Author Topic: UK State Pension Age to rise to 75  (Read 2978 times)

skip207

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UK State Pension Age to rise to 75
« on: August 18, 2019, 09:07:01 AM »
There has been quite a few articles today stating that the government are considering accelerating the SPA rises with the end goal of SPA@75.

This is really bad news!!  I am concerned they will increase the qualifying years too from 35 to 45!!

I am currently around 23 years into work and part of my FIRE plan is to FIRE with about 26-27 years of full NICs which only leaves maybe 8-9 years to catch up which will probably cost me about £14k (for 2 of us).  If they add an extra 10 years on its just not going to be worth it .

Anyone got any other angles on this or possible silver linings?!  Please!! LOL.

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Re: UK State Pension Age to rise to 75
« Reply #1 on: August 18, 2019, 09:22:42 AM »
Iím afraid I have no positives to grasp either. I saw this today too and thought ďuh ohĒ. It makes the pension v ISA balance so difficult. If they maintain the desire to only allow private pension access ten years before state pension age then thatís an extra seven years of expenses required in the ISA. This would be bad news for me in particular and Iím sure many others in a similar situation.

As you mention if the qualifying years increases too then it is bad news for the early retiree. In fact if this were to happen this could end my FIRE hopes. I have a very low ISA balance only finding MMM a couple of years ago. I would be better off using the techniques learned here to escape the stressful corporate world and find something fun and part time to do and end up FIREing in my 50ís rather than 40ís.

Letís end on a high with some positives though. You wanted positives. Err, um, err, the crickets going ok!
« Last Edit: August 18, 2019, 09:28:20 AM by never give up »

skip207

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Re: UK State Pension Age to rise to 75
« Reply #2 on: August 18, 2019, 09:58:35 AM »
Yep fully agree.  If this comes in my FIRE plan will fail to launch.

My current plan is FIRE at 43 ish.  Cover 15 years expenses with ISA.

SIPP at 55 and draw down to last till 67, probably with some of the pot remaining.

Then last dregs of SIPP plus SP to see me from 67 to 77 after which point I will probably at the point where I just want to sit in a chair and drool on myself.

Yet according to the government they want me to chip in with NI and Tax till 75.... sigh.

Kookaburra Risotto

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Re: UK State Pension Age to rise to 75
« Reply #3 on: August 18, 2019, 10:00:23 AM »
I'm worried too. Mostly because it's likely that I won't be able to access my private pension until I'm 65 if this goes through. I'm 39 and work part-time due to a disability. Between me and my husband we were on track to both be able to retire early (he may also go part-time first) because we have ISAs and a rental property to bridge the gap before we get our work pensions. But such a big change could really scupper our plans, there's no way I'll be well enough to work until I'm 65 to collect my work pension then :(

highlandterrier

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Re: UK State Pension Age to rise to 75
« Reply #4 on: August 18, 2019, 01:02:34 PM »
Yeah for most of us here joining the dots the potential knock on effect of access age to private pensions is the biggie. I suspect (or maybe hope) it's far to much of a biggie to come to fruition. I do think this is a case of negative marketing though- make an extreme proposal so that when the real proposal is heard everyone thinks "oh that's not so bad". So I expect any actual proposal to be for age 70, 75 is ludicrous.

To put in context of the 100 or so countries with retirement ages listed on Wikipedia only one has a SPA over 68 (Libya) https://en.wikipedia.org/wiki/Retirement_age

When I started saving into a private pension only about 12 years ago, I could access those funds at age 50, how could changing that to 65 be seen as any way reasonable ? I had already assumed access to private pensions at 60 for projections and taken no SP into account.

Of course, we have all got the choice to vote for a change in government, but the rest of the nation seems to have a lot more faith in the current regime than I do, or ever will. In short, I think these are "misdirections" (i.e.lies) to make their eventual shafting of the population seem less extreme.


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Re: UK State Pension Age to rise to 75
« Reply #5 on: August 18, 2019, 02:30:21 PM »
There has been quite a few articles today stating that the government are considering accelerating the SPA rises with the end goal of SPA@75.

Please don't panic, people.  I had to go hunting to find out what this was about when I saw this thread, and it's not to worry.

This is not a government proposal, or a government consultation, or a government think piece.  It's nothing to do with the government at all.  This is not on the government's radar.  All it is: a think tank connected to the Conservative Party is flying a kite.  Not just that, but it's a think tank set up by Iain Duncan Smith, the person who notoriously not only failed to make the social security system better in six years as Secretary of State for Work and Pensions but actively made it substantially worse while also failing to implement his one idea of universal benefits.

