So, can we all be trusted?

So, can we all be trusted?

Didn't find your answer?

On the one hand it is hailed as a mature and refreshing stance, to grant pensioners the "trust" to manage their own pension pots in retirement.

But on the other hand, they cannot be trusted to save up a pension pot in the first place, the auto-enrolment regs being driven on the most part by the fact the that vast majority of Jo Public are underfunding for their retirement.

How, therefore, have they earned that trust?

Just a thought

With kind regards

Clint Westwood

Replies (26)

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By Abacus Finch
23rd Mar 2014 13:41

Quite

Yes it would appear that we can't be trusted to save for our retirement so we need auto-enrolment, whilst at the same time we are now able to squirrel away £15,000 per year into an ISA which could easily add up to a more tax efficient "pension" pot in the future in any case.

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By RetiredTax
23rd Mar 2014 14:59

Pension changes
One possible downside to the withdrawal of all monies in the Pension pot may be the effect on future Care costs. If all the monies are withdrawn and saved elsewhere, will they not be then included in the means-testing for care costs?

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Replying to PALacc:
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By B Roberts
24th Mar 2014 10:12

Also ....

RetiredTax wrote:
One possible downside to the withdrawal of all monies in the Pension pot may be the effect on future Care costs. If all the monies are withdrawn and saved elsewhere, will they not be then included in the means-testing for care costs?

Not to mention means tested benefits ......

There used to be a limit of £16,000 of savings (not sure of the current rules), so even a small pension pot that would have previously given you a pension of a few pounds a month (and keep you within the earnings limit) will now take you over the savings limit and therefore not be eligible for benefits.

So, if you have saved in a pension and now need help when you are older, this may not be available if you take the pension as a lump sum.

In the meantime, the Government have introduced a new tax and called it auto enrolment - I wonder how many of the employees who join up (many of whom will be lower paid and joining a pension scheme for the first time) will pay into this scheme, only to be told in 20 years time that they are just over the limit for benefits (and also, likely to see a reduced state pension as a result - therefore making you no better off than if you did not have such a pension in the first place).

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Replying to PALacc:
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By nickja
26th Mar 2014 12:26

Yes

Cameron said they would yesterday.

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By chatman
23rd Mar 2014 16:32

It's to make money for the pension companies
I thought the idea was to make money for the pension companies. Otherwise we would just put these pension contributions into the state pension fund. It's nothing to do with trust.

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Teignmouth
By Paul Scholes
24th Mar 2014 09:31

Personally....

I think it's great, I always said I intended to be a burden, but would have had difficulty with a reasonable pension in my old age, now I can "download" and blow it, without the kids knowing HA!

The extra bonus is knowing that the pension companies will no longer rip us off paying way below what they could pay us in annuities.

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Replying to johnjenkins:
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By Huw Williams
26th Mar 2014 15:28

A smaller blowout

Paul Scholes wrote:

I think it's great, I always said I intended to be a burden, but would have had difficulty with a reasonable pension in my old age, now I can "download" and blow it, without the kids knowing HA!

The extra bonus is knowing that the pension companies will no longer rip us off paying way below what they could pay us in annuities.

 

I'd like to agree, but my pensions are invested in pension companies and they aren't worth what they used to be!

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By justsotax
24th Mar 2014 10:31

i have warmed to this

policy but not because we are all suddenly going to have massive pots of money to draw when we hit 55.  The flexibility will allow people to pay off mortgages, give deposits to children etc....but it will not stop the reliance on the state pension and benefits system.

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By leicsred
24th Mar 2014 10:53

Not me

I certainly couldn't be trusted - I'd blow it all on a fast car and foreign holidays

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Replying to rsergeant:
Glenn Martin
By Glenn Martin
24th Mar 2014 10:58

Lets get it spent.

leicsred wrote:

I certainly couldn't be trusted - I'd blow it all on a fast car and foreign holidays

I would prefer to blow mine on fast holidays and foreign cars.

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
25th Mar 2014 14:48

What about the advisory opportunity

I've already heard of one expert explaining what a big opportunity providing financial and actuarial advice will be for accountants. Are any AccountingWEB members tempted?

