Greek Pensions - and how much you need to save in the UK

Fretwired

Stocks and shares offer an excellent return. I have an online account and have been buying for years. One of my best performing shares is Dominoes Pizzas .. bought them for around 50p and they are now around £3.30.

hotpot

That's a lot of money to try & save when the wages are rubbish. A few of my friends sons/daughters don't earn much more than that in a month gross.

I remember the hardships in the 80's when the interest rate went up to 15% putting money aside for a pension went out the window, there wasn't anything left over after you'd paid your mortgage/outgoings.

Chalky

hotpot;1140634" said:

That's a lot of money to try & save when the wages are rubbish. A few of my friends sons/daughters don't earn much more than that in a month gross.



I remember the hardships in the 80's when the interest rate went up to 15% putting money aside for a pension went out the window, there wasn't anything left over after you'd paid your mortgage/outgoings.

Now you see my attitude around the time of the ERM fiasco and huge interest rates was to put MORE into my pension and do without other outgoings. Funny how people can react oppositely to the same event. Consequently I just kept chucking money in it year after year whatever happened.

UnclePsychosis

The thing that really pisses me off about pensions is that people have known for decades this was going to happen. However anyone who'd put up National Insurance contributions in the 90s would have been committing electoral suicide so instead the people who buried their heads in the sand get their pensions paid for by the workers of today, many of whom will never be able to afford to retire, the way things stand.

Fretwired

UnclePsychosis said:

The thing that really pisses me off about pensions is that people have known for decades this was going to happen. However anyone who'd put up National Insurance contributions in the 90s would have been committing electoral suicide so instead the people who buried their heads in the sand get their pensions paid for by the workers of today, many of whom will never be able to afford to retire, the way things stand.

Brown didn't help with his £5 billion annual raid on pension funds. The bastard has a gold-plated public sector pension so he's OK.

mellowsun

Fretwired said:

Brown didn't help with his £5 billion annual raid on pension funds. The bastard has a gold-plated public sector pension so he's OK.

I wrote to my Tory MP about this in 2011, saying 'How about reversing this'. Got a letter back from Osborne saying they had no plans to do so.

Fact is that the Tories are as bad as Labour when it comes to raiding pensions.

Fretwired

mellowsun said:

Fretwired said:

Brown didn't help with his £5 billion annual raid on pension funds. The bastard has a gold-plated public sector pension so he's OK.

I wrote to my Tory MP about this in 2011, saying 'How about reversing this'. Got a letter back from Osborne saying they had no plans to do so.

Fact is that the Tories are as bad as Labour when it comes to raiding pensions.

Totally agree ... the Tories are worse as they claim to be the party of low taxation but reality shows this to be a lie.

DamianP

Rich peoples problems.

DefaultM

According to that I'd need to put an additional £800 a month in to my pension on top of the 5% of my salary I already put in. Nice one. Totally doable.

Evilmags

Sporky said:

octatonic said:

I simply don't believe pensions are the best way to save for the future.

I concur.

For starters it's just too easy for totalitarian governments to raid them for tax.

This. If you are saving for retirement get an offshore SIPP and keep shtum about it. I know a lot of guys still working in their late 70s thanks to El Gordo....

Evilmags

UnclePsychosis said:

The thing that really pisses me off about pensions is that people have known for decades this was going to happen. However anyone who'd put up National Insurance contributions in the 90s would have been committing electoral suicide so instead the people who buried their heads in the sand get their pensions paid for by the workers of today, many of whom will never be able to afford to retire, the way things stand.

They Knew. Google "Ponzi Scheme". That is exactly how UK social security works. 

ToneControl

Evilmags said:

UnclePsychosis said:

The thing that really pisses me off about pensions is that people have known for decades this was going to happen. However anyone who'd put up National Insurance contributions in the 90s would have been committing electoral suicide so instead the people who buried their heads in the sand get their pensions paid for by the workers of today, many of whom will never be able to afford to retire, the way things stand.

