State Pension age set to rise to 71

[Hedgecutter]

Just now, hk blues said:

Fair point - I'll have to swallow my pride there.  

European or African?

Anyway... what are folk expecting the average private pension growth to be over the next decade or three? 5% ?

You can earn more than that in a standard cash ISA right now.  Guaranteed rise, tax-free, no age limit for withdrawal.

[Sergeant Wilson]

1 hour ago, 101 said:

Exactly this.

How can they expect prison officers to keep working until 71? When in effect they will have to as they can't access their pension penalty free before the pension age.

It does seem odd that they can change it when you have already started working, it's not like they don't know the demographics of the UK, you could be half way to retirement now and have the carpet pulled from under you as they stick the age up in 5/10 years.

It's classic Catch 22. Do you want a 70 year old fireman up a telescopic ladder trying to rescue you from a building ablaze? Or a 25 year old who's menu anxiety from the night before is still hanging on him and he might need counselling to get over the second rung of the ladder?

[resk]

2 minutes ago, Hedgecutter said:

European or African?

Anyway... what are folk expecting the average private pension growth to be over the next decade or three? 5% ?

You can earn more than that in a standard cash ISA right now.  Guaranteed rise, tax-free, no age limit for withdrawal.

Is it going to be 5% for the next three decades though?  Over the long term, stocks and shares have always out-performed cash.  

[hk blues]

5 minutes ago, Hedgecutter said:

European or African?

Anyway... what are folk expecting the average private pension growth to be over the next decade or three? 5% ?

You can earn more than that in a standard cash ISA right now.  Guaranteed rise, tax-free, no age limit for withdrawal.

I'm out of the loop on such stuff - can you add to an ISA as and when you like or is it like a fixed term contract/bond i.e. one-time lump sum for fixed period?  If it's flexible then it is a better option than AVCs.  

[Hedgecutter]

11 minutes ago, resk said:

Is it going to be 5% for the next three decades though?  Over the long term, stocks and shares have always out-performed cash.  

As far as I'm aware, pension portfolios are typically a mix of higher- and lower-return S&S and bonds, respectively.

Whilst you might have S&S at 9%, which I think is a typical average, a return to ultra-low BoE interest rates would fairly drag your overall pension rate down from that 9 figure.  One would probably shift towards a bond-heavy portfolio to reduce risk as they get closer and closer to their chosen retirement age.  At least the young 'uns have the opportunity to go down the 'adventurous' higher rate line with time for another 2008-type scenario to recover.

Edited February 6 by Hedgecutter

[Hedgecutter]

53 minutes ago, hk blues said:

I'm out of the loop on such stuff - can you add to an ISA as and when you like or is it like a fixed term contract/bond i.e. one-time lump sum for fixed period?  If it's flexible then it is a better option than AVCs.  

There are different types of cash ISA. Standard one you can add to and withdraw from as many times as you want, as long as the sum of the deposits (across all ISAs, including S&S ones) doesn't exceed £20k per financial year.  

Fixed-term ones should have higher rate of return.  Some types are properly locked in, i.e. don't expect to have any access for one or two years.  Other fixed ones like my mine you can withdraw from anytime, but my attractive interest rate drops by a few points after 3 withdrawals (doesn't matter if it's 4x £1 withdrawals or 4x £1m).

S&S ISAs are subject to the same 20k rule and are fully accessible. I personally now top up monthly (trying this 'pound cost averaging' thing), and can cash out and run at any point.  I'd never heard of the S&S type until relatively recently, and Captain Hindsight has shown this to be a pricey lost opportunity after a period of low-interest base rates.

Edited February 6 by Hedgecutter

[Cyclizine]

35 minutes ago, hk blues said:

I'm out of the loop on such stuff - can you add to an ISA as and when you like or is it like a fixed term contract/bond i.e. one-time lump sum for fixed period?  If it's flexible then it is a better option than AVCs.  

The advantage of AVC into e.g. a SIPP is the tax relief, which can be useful to bring yourself below some of the cliff-edge thresholds. Payments into a ISA are obviously after tax has been deducted. Saying that, an ISA is more flexible if you need the money, in a SIPP, the cash is essentially locked away until you reach 55. There is the lifetime ISA which can be used either for a house deposit for a first time buyer or can be withdrawn after 60. There is a limit of £4000 per year, but the government will pay a 25% bonus annually, topping it up to £5000, plus any interest.

[alta-pete]

21 minutes ago, Cyclizine said:

The advantage of AVC into e.g. a SIPP is the tax relief, which can be useful to bring yourself below some of the cliff-edge thresholds. Payments into a ISA are obviously after tax has been deducted. Saying that, an ISA is more flexible if you need the money, in a SIPP, the cash is essentially locked away until you reach 55. There is the lifetime ISA which can be used either for a house deposit for a first time buyer or can be withdrawn after 60. There is a limit of £4000 per year, but the government will pay a 25% bonus annually, topping it up to £5000, plus any interest.

The jeopardy with that though is that - at the current taxation thresholds - if you do manage to make it to State pension entitlement, you’ve only got a very small additional private pension income before you fall into having to pay tax on it. Save tax on the way in, pay it on the way out. 

I suppose the upside though is that the tax money that is saved in the way in has a longer time to mature and grow before you want it back. 

[TxRover]

1 hour ago, Hedgecutter said:

European or African?

Anyway... what are folk expecting the average private pension growth to be over the next decade or three? 5% ?

You can earn more than that in a standard cash ISA right now.  Guaranteed rise, tax-free, no age limit for withdrawal.

