Pensions… again

Its just frustrating when people who know little of a subject try to tell an expert they are wrong. Admittedly, when discussing these matters with clients I must bite my tongue. But ultimately, if they don't want my help, then I don't need them as clients. My issue here is the spreading of falsehoods.

5% after charges. Perfectly reasonable for a 60/40 medium risk portfolio averaged out. There are many low cost solutions. Inflation will increase the level of contributions and erode the real terms value therefore I have projected in todays terms. Neither of those figures are disingenuous.

A £221,000 pension fund could be accessed flexibly to provide benefits where needed. A person may decide to spend more while they have their health, travelling etc. and be more frugal in later life. Likewise an annuity could be purchased.

I use minimum wage statutory minimums as an example to show that building a good retirement pot is entirely possible if you make it a priority from early in your working life.

I was referring to the "ideal" iteration of your scenario for a minimum wage worker being able to scrape together a works pension. I'm glad that you don't deem it to be ideal.

Anyone who suggests an annual growth rate of 5%, compounded, with no mention of charges or inflation, over 40 years, is being very disingenuous.

But even if someone retiring right now with a pension pot of £221k, will have (approx) an income little more than the NMW (NSP + Private Pension) will lose the WFP and not be able to access any form of pension benefits, even if still paying a mortgage or renting.

Its not a great deal of money.

Millions of workers wont retire with anything like a pot of £221k.

It’s not me who’s talking shite. Anyone can say they’re anything here.

I have to say, i sincerely hope you don't speak to your clients as you address posters on here who dare to challenge you.

Assuming you actually are a CFP ? though given some of the numbers you come out with, with no mention of charges, you probably aren't.

Ah you hurt my feelings! Touchy now you’ve been found out talking shite?

I’m not your mate.

That’s withdrawals - there’s (generally) no tax on transfers

Although most people won’t have enough money not to need / want to take income from their workplace pension at some point, and I can’t imagine many retired professionals being happy to restrict themselves to the personal allowance (less State pension when they’re of that age)

I do this shit for a living mate.

Yes. First thing you’ve got right. So, you don’t have to take 25% at once. For example. A person with a £400k pot has a £100k PCLS entitlement. Year 1. Crystallise £40,000. £10,000 is paid as a tax free PCLS. £30,000 allocated into drawdown but not taken. Yr 2 crystallise £100k. £25,000 PClS, £75,000 allocated to drawdown. After 2 years this person has accessed £35,000 from their pension tax free. They still have £65,000 remaining (invested for growth) tax free PCLS.

Careful planning can see decent incomes with little or no tax.

Only 25% of withdrawals from a pension pot are tax free.

How? Until income is taken there is no tax.

At which point they’d be subject to tax.

@BIossomtoes I am a Chartered Financial Planner. I know how pensions are taxed.

True. There is the affordability issue. You need to be able to eat before you contribute to your pension. But if you can contribute, you should.

Not necessarily. They can be transferred.

You are assuming that those being paid minimum wage can afford to pay into a pension scheme in the first place. It doesn't matter how amazing the pension scheme is if you cannot afford to pay into it in the first place.

A couple with professional careers would have occupational pensions which are taxed at source. It’s not a question of liking, it lacks credibility.

I don’t think 40 years on minimum wage is ideal.

@BIossomtoes it is far more likely than you’d think. Each person has a personal allowance of £12,570. You can then use withdrawals from pensions, ISA withdrawals/dividends to produce further income. A couple with professional careers and savings are more than capable of acquiring capital that could be structured to provide c. £36.5k worth of income each.

Im sorry you don’t like it, but plenty of people do and I advise quite a few myself.

Cloud cuckoo land more like. Nobody with an income that high doesn’t pay a penny in tax. And most of these fabled pensioner millionaires are living in their wealth. They’re not swimming in ready cash.

I understood your point. My point is that you're describing the ideal scenario which is increasingly unlikely given the current job market. I know many young people working two or three part-time jobs (mainly zero hours) because that's all they can get.

My illustration is based on 40 years. Yes if there are breaks, then the final pot will be less. The point is that low earners can still build a decent provision, and the earlier you start the better.

Your assumption, then, is that people will be able to work with no breaks. Unfortunately, that's not a reality for the many who are on zero hours contracts or those who have breaks in their employment because of illness.

I'm very fortunate indeed. I had a middle managerial post and I inherited 4k a year of my husband's work pension. (Roughly half.) That, combined with my works pension gives me about 22k a year. I've been both lucky and unlucky: no breaks for child rearing and no significant illnesses. I should be fine, though I'm trying to set money aside for the personal care, etc that I shall inevitably need if I live long enough. Many other people - mainly women - are in a much less secure position.