They Knew. Google "Ponzi Scheme". That is exactly how UK social security works. 

hence why the idea that "the EU immigrants will pay for our pensions" will not help our kids

Evilmags

ToneControl said:

Evilmags said:

UnclePsychosis said:

The thing that really pisses me off about pensions is that people have known for decades this was going to happen. However anyone who'd put up National Insurance contributions in the 90s would have been committing electoral suicide so instead the people who buried their heads in the sand get their pensions paid for by the workers of today, many of whom will never be able to afford to retire, the way things stand.

They Knew. Google "Ponzi Scheme". That is exactly how UK social security works. 

hence why the idea that "the EU immigrants will pay for our pensions" will not help our kids

Educated children in the virtues of saving. They will have no choice. Immigrant bankers, doctors, dentists, lawyers, and other professional classes pay a lot of tax and will contribute to pensions. Immigrant tradesmen as well. Immigrant unskilled Labour will not. Canada gets this. The EU does not. Every employee on my house reformation was either eastern European or south american. Their bosses were all Spanish. Spain has 25% unemployment... 

exocet

Evilmags;1140916" said:

Sporky said:



octatonic said:

I simply don't believe pensions are the best way to save for the future.










I concur.

For starters it's just too easy for totalitarian governments to raid them for tax.














This. If you are saving for retirement get an offshore SIPP and keep shtum about it. I know a lot of guys still working in their late 70s thanks to El Gordo....

....and continued by Osborne who continued to extract even more from pension funds. A friend of mine was hit with a £250k tax bill last year for breaching the max annual allowance within a company pension scheme. He's in sales, not exactly wealthy. HMRC demanded that the money be taken directly from the pension fund. It's shattered his retirement plans too. This year, the allowance was reduced even further, all under Osbornes "low tax" regime...

Axe_meister

I've been paying about 12% per year (including company contributions) into my personal pension for the last 21 years.
The way I see it I get an immediate return based on the tax I save on the contributions 20% in the early years 40% once I reached that threshold.
So that is a minimum 5% return just on what I pay in.
So far my pot has pretty much doubled in value, and hoping for at least another 50% growth over the next 25 years I'll be working.
I doubt I would have gotten that with savings as I would a) have lost the tax, would have spent the savings on crap I don't need.

octatonic

BigMonka said:

Isn't £30k a year a fairly decent amount when retired? Assuming you've paid off your mortgage and kids have left home, then it leaves you plenty for normal living and some nice holidays

Personally, I'd want at least double that.

It all depends on what you want to do- I don't fancy living the sort of life our parents have.

They are fine  but they don't have the money to do much travel.

I'm not expecting to be living a jetset life but I'd like to have a fair degree of freedom.

Our financial planner say us down one time and asked us 'what sort of lifestyle do you want when you are in your 60's'.

It was a very helpful exercise and made us focus a bit more on the future.

A5D5E5

exocet said:

Evilmags;1140916" said:

Sporky said:



octatonic said:

I simply don't believe pensions are the best way to save for the future.










I concur.

For starters it's just too easy for totalitarian governments to raid them for tax.














This. If you are saving for retirement get an offshore SIPP and keep shtum about it. I know a lot of guys still working in their late 70s thanks to El Gordo....

....and continued by Osborne who continued to extract even more from pension funds. A friend of mine was hit with a £250k tax bill last year for breaching the max annual allowance within a company pension scheme. He's in sales, not exactly wealthy. HMRC demanded that the money be taken directly from the pension fund. It's shattered his retirement plans too. This year, the allowance was reduced even further, all under Osbornes "low tax" regime...

Your friend is telling some porkies.  To be hit with a £250,000 tax bill, his pension pot would have had to increase in value by £500,000ish over the year.  That is somewhat unlikely for a humble sales guy.  And of course, it means that after tax it still increased in value by £250,000 - not exactly likely to "shatter" any retirement plans.