And even as a think tank proposal the proposal is ridiculously thin, unsubstantiated and un-thought through.  The whole thing is just one single page (see pps 47-48 at the link below) which hasn't even been properly proof-read.  It is incoherent in its references to existing policy, hopelessly inconsistent in its future timelines and utterly useless in setting out comparative financial figures.    There's no "there" there to even start to analyse its failings in a productive manner: it's just some words plucked from the ether by a political has-been.

Bloody newspapers should know better.

https://www.centreforsocialjustice.org.uk/core/wp-content/uploads/2019/08/CSJJ7421-Ageing-Report-190815-WEB.pdf

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Re: UK State Pension Age to rise to 75
« Reply #6 on: August 18, 2019, 02:59:17 PM »
Youíre my hero former player. I take it youíre not a fan of the quality of the proposal then :-)

mubington

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Re: UK State Pension Age to rise to 75
« Reply #7 on: August 18, 2019, 03:13:36 PM »
I do wonder what the trend line looks like? Pension age has been increased in the past. If we extrapolate, what will be private pension age likely be,  for a 40 year old today?

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Re: UK State Pension Age to rise to 75
« Reply #8 on: August 18, 2019, 03:43:48 PM »
I do wonder what the trend line looks like? Pension age has been increased in the past. If we extrapolate, what will be private pension age likely be,  for a 40 year old today?
This is as close as you are likely to get as an official long-term forecast on state pension age -

"In the Autumn Statement on 5 December 2013, the Chancellor announced that this Government believes that future generations should spend up to a third of their adult life in retirement. This principle implies that SPa should rise to 68 by the mid-2030s, and 69 by the late 2040s. However, the Government is not currently legislating for this change Ė these dates are indicative only, showing a general direction of travel for future SPa changes."

Since that statement was made there have been government proposals in 2017 to bring forward the rise to 68 by the late 2030s instead of the current mid-2040s but it hasn't got to the stage of formal legislation, as far as I know.

As for private pension age, that's a bit complicated.  It depends on a number of different things, primarily the pension age as set out in the documents setting up the private scheme but also whether the scheme includes any mechanism for changing that age, and also what the tax rules are - because a lot of the value in private pension schemes is that they stay within the limits of the laws which give the contributions to the scheme favourable tax treatment.  The rule at the moment seems to be that the favourable tax treatment will require private pension schemes to start paying out no more than 10 years before state pension age, so expect it to go up to 57/58 and possibly 59.

marty998

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Re: UK State Pension Age to rise to 75
« Reply #9 on: August 18, 2019, 03:44:38 PM »
Noting former player's post, but playing devils advocate for a moment - with life expectancies heading towards 90, do you really think it is sustainable for governments taxpayers to be picking up the tab for state pensions for 25+ years for each individual (65-90+) without commensurate increases in the tax contributions that people make (over and above the taxes spent on defence, education, health etc).

Only one thing can happen, and that is for the minimum age for taking a pension to rise.

Therefore it would still be advisable to plan accordingly.

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Re: UK State Pension Age to rise to 75
« Reply #10 on: August 18, 2019, 03:52:05 PM »
Pension cost isn't just about the number of people and how long they live, it's also about how big the pension is, relative to the economy as a whole and government spending as a share of that economy. 

At the moment I don't think anyone can tell you how big the UK economy will be in six months' time, let alone in 20 or 30 years' time.


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Re: UK State Pension Age to rise to 75
« Reply #11 on: August 18, 2019, 10:12:02 PM »
I think life expectancy has recently reversed a little bit but agree that if it does increase then it may be unsustainable at current ages. The problem I have is with the ten year link to private pensions. This should be changed to 20 years or something. With the extra years to compound someone could be sitting on a massive private pension that they canít access, while struggling to work due to health issues or ageism or whatever.

Kookaburra Risotto

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Re: UK State Pension Age to rise to 75
« Reply #12 on: August 19, 2019, 12:35:00 AM »
I do think this is a case of negative marketing though- make an extreme proposal so that when the real proposal is heard everyone thinks "oh that's not so bad". So I expect any actual proposal to be for age 70, 75 is ludicrous.

This is what I think too.

