New Workplace Pension Scheme

[pdq1]

http://www.bbc.co.uk/news/business-19760421

Will this take future pensioners out of poverty and having to claim state handouts to top up their state pension? Would those deciding to opt out get extra benefits as now?

Is it a good scheme? For example the cash sum received has to be put into an annuity. These have got a terrible name because an annuity only pays out about a third of what it did a few years ago and what with QE the value has dropped even further so shouldn't the government relax this clause so that the person receiving his final sum can invest in other means?

[boxtops]

I had a private pension which could only be paid out into an annuity (that's a condition of getting tax relief on the payments) but I could put it in whichever company I chose.

Can't say if it's a good scheme, too early - but people who are past a certain age will get very little back. I understood there was no option to opt out, employers have to do it?

[Essell]

Your pension will have to go into some sort of annuity but what will be available in the future is another story. The reason for putting it into an annuity is very simple. In the past, people claimed tax relief on pension savings, and saved a good amount. Then some people retoired, cashed in the pension pot, blewed the lot on valuables, the house or holidays, and then claimed benefits because they had no pension. Now, pensions that attract tax relief have to be used for an annuity to provide a pension.
ension saving is becoming mandatory because many people who could have saved didn't, preferring to depend on the sale of their property or other assets for a pension. Unfortunately, many of them just claimed benefits instead. This is the problem the government is trying to solve.
I think it will be difficult to opt out, although what opting out depends on is still a bit of a mystery....maybe already having considerable pension assets etc.

As to claiming benefits in future, mandatory retirement at 60+ is being phased out rapidly, and therefore you could be asked to find work until you drop if your pension is insufficient. My 46 yr old son believes that by the time he retires, state pension will have shrunk so much as to be almost worthless, and is planning accordingly. I can believe this - soon there will be only two workers for each pensioner, which will be unaffordable if we do not ake action now.

[Essell]

Sorry about the typo s. Think I have some sticky keys .

[woofgang]

pension saving isn't becoming mandatory, people can still choose to opt out.

[Essell]

Woofgang - yes - sorry. Meant automatic. But was probably thinking of the employers - within the next six years all employers will have to enrol their staff into pension schemes.

[pdq1]

From what I've heard you can take your pension pot at 55. I can see the point of annuities but it doesn't mean that should be the only option. For instance most banks do bonds which cannot be cashed for a preset number of years and in the meantime pay a reasonable rate of interest depenfing on the length of the bond.

Instead of an annuity why have a bond which pays interest to the pensioner and on their death pays the bond capital to dependants. At the moment pensioners and their families lose this capital using an annuity.

Once annuities paid a high rate of interest but no longer the case.

[Essell]

I just heard a news item re. the new pension scheme, which said that future pensioners would still be able to collect benefits if their pension was too small. Also it seems as though the scheme is entirely voluntary, which absolutely contradicts what ministers such as Frank Field and IDS have been saying for many months/years - that pension benefits are the biggest ever disincentive to saving. Their position has always been that a pension should be adequate without benefits, and whatever you save should be a bonus, hence the proposed rise to £140 a week.

I can't see the scheme taking off unless there will be a definite advantage. If you are on a low income and know the state will care for you, why would you save ? Maybe this is politspeak and the rules will change after the next election !

Oh dear - I'm totally ignorant about bonds . There must be a reason for selecting annuities.

[dotty.]

only certain employees can opt out of their employers chosen scheme but they will still need to have a pension scheme in place i gather
http://www.thepension...s-law-is-changing.pdf

[youngmafbog]

Yet another con for the workers. General tax payers are paying for gold plated pensions for public sector employees and then having to fork out money they dont have for what is a total waste of time.

Pension companies will fleece this as usual and with the addition of the pension pot raid by Bottler (thanks noo labour) it will simply not be worth it. I gave up paying into a pension when I found that I could get more just putting it into a savings account.

There is NO point saving anymore. the government will just take it from you to give to the workshy and foreigners, so don't save and join the work shy I think.

[Essell]

There is no easy answer for the less wealthy. The last few years have affected all pension savings really badly, with inflation and almost zero interest rates . Although there are accounts paying more than the base rate, the truth is that many of the elderly cannot tie up savings because they need to access them to cope with rising bills and property maintenance.

[factor-fiction]

This will only work if there is reduction/phasing out in pension credit and other benefits such as Council Tax Benefit. At present there is little or no point in making modest contributions to a pension because it leads to a reduction in pension credit.

[Brimoan]

I think it will be OK for people who have several years left at work to save but I am a little unsure of it if you are say 50+ as you may lose out on various benefits and you would have not saved very much.
The government is bringing in what they say is a good basic pension of £140 per week.
I would not like to have to live on that amount however.
I filled my car with petrol yesterday for example and that was £35 and spent £20 on food which will only last about 3 days at the most.

[factor-fiction]

What did you think of BillSharpe's idea, Brimoan?
http://www.theanswerb.../Question1174795.html

[237SJ]

Wouldn`t pension credit be defunct if the state pension is increased to £140 anyway?

[factor-fiction]

Yes 237SJ- let's hope that goes ahead, although it wouldn't surprise me if that got put back a bit. Pension credit, whilst essential to poorer pensioners is a disincentive to save for retirement.

[Essell]

The proposal to increase basic pension to £140 weekly (for new pensioners only) is common sense. If you have less than that amount now, with no private pension, the state make it up to about £140 weekly anyway. Those with small pensions will benefit but the state will save the cost of means testing.
However, other benefits on top of the £140 will still be payable, such as rent/rates, specs, dental care, costs of hospital travel etc, if you have no other income. So no-one has to live on just £140.00 really, although some are too proud to claim.

[Essell]

The really hard up are people like my neighbour now in her nineties. With a very small private pension she is just above any benefit level. The nearest hospital is about 30 miles away and she is too frail to use the free bus travel. So friends and neighbours rally round. But if they did not, she would have to pay for a taxi each time. As it is she has to save hard to keep her property in repair. Were she on benefits, she would be able to claim many of these costs.

[pdq1]

When universal benefits are brought in shortly it is said there will no longer a disincentive to work. However I wonder how that affects the non workers who live on their savings? Many with a small pot of money are denied claiming most benefits nowadays.