Finally, having the fund pay the tax charge is an option (to avoid having to find a large cash lump sum).  It isn't compulsory.

exocet

Hes

A5D5E5;1141066" said:

exocet said:

Evilmags;1140916" said:Sporky said:







octatonic said:



I simply don't believe pensions are the best way to save for the future.





















I concur.



For starters it's just too easy for totalitarian governments to raid them for tax.





























This. If you are saving for retirement get an offshore SIPP and keep shtum about it. I know a lot of guys still working in their late 70s thanks to El Gordo....

....and continued by Osborne who continued to extract even more from pension funds. A friend of mine was hit with a £250k tax bill last year for breaching the max annual allowance within a company pension scheme. He's in sales, not exactly wealthy. HMRC demanded that the money be taken directly from the pension fund. It's shattered his retirement plans too. This year, the allowance was reduced even further, all under Osbornes "low tax" regime...





Your friend is telling some porkies.  To be hit with a £250,000 tax bill, his pension pot would have had to increase in value by £500,000ish over the year.  That is somewhat unlikely for a humble sales guy.  And of course, it means that after tax it still increased in value by £250,000 - not exactly likely to "shatter" any retirement plans.

Finally, having the fund pay the tax charge is an option (to avoid having to find a large cash lump sum).  It isn't compulsory.

He's definitely not telling porkies. There were a few others impacted as well although he was the worst impacted. The calculations for taxable benefit on pension contributions have changed significantly - it's not based purely on what you earn, it's biased against variable earnings, which in Sales, you're going to experience. HMRC apply a "multiplyer" to your contributions where they vary wildly from previous years. So, he had a very good year but was then hit by a massive tax bill. I'm missing out some important detail here, he was silly in ignoring advice that was given to him in terms of "do you want us to treat these earnings as pensionable". Employers are in a difficult position because officially can't advise.

So, his contributions did not increase by £250k (probably they were in the region of £75k for the period) but the tax bill was as near as dammit £250k. His future pension has been reduced by approx £20k a year...he won't starve but the tax man has done very well.

A5D5E5

exocet said:

Hes

A5D5E5;1141066" said:

exocet said:

Evilmags;1140916" said:Sporky said:







octatonic said:



I simply don't believe pensions are the best way to save for the future.





















I concur.



For starters it's just too easy for totalitarian governments to raid them for tax.





























This. If you are saving for retirement get an offshore SIPP and keep shtum about it. I know a lot of guys still working in their late 70s thanks to El Gordo....

....and continued by Osborne who continued to extract even more from pension funds. A friend of mine was hit with a £250k tax bill last year for breaching the max annual allowance within a company pension scheme. He's in sales, not exactly wealthy. HMRC demanded that the money be taken directly from the pension fund. It's shattered his retirement plans too. This year, the allowance was reduced even further, all under Osbornes "low tax" regime...





Your friend is telling some porkies.  To be hit with a £250,000 tax bill, his pension pot would have had to increase in value by £500,000ish over the year.  That is somewhat unlikely for a humble sales guy.  And of course, it means that after tax it still increased in value by £250,000 - not exactly likely to "shatter" any retirement plans.

Finally, having the fund pay the tax charge is an option (to avoid having to find a large cash lump sum).  It isn't compulsory.

He's definitely not telling porkies. There were a few others impacted as well although he was the worst impacted. The calculations for taxable benefit on pension contributions have changed significantly - it's not based purely on what you earn, it's biased against variable earnings, which in Sales, you're going to experience. HMRC apply a "multiplyer" to your contributions where they vary wildly from previous years. So, he had a very good year but was then hit by a massive tax bill. I'm missing out some important detail here, he was silly in ignoring advice that was given to him in terms of "do you want us to treat these earnings as pensionable". Employers are in a difficult position because officially can't advise.

So, his contributions did not increase by £250k (probably they were in the region of £75k for the period) but the tax bill was as near as dammit £250k. His future pension has been reduced by approx £20k a year...he won't starve but the tax man has done very well.

