Budget 2014 - watch with us!

Thank you. That's very helpful, everyone has been.
So when I get to 55 I will decide if I want to take 100% out (75% of it taxed at 40% or 45%) or just the 25% tax free and keep the rest in to be drawn out later if I ever get into financial difficulties or need it.

There is no easy answer to this. I take it all out and lose almost 45% of 75% of it or buy an annuity which is taxed at 40 or 45% when I draw it as i will have other income. (And I do appreciate that most people have about £30k in their pension pot which will yield them about £1k a year income and I am very lucky to have the "problems" I have).

Jane, if you are still around, yes you will still be able to take 25% tax free under the new regime.

If you draw out small sums and are not a tax payer then it may well be tax free.
What I cannot find out is under current law you can take 25% totally tax free even if you are a 45% tax payer as long as you buy an annuity with the rest and I was planning that at age 55. Under the new rules from April 2015 will you still even if you take 100% of it out as cash get that 25% tax free element? I fear not. Therefore if you take all the money and it is a big sum say £400k then most of that will bke taxed immediately at 45% i.e. the state gets £180k and you get the balance.

If you have only a small sum in there - typical one is £10k it might be taxed at 20% only or possibly nothing at all if you have no other income (eg a woman at home with a pension from when she used to work who does not yet have a state pension and whose husband works).

The flat rate £140 a week per person state pension is only paid if you have 35 years of NI contributions though so there will still be people on pension credit and housing benefit in older age.

that was in response to "The government don't tell anyone else how to spend their money"

The deal has been changed.

But PigletJohn if you draw it out in one lump sum, you will pay more at 20% (or 40%) than if you draw it out over a longer term.

And the flat rate pension will mean that there is no difference to the amount you will receive from the state in your declining years.

the special thing about a pension fund is that for every £80 you put in, the taxpayer put in £20. Or possibly for every £60 the taxpayer put in £40.

Part of the deal was that the taxpayer would be saved (some of) the expense of looking after you in your declining years.

The government don't tell anyone else how to spend their money so why should the labour party single out older people as an exception? My mother who is 88 this year says the worst thing about being old is everyone thinking they can talk about you and tell you what to do.

I'm in my 50's and I'll be saving a lot more in my pension pot now. If I maintain good health I'll probably draw lots of it out and use it to set up another business when I retire from ordinary work and then sell on the business later to finance later retirement. Of course now they no longer have a captive audience the annuity companies will probably offer more tempting rates to the risk averse. Sounds like win/win to me.

The Media are all reporting that this is a good budget for Pensioners, but speaking as one of this much maligned group I have to beg to differ. Folks who are already pensioners will have been forced to buy an Annuity at existing poor rates and cannot ask for their money back or take advantage of the new arrangements. My own annuity is so miniscule that it is actually less per Month than my state pension is per week and I do not pay income tax at all as my total income is below the threshold. I do not drink beer, nor do I play Bingo so no joy for me there either.

As to the 'up to £2,000 per child' childcare allowance, where are my DD's supposed to find £8,000 or £16,000 to pay into their accounts? Also all 3 of my DGC are now at school, there are No after-school clubs available so I will continue to collect them from school and feed and entertain them until their parents return from work - all on an unpaid basis of course.

I have been trying to think up a scheme where Grannies could swap DGC and thereby qualify to be paid to look after them but love my own too much to leave them to anyone else's tender mercies.

So, to sum up - nothing in this budget for lower paid parents or pensioners, plenty for people with well paid jobs, nannies/child minders and the odd £15,000 to invest tax free. Tories? you've got to love them. They are for the better off and they 'do what it says on the tin'.

The budget is a joke again. I would love to put my daughter into nursery full time and get a job my my earns would go straight out on nursery fees and the £2000 wouldn't help even if I got a job. I think it would of been better if the provide free nursery places for everyone who earns less than £80 thousand per couple. Anyone earning over that should be able to afford childcare by themselves, but this government only wants to help the rich not the poor.

Maybe if you've been shafted by that many companies you need a better adviser!

L&G
Clerical Medical
Scottish Widows
Standard Life
Prudential
ie the ones who have shafted me on products over the last 30 years

Oh, and out of interest who is this phantom "they" who deserve it? The companies which will be hit the hardest by this aren't the huge insurance giants who are probably the ones you are thinking of as the big, eeevvviiilll companies who confuse people and overcharge them. They have diversified product ranges, they'll probably be absolutely fine. The ones who will struggle are the smaller specialists, the ones who are at the forefront of driving down prices in the market because they are relatively small and agile and not weighed down by a larger cost base.

but tbh, when you come out with "they deserve it" as an argument against an entire industry it doesn't really make you sound terribly astute. More like a daily mail reader.

