesonline.co.uk/to...icle721035.ece

Originally Posted by peterb

Work out the very basics. A good annuity pays around 5% these days (blinking disgusting but there you are).

So if you want to have (say) £30 grand a year (and that is before tax) then you need to have £600,000 in your fund at the time you purchase the annuity.

Can anyone save £600 grand in their working lives? Very few...........

What you describe is in effect the interest from a standard bank account... ...i.e, you still have a £600k asset sitting there too. I could be wrong but it seems too much?

I think the main problem is that what sounds like a lot of money today is actually not anywhere near as much in 20 years time even with moderate inflation. e.g. to have the equivalent spending power of £30k in todays money in 20 yrs time you need to plan to have £45-54k (assuming a 2-3% inflation rate).

[Ezgoing]

HT

Well done for putting some thought into your future.

Get saving as much as you can now. It tends to grow if you save it!

Consider buying an investment property and subsidise the mortgage for a few years if needs be.

Consider if it is possible to purchase the property within a self administered fund.

The more now the merrier later.

Rgds

[Biggles]

Originally Posted by Hightower

Is there a good Web site that explains pensions in lay-mans terms?

I've always had a pension of one sort or the other, but at 41 years old should start to understand the system and identify if I'm putting enough away to retire on.

Best pensions are the dole.

[Hightower]

Yeh, I know the sad truth of saving for a future. What I'm after is a "how it works" website, so that I might read the ins and outs of pensions. Whether to opt in or out or SERPS etc.

My plan is to invest in a property portfolio and get someone else to pay the morgage. But I have several frozen pensions from the years I've been at other companies and a personal pension too. I think time has come to gen up on pensions so that I can determine what to do with these frozen pensions or not

[jwalker]

Originally Posted by Polwart

What you describe is in effect the interest from a standard bank account... ...i.e, you still have a £600k asset sitting there too.

But maybe you don't. Particular types of pension investment are plans where your fund grows but access to the capital is not available. It must be used to buy an annuity to provide your pension. However, 25% of the fund can be taken as a tax free lump. As Peterb said, currently the annuity will provide less income than can be got from interest on a bank account. However, again, the contributions to this type of fund will have been tax free or limited taxed or a bit of both, depending when contributions started, so the fund will be larger than it would be had you just saved it in a bank account. But if it was savings, you would still have the capital. Payment from the annuity will depend on the payment option you choose to take at retirement, ie. simplisticly, long term = low payments and short term = higher payments.

Apologies for this bit but, on a less pleasant note, should you die before starting your annuity, the fund, less tax, will be payable to your wife. I'd need to check the tax position but I seem to remember it is a fairly high rate. Should you be unfortunate and become seriously ill and your death is imminent within 12 months, it is possible for the whole sum to be paid to you tax free. I'll leave you to work out the implications of timing a claim to your and your wife's advantage.

Think about what you feel you may need; access to funds or steady income or a bit of both. Will you fall heir to something, a parent's house for example. Remember you'll also get your state pension and a few perks which may take a little financial pressure off in time. Probability may need to be considered; is your family particularly long lived? Do you weigh 20 stone and smoke? etc.

[peterb]

Originally Posted by Polwart

Andy - try here: http://business.timesonline.co.uk/to...icle721035.ece

What you describe is in effect the interest from a standard bank account... ...i.e, you still have a £600k asset sitting there too. I could be wrong but it seems too much?

Get a quote for an annuity Polwart. Sadly, thats a typical rate.

The problem is that the savings that are poured into pension funds can ONLY be used in this way. You cannot do anything else with them!

Granted we get tax relief on those savings which helps, but at the end you can only do one thing with the pension fund - buy an annuity and (optionally) have up to 25% tax free.

When I bought my annuity three years ago, I was completely disgusted - I could have got more monthly income by investing into a building society, and of course had I been allowed to do that then I would have also had access to the capital as well.

