Right Honorable Duncan Smith, MP

[Silver_Shiney]

Paul, to the best of my knowledge, there is only one State Pension (now called the State Secondary Pension), which is a fixed sum regardless. Having said that, if you don't pay enough in the way of NI contributions, this amount can be reduced. You can purchase contributions back (I think) for 5 years to try and regain full entitlement to SSP.

Any extra retirement "income" comes from either an annuity, that you purchase with the proceeds of a private or occupational pension plan, to which you contribute during your working life (incidentally, NEVER take the annuity offered by your pension provider, ALWAYS take the Open Market Option and shop around to get the best annuity), or "income drawdown" from an investment bond (actually it's classed as return of capital and, as long as it's below 5% of the original investment, is tax-free). You can also take an income from PEPs, ISAs and unit trusts, but I can't remember the tax implications of income from unit trusts.

The SSP is on its way out at some point. That's why employers are required to offer an occupational scheme, to which they may or may not contribute, and to which you'd be foolish not to pay into via salary sacrifice (this means your pension contribution is made from gross salary, so your tax and NI contributions are lower).

Crumbs, what a lot of parentheses! Hope that all makes sense, though.

[paultheeagle]

Alan

Thank you (I think) very clear.......I paid into my companies pension scheme for many years, like loads of other people....The contributions came directly from my salary and my company made a contribution as well...I always considered that as a perk...so my pension will be made up of the states contribution and my own money....not public money, like what my income tax and NI payments goes toward...

Have I got that right?

[Silver_Shiney]

Pretty much, Paul.

The other thing to consider with your P(ersonal)P(ension)P(lan) or O(ccupational)PP is: what funds are the contributions being invested in? Many group schemes don't give you a choice, some give you a limited choice. A good PPP will have a wide range of funds, although these may be limited to that particular company.

Personally, I've got an OPP (actually a Group Personal Pension Plan - that means my employer sets it up but I can take it with me if I leave and continue contributing to it) with Scottish Windows, which has a decent range of funds that I can adjust at will online, and a PPP with Hargreaves Lansdown, which has a huge range of funds, again I control my investments online. In the two years I've had the PPP, my fund overall has grown over 20%. Some individual funds have made a significant loss, others have made a huge gain.

You should also consider your "attitude to risk" and your age. If you are young, with at least 20 years to go before retirement, you can afford to put a smallish portion of your fund in higher-risk funds. These have the potential to make big gains and big losses. These things tend to be cyclical - 5-10 years, so if going for a more volatile fund, expect to leave it untouched for at least 5 years. Lower risk funds can still lose money but the likelihood is much lower - as are the potential gains. The closer you get to retirement, the more of your pension pot should be in lower risk funds. For example, I put £500 into one fund two years ago and it made 150%. As I'm expecting a big downturn in that sector, I've transferred it out (actually put it in a cash fund awaiting the market to bottom out and then I'll reinvest).

[Silver_Shiney]

The other thing with any pension plan is that you have the option of taking 25% as a tax-free cash lump sum at retirement. This obviously means that your resulting annuity will be lower. However, your annuity will almost certainly be taxable. By taking the tax-free cash, while getting a smaller annuity, your tax bill will be lower (while you will still pay tax in retirement, you don't pay NI anymore). You then invest the tax-free cash in an investment bond and take 5% "income" withdrawals (actually it's classed by HMRC as "return of capital", so the payouts are tax-free). Hopefully, your adviser would invest you in funds that grow in excess of 5%, so despite the monthly withdrawal, your capital will still grow.

[paultheeagle]

Thanks again Alan.....Don't want to look after my pension do you

[Silver_Shiney]

Ha ha - I'm no longer qualified, and was never authorised to advise.

[Onelife]

Hi SS

Having a secure understanding of the options, pitfalls and gains that come with investing your hard earned money gives you a far better chance of retaining or indeed increasing your investment for those sunnier days ahead. Having just read through your “personal” opinions about investment options I’m sure some of us are a lot wiser now about the options available to us (whilst understanding any investment should only be taken after seeking “professional and trusted advice) nevertheless having a little knowledge is always an advantage...so on that count may I thank you for taking the time to explain what is for most a very difficult area to get their heads round.