No, Gideon made that move because he's going for a vote winner a year before an election. Just like labour used to do, but with a different target audience.

Charges on a modern pension product are not difficult to understand.
That is not what the FSA found when they started investigating : which is why Gideon made the move he did yesterday

Your pension is not the same as an annuity talkinpeace. If your returns are that poor on your pension then move the damn thing, transfer to a different provider, different product, different fund...Charges on a modern pension product are not difficult to understand.

No, he hasn't 'capped DLA'. He's set an overall limit for all benefits. So, I imagine the in line with inflation increases will cease if he needs to stay within his set benefits budget.
Anyway DLA is being replaced by PIP over the next few years.

My pension pot is £11,000 and growingat diddly squat
because the hidden charges are almost equal to the headline returns

the Pensions industry were told to get transparent and drop their transaction and management rates to comparable with German companies
they didn't
serves them right
they will not get bailed out

So reading between the lines, he's capped DLA. Someone tell me I'm mistaken as I can't see how I can be.

Clean Correct.

Jane - I don't think you would pay 20 percent on the 300k. Marginal rate would be whatever your drawdown put your highest income as. So if non pension income was £30k (in the 20 percent band) and you drew out £200k, you would pay some tax at 20percent, some at 40, some at 45.....

I think as you say the situation is a bit more complicated for higher earners with bigger pots but the average pension pot is nowhere near that value.

So you would if you were still working full time/had a business etc need to make sure in one year your income was kept to 20% tax rate levels, draw out the whole sum of say £400k, £100k tax free and pay 20% tax on the £300k. If instead your marginal tax rate is 40% or 45% ( am talking about everyone I know here as we are all h igh earners, whether male or female so I accept we are not typical) then all the state is giving you is a 10% difference from 55 - 45% penalty - a bit of a boost, but not much.

I found the bit I was looking for about whether I can still take the money and run aged 55. I can but not everyone will:-

“Finally, hidden away is the increase in minimum pension age from 55 to 57 from 2028 with minimum pension age being linked to state pension age going forward. There have been calls for earlier access to pensions – to help stem the flow of those wanting to liberate their pensions. This goes against those calls but the change is a long way hence. In the meantime, those desperate for extra money will be able to draw extra legitimately from their pension scheme once they reach age 55 (or earlier on ill-health). I wonder if there will be a flow of ill-health requests as a means of liberating pensions.”

Jane the average pension pot isn't all that large at the moment - nowhere near the hundreds of thousands mark AFAIK. I'm also seeing a lot of chat suggesting that you might well be able to draw the money out piecemeal so you could find people wind up not paying that much tax and nowhere near 55% which is the current tax rate for excess withdrawn.

With regard to whether annuities are good value - the investment returns you had on your pension during the savings period aren't relevant. They're a separate product. Gender has no impact on annuity prices so they're generally speaking better value for women as we live longer on average.

SC, you can already withdraw (and pay I think it is 50% or 55% penalty) on the 75% which is not withdrawn in cash as a lump sum tax free (25% is tax free). This is moving down to your upper marginal rate so if someone withdrew say £400k in cash at 55/57 £100k is tax free and £300k is subject presumably to 45% tax. So not too different when you get into the details of it unless they mean you work out that person's tax rate in that year eg. 20% and they get £300k taxed at 20% which the budget speech might have implied or more likely for people with bigger funds they are paying 40% or 45% upper rate already so still about half or nearly half if confiscated if you choose to take it in cash. This is relevant to me as I wanted to do that at 55 coming up but will just buy the annuity if the tax penalty for taking all in cash is too high.

On whether annuities are worth it a lot of us only draw out what we pay in as we have had so many years with very low returns on shares and savings are female and will live 30 years into retirement (I will work until I did so stopped paying into a pension 10 years ago and just want to take the money and run now).

I don't agree that higher charges always mean you do worse however. Higher charges if the fund is making massive profits are absolutely fine. You get what you pay for. Pay peanuts and you get monkeys. Although if you pay massive charges and those choosing the investments are useless too that's lose lose. I have managed my own SIP for years as I like the control over choosing the shares in it.

Look lets just agree to disagree eh? I probably shouldn't have got involved in this thread - I've spend most of the day looking at stuff related to annuities and because of my job I do have a lot more knowledge of how annuity pricing works and what is really involved behind the scenes. Some of the comments and reporting I have read tonight (not specifically aiming at you) have been quite frustrating for me as many are just riddled with inaccuracies.

Sometimes you get fed up of your entire industry (and everyone in it!) being painted as evil when you know most of it isn't true and that a lot of it boils down to lack of understanding (again, not you specifically)