(And now I read JWalkers post I realise I have pretty much duplicated his reply - apologies JW)

[Poly]

Originally Posted by peterb

Get a quote for an annuity Polwart. Sadly, thats a typical rate.

The problem is that the savings that are poured into pension funds can ONLY be used in this way. You cannot do anything else with them!

Granted we get tax relief on those savings which helps, but at the end you can only do one thing with the pension fund - buy an annuity and (optionally) have up to 25% tax free.

When I bought my annuity three years ago, I was completely disgusted - I could have got more monthly income by investing into a building society, and of course had I been allowed to do that then I would have also had access to the capital as well.

(And now I read JWalkers post I realise I have pretty much duplicated his reply - apologies JW)

Peterb - and JW. All good points. I just did some quick checks using the FSA's website and I guess there are things I hadn't taken into account - like if the pension is still payable in full/part to spouse after death, whether it is fixed (level) or index linked and of course that it depends not just on the size of the fund but also the starting age. However to have an income of £30k as a 65 year old male I only seemed to need around 400k in the fund - but this does assume no index linking and no payments to a spouse - so you are probably not far off.

[paul holder]

i have just reached 65 & have paid a full stamp all my live the state pays me £115 per week you wont get this till your 70 .i allso payed into companey scheme at max +avcs they were underfunded .the only people to make money are the suits .the only way as i can see it is to take the long veiw & do it for your self have many investments , property look for reposes. isas,none sexy shares, & keep away from all the people who wont to help you

[peterb]

Originally Posted by Polwart

Peterb - and JW. All good points. I just did some quick checks using the FSA's website and I guess there are things I hadn't taken into account - like if the pension is still payable in full/part to spouse after death, whether it is fixed (level) or index linked and of course that it depends not just on the size of the fund but also the starting age. However to have an income of £30k as a 65 year old male I only seemed to need around 400k in the fund - but this does assume no index linking and no payments to a spouse - so you are probably not far off.

Its just all very depressing! (So I am going off to scrape a bottom and forget about it. )

[tinker]

Live faster and die younger

[peterb]

Excellent advice Tinker. But not too young eh??

[Hightower]

Yeh, but it still doesn't help me to understand how to get the best out of my pensions.

So any sites to go to?

[Poly]

Originally Posted by Hightower

Yeh, but it still doesn't help me to understand how to get the best out of my pensions.

So any sites to go to?

Andy, I don't think you are going to find a site that gives you what you are hoping for. Anybody doling out that sort of "advice" runs the risk of being regulated by the FSA.

If you are looking for general information explanations of the type of offerings then the FSA's own website is OK:

http://www.moneymadeclear.fsa.gov.uk/

[Hightower]

That's the sort of thing I had in mind, thanks Polwart

[codprawn]

I also think property is the best way forward.

Lets not forget one of the reason why pensions are doing so badly - the FTSE has performed really badly over the last 10 years.

I wonder why?

[alystra]

Yeh! My policies are just about to mature and I've only just found out I can't have the money.

Put your money anywhere but in a 'pension scheme'. What you need when you retire is a pot of gold that you have full control over and can invest where you like.

I was 20 yrs old when I took out my pension schemes. If I'd have known then that I wouldn't be able to get at my money, I sure wouldn't have done it. What I have done is give a load of my money to the Pru. They won't give it back.

To my mind that's fraud.

These 'pension providers' have shown themselves to be completely incompetent when it comes to handling other peoples money. I have managed my savings much better than they have managed my so called pension.

Steer well clear. Buy a house, or a field, or some woods, or just put it in a bank, or under your mattress. 'They' will say you could do better. Perhaps so, but at the end of the day you will have capital you have control of. Believe me, that's what you will want when you retire.

[David G]

Try:

http://www.adviceonline.co.uk/pendecisiontree.html

Orve

[BumbleAbout]

I have always found the Motley Fool http://www.fool.co.uk/ is a good source of financial advice - plus the forums have many contributors who have "been there and done that" (a financial RIBnet !).