And if you were, what approaches would you be suggesting at this point?

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Replying to Tambo:
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By puzzel
26th Mar 2014 12:30

Don't think so

John Stokdyk wrote:

I've already heard of one expert explaining what a big opportunity providing financial and actuarial advice will be for accountants. Are any AccountingWEB members tempted?

And if you were, what approaches would you be suggesting at this point?

Yes I read the article yesterday, but would find it very hard for a one man band Co to come up with the £500 consultation fee

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By allan613
26th Mar 2014 11:28

The other side to the question.

Could you trust the pension companies to look after your money, and give you a reasonable rate of return, and not charge an 'arm and a leg' for their services?

From past experience, I hate to think of the answer.

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By User deleted
26th Mar 2014 11:33

Take it and run

Well as my father was well and truly shafted by Equitable Life I'd rather have any money in my hands and not in the pension company's. If I then blow it or lose it then it's my problem. But I'm damned if I'll see it disappear because someone else is playing fast and loose with it.

Surely if someone has made the effort to save money they're not suddenly going to blow it all anyway..... It's refreshing to be treated like an adult with a few brain cells. Let's enough that.

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By andrew.hyde
26th Mar 2014 11:42

Blow it on wine women and song...

..then squander the rest.

Alternatively why not take a few SKI-ing holidays? Nothing to do with winter sports BTW. SKI stands for 'Spending the Kids' Inheritance'.

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David Winch
By David Winch
26th Mar 2014 12:48

And another thing . . .

Quite apart from the tax charge which would arise on a withdrawal, in my area of work an issue is confiscation following conviction for a criminal offence.

As things stand a convicted defendant cannot be ordered to pay over monies which he cannot access - & that includes investments in a pension fund which he cannot draw.  Under the Budget proposals that will presumably change because the convicted defendant could then be ordered (in effect) to hand over his pension fund because it would be accessible.

David

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Replying to andy.partridge:
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By Huw Williams
26th Mar 2014 15:31

Confiscation orders

davidwinch wrote:

As things stand a convicted defendant cannot be ordered to pay over monies which he cannot access - & that includes investments in a pension fund which he cannot draw.  Under the Budget proposals that will presumably change because the convicted defendant could then be ordered (in effect) to hand over his pension fund because it would be accessible.

David

 

That makes it a bit more like divorce law - does that mean it is more fair?

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Replying to andy.partridge:
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By Caber Feidh
26th Mar 2014 15:47

Tax on pension pots used to meet confiscation orders

Another gem of lateral thinking from David.

If a miscreant's pension pot is used to meet a confiscation order will he/she have to pay tax on the pension monies at his/her marginal rate? Or could the pension monies be treated as moving directly from the pension pot to the Court?

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By raybackler
26th Mar 2014 12:49

Equitable Life

As someone who got shafted by Equitable Life and then the government, I am ecstatic that I can now manage my own money.  I don't think pension pots will just be blown.  Surely the tax rates will cause some caution.  Why draw out a large amount at 40% or 45% tax when you can draw out smaller amounts each year at 20% tax and keep more net pension in the long run?

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By Mark Three
26th Mar 2014 13:28

twopenneth..

Plenty of people have had poor outcomes from pension companies.  What stands out with Equitable Life is perhaps that there were more professional types that had their money with them.  Therefore more noise was made and it came to the fore.  As I understand it others in the 'industry' had noted the disparity between EQ Life's apparently great returns, whilst their sales staff "no commission Henry" enjoyed nice cars and salaries.  With apologies to those that were badly let down by Eq Life - it is just that you are not the only ones to suffer.

As to the ability to take whatever pension you like - tax will obviously be the limiter for many, plus there will be a cost in dealing with the payments - the money/fund will be held by a provider and they will still get their slice.

I don't see it as radical as many make out, but it is at least welcome to many.

I guess that makes auto-enrolment a bit easier to take - but no, many of us cannot be trusted to save in the first place, but having saved we deserve to do what we like with it.

