Victoria Derbyshire asked this morning how George Osborne’s pension changes will affect you.
They won’t effect me, but they will effect those companies that provide the dreaded annuities, as I won’t be buying one!
I will be putting money into a peer-to-peer lender like Zopa, to provide me with a flexible income.
Suppose you had £50,000 invested in Zopa and it was generally lent out at 5% for five years. This money would be safeguarded by Zopa.
Once it was fully lent out, you would get an interest payment of £2,500 each year and capital repayments of £10,000 a year.
So in other words, you could withdraw £12,500 a year with no trouble. But if you didn’t and left it to accumulate in Zopa you would be earning more money.
Obviously, you would have to pay tax on your earnings, but the idea of using Zopa or one of their ilk, as an annuity could turn out to be a good one.
There is a rumour doing the rounds, that peer-to-peer lenders will be starting to productise their offerings, by creating specialist ISAs and flexible on-demand deposit accounts.
I have never understood why pensioners had to buy an annuity to give themselves an income in the last years of their lives.
In fact after hearing Adrian Chiles talking about his ideas for pensions, I vowed that unless it was a capital offence, I wouldn’t buy one!
So George Osborne did the honest thing and has made it that no-one will have to buy one any more. It’s all reported here in Citywire. Here’s the summary.
The government has unveiled a landmark overhaul of pensions drawdown and has abolished the 55% tax on pre-retirement pension withdrawals, meaning no one will have to buy an annuity.
From April 2015 people will be able to access pension savings as they wish at the point of retirement, subject to their marginal rate of income tax, rather than the current 55% charge for full withdrawal.
This had two immediate consequences.
Insurance company shares dropped as reported here in the Guardian.
George Osborne was put on a stop list of those, who aren’t entitled to buy insurance.
But well done George, as he also put the tax up on fags, although he was gentle with beer and cider.
I recently received a letter from the Department of Work and Pensions, to say that my pension was going up.
As like many pensioners in the UK, I get my pension paid directly into my bank account, surely this mass destruction of trees to send something, I didn’t read, was a waste of taxpayers money.
After all, I would notice that my pension had gone up, when I check my bank statement.
What percentage of these letters and booklets were actually read? It must be less than one percent.
A former minister, Paul Burstow is suggesting that winter fuel payments be means-tested. It’s here on the BBC.
I’m over 65 and get a state pension, winter fuel payments, free travel in London through my Freedom Pass and discounts in lot of places including on National Rail through my Senior Railcard.
I would like to get a statement each year, as to how much I’ve received. I could then give an equivalent amount to charities of my choice. Probably, I’d to that on my birthday to celebrate cheating the Devil for another year.
If the government didn’t pay me, they’d only blow in on some ridiculous project.
I’ve also received a text message saying.
Hi, as you have a frozen pension, you can get a large cash payment within 4 weeks, to get it started today reply ‘CASH’ to this text.
It was unsigned. That told me it was a scam, as if my pension manager wants me urgently, he comes round on his bike, or gives me a call on the land-line.
The grammar is all wrong too. one of the advantages of an education system, that no longer teaches how to form sentences correctly, is that it’s easier to spot frauds.
And my grammar isn’t perfect!
Pensions are a nightmare and more rubbish is talked about them than any other financial matter, except possibly credit cards.
I’m in some ways typical, but the size of my pension pot is not typical.
When I worked for Metier, our wonderful accountant, Brian, set me up with a pension that I can live on.
I also have an income from the cash I got from selling the stud.
And when the DWP sorts it out I’ll have my State Pension.
So basically, I have a fixed sum coming in each month, from which I take my living expenses. Which of course varies on a month by month basis.
So at the end of each month I have a current account, which either has a small surplus or perhaps a small deficit. If it’s a surplus, the money goes into my Zopa account and if it’s a deficit, I withdraw a proportion of the payments made in at the first of the month.
So Zopa acts like a deposit account, that pays a reasonable rate of interest. The great thing, is that it costs me nothing to transfer money to and from Zopa.
There is of course a slight risk with Zopa, but I’ve used it long enough to have developed a philosphy that minimises bad debt.
Effectively, I’m using Zopa to damp out the fluctuations in cash flow, just as a control engineer might add damping to a feedback system.
I was sixty-five on the sixteenth of August and still haven’t had a sniff of a pension, despite several phone calls and a few letters.
I’m not someone who is in desperate need of the money, but surely if I was, it would be causing me great difficulties.
After all, it’s not if my pension age sneaked up on them and they’ve had my details since I started getting winter fuel payments a couple of years ago.
It’s a complete disgrace!
I’ve had some more positive responses on my idea for giving to charity on your birthday, which I outlined here.
It just seems to hit a chord with people, to give to celebrate another year of life, hopefully well-lived.
So I’ve now given it a name of Birthday Charity Giving. It was the only sensible name I could think using the first letters of the names of my wife, son and the late company accountant, who set me up with the good pension I enjoy.
I avoided the NatWorst problem, as I’ve never banked with them, and over the last few years I’ve been very happy with Nationwide.
So today I got my comeuppance.
I have been trying to get a forecast for my pension, which will be paid on my 65th birthday in a few weeks time.
Today the DWP has informed me that they can’t find my National Insurance contributions from the Department of Revenue and Customs.
So now, I will have to navigate myself round what is reputed to be the worst Government system in the UK.
Why am I the one, whose records have got lost?
I am 65 in a few months and I need to find out what my State Pension is going to be, so that I can plan my life accordingly.
As I live only a short walk from my local Jobcentre Plus and they helped me with my winter heating allowance, I decided they would be the first place to try.
They couldn’t help me directly, but they gave me a list of useful numbers and told me to ring the Pension Service on 0845 606 0265. This incidentally is free from BT, but expensive from a mobile.
After I got home, I rang the number and they told me that the simplest way was to ring another toll-free number, 0845 300 0168.
It took me about ten minutes before I gave them all the information they needed, like both out National Insurance numbers, C’s Date of Death and our Date of Marriage.
The guy at the other end said, I’d get the Pension Forecast through the post in about ten days.
It was all fairly painless! And there were no charges anywhere. Not even phone ones!