Note that the guaranteed rise is based upon the underlying health of the company providing the assurance…the tax-free status depends on the Government never changing  the rules…and the no age limit does too.

The steady increase in ISA balances will become an increasingly attractive target to politicians, they will likely not act quickly or soon, but in the end, they will start nibbling at the forbidden fruit.

The clearest example of this is U.S. Social Security taxation. Social Security payments are (theoretically) recompense for contributions taken in the form of a tax, which has increased several times. Since the 1980’s, an increasing percentage of the payments has become subject to income tax, and now means testing is again being discussed. The IRA (somewhat a U.S. version of an ISA) has slowly become a talking point for some financial experts as the next target to provide more income, especially focused on the wealthier holders, much as taxation of Social Security benefits was “focused” initially and how the means testing is being pitched.

[Cyclizine]

3 minutes ago, alta-pete said:

The jeopardy with that though is that - at the current taxation thresholds - if you do manage to make it to State pension entitlement, you’ve only got a very small additional private pension income before you fall into having to pay tax on it. Save tax on the way in, pay it on the way out. 

I suppose the upside though is that the tax money that is saved in the way in has a longer time to mature and grow before you want it back. 

Yes, you are delaying paying tax now with a SIPP, but the advantage is still there for higher rates tax payers in that you can use contributions to reduce your income to below the thresholds, useful if you claim e.g. child tax credits, which you start to lose currently. Also for avoiding the >60% tax trap once you start to lose your personal allowance. You obviously will see any investment gains when withdrawing your pension, but you do have some flexibility in keeping your pension income within the basic rate. For most people, paying into a pension makes more sense than an ISA, particularly when employer contributions are taken into account. I think many people forget about the value of this, if you stop your pension contributions, you will lose free money from your employer and any increase in your take home will be less than your contributions as it'll be taxed.

[superbigal]

When I read the thread title "state pension set to raise to 71"

I thought those fecking pensioners.  £71 a week is far too high for the coffin dodgers.

[vikingTON]

3 hours ago, btb said:

The vote on bringing forward the rise in SP age to 68 by 7 years is already scheduled.

Which wasn't actually the headline story yesterday, or the OP of this thread.

It's really not an 'Orwellian' conspiracy then.

[Salt n Vinegar]

2 hours ago, TxRover said:

Note that the guaranteed rise is based upon the underlying health of the company providing the assurance…the tax-free status depends on the Government never changing  the rules…and the no age limit does too.

The steady increase in ISA balances will become an increasingly attractive target to politicians, they will likely not act quickly or soon, but in the end, they will start nibbling at the forbidden fruit.

The clearest example of this is U.S. Social Security taxation. Social Security payments are (theoretically) recompense for contributions taken in the form of a tax, which has increased several times. Since the 1980’s, an increasing percentage of the payments has become subject to income tax, and now means testing is again being discussed. The IRA (somewhat a U.S. version of an ISA) has slowly become a talking point for some financial experts as the next target to provide more income, especially focused on the wealthier holders, much as taxation of Social Security benefits was “focused” initially and how the means testing is being pitched.

This. I agree.  To me, an overriding factor in considering taxation is the ability to pay.  I have no problem at all with folk talking about taxing "assets" like homes, but I still think that someone's main residence should be exempt.  There's already local taxation on normal residences via Council Tax, but tax second homes to the max, IMO.

Income from ISAs though... I think that's now different.  For those with the financial clout to be able to afford it, a small fortune could have been put away in ISAs by now.   There must surely come a point where the annual investment "unearned" income would justify a bit of scrutiny.  

It is hard to draw a line somewhere but maybe, say, unearned income above 3x the average after tax earnings could be taxed at 5-10%? It would still be a good deal for investors. They'd keep 90% of the dividends and increases in the value of the shares would still be exempt from Capital Gains Tax if they were sold.

With shares ISAs folk could be coining in tens of thousands in dividends a year, which, if withdrawn as they arise, or in a lump sum, is a fair whack.  When ISAs were introduced ages ago, with annual deposit limits of a couple of grand, was it really the intention that after a period of time folk could literally retire with an unlimited "unearned"annual tax-free income, while ordinary folk would be expected to pay significant tax on their much smaller "earned" wages and work until they're 71?

Part of me thinks "of course it was!  It's the golden rule... those with the gold make the rules." Cynical? Moi?

Seriously though, is it time to look at the untaxed income allowed by ISAs?

[sugna]

6 hours ago, Hedgecutter said:

Don't think you're taking crow-years into consideration here.  For all you know it was old and required feeding.  A rookie* mistake.

*yes, intentional.

You're quite choughed with that one.

[EvilScotsman]

19 hours ago, Shadow Play said:

Regardless of all this I remember reading an article that looked at how the UK Governemnet could pay off all debts.

This would require the abolition of money.

[Shadow Play]

1 hour ago, EvilScotsman said:

This would require the abolition of money.

Apologies, I was referring to “all debt” in the context of national debt.  The debt that is over £2.5 trillion.

[Brother Blades]

National debt is an imaginary thing. It can be easily added to if the Tories fancy a wee pre election tax cut. 

Money is a joke, I’ve been collecting fancy shells for years to counter inflation until the end of days. 

 

[btb]

5 hours ago, virginton said:

Which wasn't actually the headline story yesterday, or the OP of this thread.

It's really not an 'Orwellian' conspiracy then.

It will be when the eventual outcome is less bad than the scare stories.

[vikingTON]

5 minutes ago, btb said:

It will be when the eventual outcome is less bad than the scare stories.

It won't be because they're two unrelated groups doing entirely their own thing - which is not a conspiracy.