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Pension top up- it must be April Fools Day!

(17 Posts)
ninny Tue 28-Jan-14 09:49:49

Is this a Joke!

merlotgran Tue 28-Jan-14 10:51:13

Anyone rushing to invest £900 for every £1 per week extra?

Thought not! hmm

Anne58 Tue 28-Jan-14 10:56:28

Doesn't seem like a particularly good ROI !

mollie65 Tue 28-Jan-14 14:16:35

so all those 'taking up this offer' will probably be over 70
how long will they need to live to recoup that 25K (if they had it anyway)
if I had 25K going spare I would spend spend spend rather than let the government get its sticky hands on it for
an extra £25 a week shock
if we could get 5% on our savings that 25K would yield about £1000 a year after tax - so about £20 per week then. and you have control of your capital.
if only they would stop tinkering with pensions, interest rates and the coming up with these half-baked ideas we would know where we stand.angry

FlicketyB Tue 28-Jan-14 15:46:13

They reckoned that someone taking it out on retirement and with average life expectancy will get back £39,000 and that the older you are the less each extra £1 will cost.

Remember also that each year your whole pension including the extra will get a pension rise, so with compound interest the £25.00 a week will work its way up from £25.00 to £30 or more, depending on your age at taking it and your age at death.

papaoscar Tue 28-Jan-14 18:13:17

Am I getting this right, £900 contributed now would give you an extra £1 per week SRP. So if you were, say, 65 when you started drawing your pension you would get an extra £52 a year, and if you lived to, say, 85 you would have got £1040 back, plus annual increases but less the effect of inflationary increases. Can't see much point in that unless you've got some cash to burn and feel like living for a long time, otherwise you're just giving HM Gov your cash to fritter away.

Dianalou Tue 28-Jan-14 18:33:07

It is better than buying an annuity, but not a fantastic deal.
It just shows how poor annuity rates are at the moment- you would pay a lot extra for the annual increase.

NfkDumpling Tue 28-Jan-14 19:38:44

I suspect it's a way of introducing the idea of boosting the State Pension so the Government doesn't have to. It may be something people who can't afford to pay into a private pension and will only get State Pension will be interested in.

FlicketyB Tue 28-Jan-14 19:44:51

papaoscar. Think again. If in year 1 you invest that £900, at current interest rates you will only get about £13 interest, you will therefore need to take £39 out of your £900 to get the same benefit as the state scheme so in year 2 you will only have £861 in your fund, so your interest will still be about £13, but under the governments triple lock your pension will have risen at least 2.5% to £53, so in year 2 you will need to withdraw £40 from your capital that then falls to £821, the figures for year 3 will be interest: £12, pension:£55. The gap is now £43 so in year 4 the figures will be £778, £11, £56, gap £45 and so on. Your £900 will last you around 12 - 15 years or until you are 77 - 82 - and more and more people are living into their 90s.

The problem is the investment will be locked at its monetary value as will the interest and will fall in real value as inflation eats into it and capital is withdrawn to equal the state pension income it would generate. Meanwhile the pension is being increased by a minimum of 2.5%, compounded year on year.

I worked this out some years ago when I retired, which was why I chose to leave all my money in my company pension scheme and take the maximum pension rather than take out a tax free sum.

mollie65 Tue 28-Jan-14 20:54:17

nfk - it is intended for those who have already retired and are drawing the current state pension.
my suspicions (how cynical am i) is that it is intended to be a sop to those of us who not only had to get 39/44 years of NI contributions to get a full pension (£110 if you disregard SERPS) but have missed out on the proposed flat rate pension due to be introduced in 2016/2017.
don't think they are fooling anyone. hmm

NfkDumpling Tue 28-Jan-14 22:18:53

Aha, thanks Mollie, I didn't read that bit.

papaoscar Wed 29-Jan-14 06:14:09

FB & mollie65 - I take your points, all well made. It is difficult these days to know who or what to trust. In financial matters especially people's hopes, plans, savings etc., have been ripped up by greedy, cheating governments, banks and big institutions. It is no wonder folk are cynical!

durhamjen Wed 29-Jan-14 14:23:01

This is weird because I am sure I paid £990 just before I retired to make up years missed and got an extra £5 per week pension.
It worked for me because it's nearly 5 years since I retired. However, if we had had to do the same for my husband it would not have been worth it as he died just 6 months after he retired.

FlicketyB Wed 29-Jan-14 16:41:35

durhamjen the current system is that you can make up any NI payments you missed in the previous six years, so you get the extra pension you would have had had you worked through. However if your missing years were more than six years ago there is nothing you can do to make it up

I think this scheme is aimed, particularly at women who have small state pensions and weren't able to make up missing years because, like me, they missed NI payments when they stopped work when their children were young, which was 25 years before pension age or who paid the married woman's stamp. Younger women, 65 and under, will get their missing year payments made up under the 'domestic responsibility' contribution rules. I was just too old for that. I got 1 year of it but the remaining years remain blank non-contributory hole in my pension.

Plus, of course, mollie65's point about enabling us, at our expense, to catch up a bit on those on the new flat rate pension coming in in 2016/17

mollie65 Sat 01-Feb-14 15:54:21

thinking about this further - have a wet weekend and decided to investigate
this 'extra' pension accrued if you have the funds is not part of the state pension but a bit like SERPs which is not protected by the triple lock. - no advantage there
this is how SERPs is treated
'The triple lock promise does not cover the State Earnings-Related Pension Scheme (Serps) or State Second Pension (S2P), which replaced Serps a decade ago.'

also the funds to pay this 'top-up' will have to be paid out of taxed income.
as I understand it (correct me if I am wrong) NI contribs are deducted from salary/income before income tax is paid.

I feel very irked as I know some of you do because you have to wait for your state pension - but I feel irked because being born in 1947 and not being entitled to HR credits as I was not at home when they began in 1978
I have actually paid 37 years of NI (really paid not credited) but don't get a full basic pension as I was the wrong side of the cliff edge when it was dropped to 30. I feel it would have been fairer to treat all pensioners who had paid > 30 years of any age the same and that is yet another reason to dislike how they treat pensions/pensioners so arbitrarily.
do not trust them angry

papaoscar Sat 01-Feb-14 19:48:31

Thank you, Mollie65, for ripping open this bag of false promises!

FlicketyB Sun 02-Feb-14 14:16:48

Everything this government promises anybody is always a con.