Should you need any advice about horse racing don’t hesitate to ask...I'm yer man

Regards

Keith

[Silver_Shiney]

Thank you for your kind words, Keith

[Dark Knight]

hells teeth Alan, I could have saved a fortune if you could have told me this before

I had to pay to get all that

[HK phooey]

Batty, play fair now and don't slope off sulking like an Arsenal player after a peek into their trophy cabinet. Of course people will disagree with you on something as controversial as having their pension stopped, there is an interesting debate going on here!

[Dark Knight]

HK
we have done it to death I think and QB and me have agreed to disagree and all is good in the world

I am as happy as Mr Bale will be ,when he signs for a big club

[HK phooey]

One more comment about Gareth and you're reported

[Dark Knight]

you mentioned bailing out not me......

[HK phooey]

You were warned.

[Dark Knight]

HK
you know it's true, it just a case of which proper club and for how much
so stop creeping to plod and take it on the chin
and don't get down in the mouth

[HK phooey]

Can somebody please ban the little git?

[Dark Knight]

Oi I am 6" 3
I am sure you can get something to numb the pain

[Not so ancient mariner]

Maybe even a 'special one'!

[Mr-big-bits-mk2]

Either Dispatches or Panorama covered this very subject just a few weeks ago. The weathy pensioners that were interviewed during the program were extremely defensive of their state pension and almost all argued that they'd paid in so the state should pay out even though the money they received simply paid for their golf club membership.

Personaly i'd see it reformed. We as a country can't afford everything like it once did. It would make some sense if their was a tiered system which resulted in less being given by the state based on what you have and the money saved by cutting off the state pension being used to make the lives of the very poorest pesioners better. If rish pesioners received nothing from the state that may allow another £20 a week to the least well off.

[Kendhni]

The most necessary reform is to IMMEDIATELY cancel all public sector schemes that do not fund their own pensions. The simple rule of thumb, as given by the government, is you need to save at least 20% of your salary throughout your entire working life, anybody saving less than that is not funding their pension properly.

[Silver_Shiney]

Batty, play fair now and don't slope off sulking like an Arsenal player after a peek into their trophy cabinet. Of course people will disagree with you on something as controversial as having their pension stopped, there is an interesting debate going on here!

Yes,. which I'm afraid I took somewhat off-topic. Humble apologies.

[Silver_Shiney]

hells teeth Alan, I could have saved a fortune if you could have told me this before

I had to pay to get all that

Kev, if I knew then what I know now, I'd have played things VERY differently.

Besides, I didn't have the honour of knowing you back then.

[Manoverboard]

I am already getting my State Pension so I'm all right Jack but I concede that I wouldn't be imacted if the Xmas tenner and the Winter Fuel Allowance was removed or taxed. Mobietta however should keep hers. The bus passes, I thought, were funded by the County Council ?

Any additional pension that anybody receives is down to them and has nothing to do with the Government so they can keep their wasteful greedy hands off, it has already been heavily taxed thank you.

DN will perhaps be pleased to note that any additional ' Tax free Personnal Allowance ' for Pensioners has been clawed back by the Inland Revenue for those who's income has been above the given threashold.

ps ... I will be marching in the streets if anybody attempts to remove my State Pension, oh yes I will

[Dark Knight]

I can understand people being very defensive about pensions, but like many other benefits and perks, we as a nation simply cannot afford to carry on the way we are going.
so why not adopt a common sense approach to pensions and have a tired system, depending on you income, not savings etc
This way some would see a reduction, some would stay the same and some would be slightly better off.
My biggest issue with nthe whole scheme is people assuming that all their contributions are just sat there waiting for them to take back, which is way off the mark

[Dark Knight]

and just to square the circle, I have a lovely generous final salary pension bubbling away, a company pension and a private pension, plus some savings and a nice house to fall back on when we downsize, eventually. So I am Well alright Jack
so any state pension I would recieve would be great for paying for holidays, cheers "Call me Dave"