to give up paying into my pension

[laurageordie]

It seems like the rates on return have really gone down. Just had a statement through and it says if I carry on paying into it till I'm 65 and it does averagely well then I will get 3000 a year. Ffs it is impossible to live off that today let alone in 30 odd years time. I earn about the average and put away 5% a month

What do you mean by "pension rates have been going down "? Are you talking about annual returns, annuity rates...? And by "we are only just getting started with the recession? "

It's really not clear what you are actually trying to say here.

Rules are changing for the better, not the worse.

More flexibility, good thing.

If that had been now Greengrow you dad would have been able to pass on his fund. The change is for the better.

Even the supposedly better new proposals though does not mean it's tax free. At prsent if you leave the fund to heirs it's taxed at 55%. Under the changes it will often be taxed at 45% i.e. more than inheritance tax at 40%.
If your heirs don't work and have no income and it is a tiny pension pot which is left then yes they may get it tax free but that is a lot of ifs.

Same with the right to take all the pot as cash something I've considered when I turn 55. Under current law if I did that the state would confiscate 55% of 75% of the fund. Under the changes the state will confiscate 45% of 75% of the fund. If I buy an annuity the pension income will be taxed at my highest rate - up to 45% . I am stuffed whatever I do in terms of the state stealing nearly half of the total pot or income.

then take 25% in the first year and £10k a year after that

There are options in between taking it all as cash, and annuity -drawdown products for example. If you are talking about the state taking nearly half of your pot under every scenario then you must already be a very high earner and/or have a large pot. That's not the case for most people. Neither is 45% income tax.

It doesn't work like that sadly. 75% of what you draw is taxed at your highest rate so 45% or 40% etc and yes 25% is tax free. I agree that if someone has £5k a year income only from the state pension they can structure their private pension after the rules change to take only enough each year to take them up to their £10k a year tax allowance. that is not much use for people who have bigger houses, more expenses than that or whatever.

The changes incentivise people to take all the fund soon and spend it, flooding the economy with cash (good for the country) and the coffers of the state with extra tax revenues - yes it may be 20% of 75% rather than 40% fotr lower earners but still a lot of tax. It is a very strange message when we had been told to save for old age rather than spend it all at once. It is not as if people can find investments paying them 10% a year . Savings rates do not even keep up with inflation at present.

The money has gone in, for most people, tax free. Most people have a lower income after retirement so will pay less tax on the way out. So for most people, it is tax efficient. Have a look in to what the average annuity size is for example

What makes you think it "ought" to be tax free?

The deal with pensions is that you get tax rebate on your contributions. So it is untaxed when it goes in. When it comes out, it is taxable.

However there are generous ways of paying less, or little, or no tax when it comes out.

If you want it to be, not a pension but an inheritance, there is no particular reason why it should have tax concessions.

You will have got the tax relief on the way In, not everyone will be firmly in the higher rate tax bracket when fully retired. If you are well, I mean you will have benefitted from higher rate relief so I don't see what the issue is for paying some tax at that point.

What do you think you can invest in totally tax free?

Your not really an average case to be fair green.

10% capital gains tax on companies you own. 45% exit tax on pensions.
Even a buy to let flat CGT is only 28% and you can set all your tax losses and annual capital gains tax allowance against that. Pensions are looking a worse and worse investment.

Also people have put almost a total hold on buying annuities given the recent changes. the fewer people who buy them the worse the deals will be and higher the costs. if I take an annuity the income will be taxed at 45% or 40%. If I take the lump sum most of it is taxed at 45%. If I wait until I die my children pay tax on it even under the new rules at 40% so you wonder what was the point in locking yourself out of your own money for so long with all those charges applied to it when the rules change on a whim and so hugely so regularly. When I set it up I could take my pension at 50. That was the contract. Then the state snapped its fingers and said no - whatever that deal they were unilaterlaly changing it to 55. Now it's going up to 57. year by year they also change the rules so there is a new maximum you can hold in your pension pot.

If you are the other end of the scale and earn very little it's even worse a deal - worst tax relief 20% etc only and by having the extra pension in 30 years you will probably get fewer state benefits than someone who did not save into a pension but spent their money as they received it.

Anyway don't listen to me anyone - take advice from lots of people before deciding.

Like you say you have to get advice particular to your situation.

I don't understand your point Greengrow

Are you starting from the premise that nobody should ever pay any tax? Or just you?

I think the main lesson here or what I have learnt from my own research is if you can get a company pension then you'd be silly not to join it but avoid private personal pensions as they might not be great and use other investment products like ISAs, buying property etc.

I don't have one, been stay home mum for 15 years. Luckily hubby has a spouse one. I don't worry about it as not sure I will even make old age (long and complicated not just naivety)

Is it normal for a pension provider to stop you paying more into your pension? My pension provider says I can not change payment, have to see a financial advisor to start a new pension.

I suspect that this is to do with commission and charges.

It might be, for example, that your old scheme has such dreadfully high charges that they no longer offer it. Or it might be that their pet salesman will earn more commission by selling you a new scheme.

You can get very low-charging schemes now. Salesmen are unlikely to offer them, unless you pay them a fee, because low charges mean low, or no, commission.

UK pension schemes are notorious for high charges which sometimes gain more out of your scheme than you do.

The salesman's loss is your gain.

Fell free to tell us the name of your pension provider.

Have you got a financial adviser? If not you should check and make sure your not paying anyone anything through your plan.

in 2015, charges are supposed to be capped

Depending on your POV, this is either a cruel change taking the bread out of the mouths of salesmen's children, or a long-overdue and far from stringent change preventing the L&P trade profiteering from the ignorance and inertia of mugs clients.

I pay in 11% and employer 13% (I think) doing a calculation on mine my pension would be £25,000ish.

I pay 5% so does my employer plus a bit more. I just had my annual statement and it is currently worth 18k. I have only had my pension for 2 years and only roughly 8k has gone in between me and my employer. So not such a bad return whether I get a smiliar return at retirement age is left to be seen.

Well done

I think you've had a good couple of years. Sadly there will also be bad years, but over time we mostly think you will be a winner.

Well I am still trying to sort my pension out. Have finally got an email address of someone at FriendsLife who will see if they can figure out what is going on. Meanwhile the online system has now decided to remove my 'products' so I can't use that to see fund values, modify direct debit, change address, any of that sort of thing.

Found this from my original sales material:
Reasons to recommend Friends Provident's Personal Pension Plans leaflet. (reference SAD756 8.98)

After 12 months you can increase, decrease or miss contributions without penalty. (Higher maturity value plan)
or
You can increase, decrease or miss contributions at any time without penalty (Higher transfer value plan)

So I have the Higher maturity plan, so looks to me that I can increase my contributions. At least I could when I took the plan out in 1998. Since then something has happened to prevent me increasing my contributions, though no fault of my own.

So I have asked FriendsLife if they will pay the cost of a financial advisor. If you don't ask you won't get, so never know they might pay, as it's not my fault they are not sticking to the rules of the plan at the time it was sold.

Am I Being Unreasonable?

I have emailed a local financial advisor to get an ideas of fee, will try to call them tomorrow. Anyone know what a likely fixed fee would be for a pension review and if required setting up a new pension plan?

OP - I stated a pension in 1998. They are long term products not short term savings, so you could just leave it and let it slowly increase with value.

In 2005 my plan value was £4000, it is now £13,000. Over that time I have paid in £5600. So growth of £3400. Ok it may not be that much but with low interest rates, I suspect it did better than putting it in a standard savings account or ISA.

nannynick I haven't used these people but apparently they give free advice couldn't harm to give them a call

www.pensionsadvisoryservice.org.uk/