The problem I have is with the ten year link to private pensions. This should be changed to 20 years or something. With the extra years to compound someone could be sitting on a massive private pension that they canít access, while struggling to work due to health issues or ageism or whatever.

Yes, this is the issue for me. My calculations assume I won't get any state pension but I have assumed access to my work pension by age 60 (accounting for further rises).

PhilB

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Re: UK State Pension Age to rise to 75
« Reply #13 on: August 19, 2019, 08:56:53 AM »
It's also worth noting that the last time private pension age was raised - from 50 to 55 - all existing pension schemes retained the right to access them at 50.  It is highly likely that similar rules will apply to future changes as the courts really don't like retrospective legislation.  It may be less generous next time, to the extent that they remove the protected rights for future contributions, but I really cannot see that happening for existing contributions.

highlandterrier

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Re: UK State Pension Age to rise to 75
« Reply #14 on: August 19, 2019, 11:38:57 AM »
It's also worth noting that the last time private pension age was raised - from 50 to 55 - all existing pension schemes retained the right to access them at 50.  It is highly likely that similar rules will apply to future changes as the courts really don't like retrospective legislation.  It may be less generous next time, to the extent that they remove the protected rights for future contributions, but I really cannot see that happening for existing contributions.

Are you sure about that Phil ? I'm far too young to remember (cough, cough)  but this article suggests there was a hard cut off date the last time without protected rights ?https://www.theguardian.com/money/2009/aug/23/pensions-savings

"Many pensions savers aged between 50 and 55 who are unaware of the rule change could miss out. According to research last week from the risk and benefits management firm Aon Consulting, only a quarter of UK workers are aware of the new rule."

PhilB

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Re: UK State Pension Age to rise to 75
« Reply #15 on: August 19, 2019, 01:52:09 PM »
Apologies, you are right.  There was a blanket protection of age 50 for occupational pensions, but not for private ones (which were rarer beasts then than they are now)
« Last Edit: August 20, 2019, 12:54:50 AM by PhilB »

highlandterrier

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Re: UK State Pension Age to rise to 75
« Reply #16 on: August 20, 2019, 01:46:09 AM »
Yep, occupational pensions tended to have a retirement age explicitly stated which makes changing difficult, and those would be protected. Nowadays many of those are also variable with SPA.

Other private pensions are open ended with an end date sometimes entered for projection purposes, but nothing binding and those would be at risk.

All theoretical and hope it stays that way.

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Re: UK State Pension Age to rise to 75
« Reply #17 on: August 21, 2019, 02:56:47 AM »
Not going to happen- any party making such a proposal would be annihilated at the next election!

habaneroNorway

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Re: UK State Pension Age to rise to 75
« Reply #18 on: August 21, 2019, 03:12:25 AM »
It is pointless for any single political party to reform any pension system - it has almost by definition to be a broad political compromise as it is a stystem in which income and payouts runs for decades. It's a long-term thing so unless the broad principles are agreed it won't change.

We had a pension reform about a decade ago. It has not really been debated since politically - but there are of course certain groups who discover that they will get less than they assumed and are p..d off, but it's not on the political radar to change it in any meaningful way.

However - it is fairly safe to assume there is no realistic scenario pensions will get better, so the rational thing is treat what you are told you are entitled to as the absolute best case and expect something a fair bit worse in terms of age, actual payout or both. Exisiting vs future contributions and "guaranteed" pensions are also touchy issues. Expect anything to be up for change at some point in the future.

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Re: UK State Pension Age to rise to 75
« Reply #19 on: August 21, 2019, 04:46:21 AM »
This whole thing is making me think about shifting my priority from private pension to more funding into S&S ISA as the main vehicle (after maxing employer contributions)....but for all we know they could just change the rules on that too.

habaneroNorway

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Re: UK State Pension Age to rise to 75
« Reply #20 on: August 21, 2019, 05:03:56 AM »
I get a "number" when I reach the age where I can start receiving my state-backed pension based on my contribution during my working years. Some years prior to that, the life expectancy for my birth year has been calculated, and my "number" is then devided by my expected remaining years on earth which gives me my annual payout (the payout itself is roughly inflation-adjusted as time goes, however). So in the new system life expectancy is built into the system and pensions are adjusted accordingly.

If I start taking out my pension sooner (62 instead of 67 or whatever), the annual sum is lower. I do receive they payout until I die - no matter how long I should live. My heirs get none of it if i die "too early". On the plus side I can earn money while receiving it.