The tax charge for a defined contribution scheme is simply the contributions paid in by the person and their employer in excess of the annual allowance multiplied by the individuals marginal tax rate.  There is no multiplier for variable earnings.  For a defined benefit scheme it is based on the change in amount of pension over the year multiplied by 16.  Earnings are only a factor for determining the amount of the annual allowance from 2016 - it tapers down from £40,000 to £10,000 as earnings increase from £150,000 to £210,000.  

Even if this is what your friend is subject to it would only serve to reduce the annual allowance by £30,000 and hence increase the tax charge by £15,000 ish.

Last year the annual allowance was £40,000 so with £75,000 of contributions his tax charge would be (75,000 - 40,000)* 45% = £15,750.

Regardless of all this, the fact remains, in order to get a tax bill of £250,000 you first have to benefit by £500,000 so something is a bit off.

exocet

A5D5E5;1141149" said:

exocet said:

HesA5D5E5;1141066" said:exocet said:



Evilmags;1140916" said:Sporky said:















octatonic said:







I simply don't believe pensions are the best way to save for the future.











































I concur.







For starters it's just too easy for totalitarian governments to raid them for tax.



























































This. If you are saving for retirement get an offshore SIPP and keep shtum about it. I know a lot of guys still working in their late 70s thanks to El Gordo....



....and continued by Osborne who continued to extract even more from pension funds. A friend of mine was hit with a £250k tax bill last year for breaching the max annual allowance within a company pension scheme. He's in sales, not exactly wealthy. HMRC demanded that the money be taken directly from the pension fund. It's shattered his retirement plans too. This year, the allowance was reduced even further, all under Osbornes "low tax" regime...











Your friend is telling some porkies.  To be hit with a £250,000 tax bill, his pension pot would have had to increase in value by £500,000ish over the year.  That is somewhat unlikely for a humble sales guy.  And of course, it means that after tax it still increased in value by £250,000 - not exactly likely to "shatter" any retirement plans.



Finally, having the fund pay the tax charge is an option (to avoid having to find a large cash lump sum).  It isn't compulsory.

He's definitely not telling porkies. There were a few others impacted as well although he was the worst impacted. The calculations for taxable benefit on pension contributions have changed significantly - it's not based purely on what you earn, it's biased against variable earnings, which in Sales, you're going to experience. HMRC apply a "multiplyer" to your contributions where they vary wildly from previous years. So, he had a very good year but was then hit by a massive tax bill. I'm missing out some important detail here, he was silly in ignoring advice that was given to him in terms of "do you want us to treat these earnings as pensionable". Employers are in a difficult position because officially can't advise.



So, his contributions did not increase by £250k (probably they were in the region of £75k for the period) but the tax bill was as near as dammit £250k. His future pension has been reduced by approx £20k a year...he won't starve but the tax man has done very well.










The tax charge for a defined contribution scheme is simply the contributions paid in by the person and their employer in excess of the annual allowance multiplied by the individuals marginal tax rate.  There is no multiplier for variable earnings.  For a defined benefit scheme it is based on the change in amount of pension over the year multiplied by 16.  Earnings are only a factor for determining the amount of the annual allowance from 2016 - it tapers down from £40,000 to £10,000 as earnings increase from £150,000 to £210,000.  

Even if this is what your friend is subject to it would only serve to reduce the annual allowance by £30,000 and hence increase the tax charge by £15,000 ish.

Last year the annual allowance was £40,000 so with £75,000 of contributions his tax charge would be (75,000 - 40,000)* 45% = £15,750.

Regardless of all this, the fact remains, in order to get a tax bill of £250,000 you first have to benefit by £500,000 so something is a bit off.

There is a multiplyer - my wife has been subject to the same restrictions.

I'll try and post the relevant legislative details once I lay my hands on it but I can say that your estimates of the situation are very wide of the mark. My wifes liability under the pension scheme changes were in the order of £15k.