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By User deleted
26th Mar 2014 14:03

Equitable Life

My dad wasn't a professional, just a poor sod who saw his pension disappear and who has had to cope with a lot less income as a result. Still, at least he has his state pension to keep his heating bills paid comfortably... Oh no, hang on.....

I'm sure plenty have suffered, but the EL lot have had to wait a long time and in the end for [***] all worth having. I don't put my money in a pension. It would be safer under the mattress. 

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By Caber Feidh
26th Mar 2014 16:05

Moving between Cash and Stocks & Shares ISAs

I wonder if I have understood the pension changes correctly.

If you have Stocks & Shares ISAs but expect the Stock Market to decline, then can you move them all into Cash ISAs until you think the Market is about to recover?

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By DarkPariah
26th Mar 2014 17:59

Lowering expectations

I would suggest that this is actually quite clever.

You reduce someones' pay packet, so whether they like it or not, they have to manage on less. Your NIC income is relatively unaffected. The pension money then gets invested by the insurance companies and some of it will inevitably be invested in UK businesses, which means that you receive tax, either on the dividends or increased profits. You are heating (or perhaps gently simmering) the economy, which means that employment increases (or at least unemployment does not unduly increase), so you have more people paying into pensions.

Roll on several years, when you release the PCLS money, which is again is likely to be spent in the UK (VAT anyone), so you get MORE tax and you have put money back in the economy.

In the meantime, you slowly reduce the levels of Minimum Income Guarantee (because people have less in their paypackets, they are less able to spend- pushing the price of necessities down, impacting the levels of MIG you need to pay).

Your basic state pension and Second pension are now flat rate and you can take away the triple lock guarantee. CPI is low, as the price of necessities is low and under pressure not to grow too quickly. Your annual pension bill is lower.

Bearing in mind that it has been recognised that many people will need financial advice (a service which will not be free - i.e. taxable income for the adviser). These people when asked what their expectations are, will have a lower expectation (they have had less to live on pre retirement)and are likely to opt for a safe annuity (or have this recommended to them as a result of the adviser's duty or care and 'know your client' responsibilities ).

All you need to do is find some way of saying that 'profligate' spending of the released money on retirement removes or reduces the social security safety net and you have a partial solution to the growing issue of the social cost of supporting the elderly (many of whom are now sipping pina coladas in their holiday villas down Fuengirola way)

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David Winch
By David Winch
26th Mar 2014 18:01

Lateral thinking

I can't take the credit - a lawyer raised it with me a couple of days ago.

I am sure the income tax would have to be paid.  A confiscation order does not (despite its name) actually confiscate anything at all.  A confiscation order simply requires the convicted defendant to pay a specified amount of money into court by a specified date.  (But both the amount and the date may be varied by a further court order.)  How the defendant achieves that is - strictly speaking - up to him.

So I cannot see that for tax purposes the amount realised from a pension pot could be regarded as being paid to anyone other than the defendant (with income tax consequences).

David

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Replying to lionofludesch:
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By Caber Feidh
28th Mar 2014 03:00

Confiscation Orders and pension pots


What happens If the recipient of the Confiscation Order ignores it and does not draw the money from his pension pot? Is there any possibility that the Court would then make an Order seizing the pension pot (or part of it) rather than increasing the jail sentence on the recipient? Seizing a pension pot seems much the same as the Court ordering the splitting of a pension pot on divorce, for which there does not appear to be a tax penalty.

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David Winch
By David Winch
28th Mar 2014 09:18

Confiscation & pension

A couple of points:

The jail sentence can be triggered by the Magistrates' Court when the confiscation order has not been paid on time - but it is usually invoked as a last resort when the Magistrates are satisfied that other methods of enforcement which are more readily available have failed.  Serving the jail sentence does not expunge the debt, which remains collectible after the sentence has been served.

I don't know that much about financial arrangements associated with divorce (I specialise in criminal cases) but I had thought that in a divorce where the pot was split the monies remained in a pension fund.  So there would not be an income tax charge of the type envisaged in the Budget proposals.

In confiscation cases it can happen that an 'enforcement receiver' is appointed to collect the defendant's assets & realise them to pay off the confiscation order.  Again it is not a first choice option - probably because it can be relatively expensive.

David

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