No matter which variation a country chooses it can be little doubt which direction the wind is blowing with ageing populations and increased longevity.

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Re: UK State Pension Age to rise to 75
« Reply #21 on: August 21, 2019, 06:52:46 AM »
This whole thing is making me think about shifting my priority from private pension to more funding into S&S ISA as the main vehicle (after maxing employer contributions)....but for all we know they could just change the rules on that too.

I'm having similar thoughts. I've got a new spreadsheet tab looking at possibilities: it's really sensitive to growth estimates.

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Re: UK State Pension Age to rise to 75
« Reply #22 on: August 21, 2019, 10:35:03 AM »
New spreadsheet! Exciting Playing with Fire UK.

I too was thinking about this earlier. I didnít get too far but the political risk around pensions is a worry regardless of whether this particular story was nonsense or not. So far Iím thinking that a pension is useful in order to:

1. Avoid paying 40% tax.
2. Obtain a company match.
3. To get to a level around 25X the income tax personal allowance.
4. For anyone either close to retirement with certainty over their qualification age or who has no intention to retire prior to the date when they can take their private pension.

Err thatís it I think. I would rather prioritise ISAís and Investment Accounts other than the above. I appreciate very high earners have more to consider here but Iím not one of them so havenít thought about it.

The age for taking a private/company pension used to be 50 and is now 55 with plans to move to 57, 58. I have zero trust this wonít move back further.

poppydog

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Re: UK State Pension Age to rise to 75
« Reply #23 on: August 21, 2019, 02:11:07 PM »
There are two benefits of continuing to contribute to pensions even if youíre a standard rate taxpayer, and one drawback.

1.  You will be able to take 25% tax free when you crystallise your pot
2.  You canít be tempted to spend it before youíre 55.

The drawback is the reverse of no. 2 above - you canít access your money before 55 even if you desperately need it.

Unless you may have a need for the funds before youíre 55 (currently) you are arithmetically better in a pension fund. 

aflockhart

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Re: UK State Pension Age to rise to 75
« Reply #24 on: August 21, 2019, 02:54:28 PM »

So far Iím thinking that a pension is useful in order to:

1. Avoid paying 40% tax.
2. Obtain a company match.
3. To get to a level around 25X the income tax personal allowance.
4. For anyone either close to retirement with certainty over their qualification age or who has no intention to retire prior to the date when they can take their private pension.

Err thatís it I think. I would rather prioritise ISAís and Investment Accounts other than the above. I appreciate very high earners have more to consider here but Iím not one of them so havenít thought about it.
Another couple Ö
5: Avoid paying 20% tax as well, on at least part of the money you eventually choose to extract ( tax free withdrawals, plus whatever remains of your annual allowance)
6: Avoid paying employee or employer NI contributions, if you can pay in to your pension using salary sacrifice


PhilB

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Re: UK State Pension Age to rise to 75
« Reply #25 on: August 21, 2019, 08:16:49 PM »

So far Iím thinking that a pension is useful in order to:

1. Avoid paying 40% tax.
2. Obtain a company match.
3. To get to a level around 25X the income tax personal allowance.
4. For anyone either close to retirement with certainty over their qualification age or who has no intention to retire prior to the date when they can take their private pension.

Err thatís it I think. I would rather prioritise ISAís and Investment Accounts other than the above. I appreciate very high earners have more to consider here but Iím not one of them so havenít thought about it.
Another couple Ö
5: Avoid paying 20% tax as well, on at least part of the money you eventually choose to extract ( tax free withdrawals, plus whatever remains of your annual allowance)
6: Avoid paying employee or employer NI contributions, if you can pay in to your pension using salary sacrifice
7: Avoid losing child benefit if earning >£50k

frugledoc

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Re: UK State Pension Age to rise to 75
« Reply #26 on: August 22, 2019, 02:06:28 AM »

So far Iím thinking that a pension is useful in order to:

1. Avoid paying 40% tax.
2. Obtain a company match.
3. To get to a level around 25X the income tax personal allowance.
4. For anyone either close to retirement with certainty over their qualification age or who has no intention to retire prior to the date when they can take their private pension.

Err thatís it I think. I would rather prioritise ISAís and Investment Accounts other than the above. I appreciate very high earners have more to consider here but Iím not one of them so havenít thought about it.
Another couple Ö
5: Avoid paying 20% tax as well, on at least part of the money you eventually choose to extract ( tax free withdrawals, plus whatever remains of your annual allowance)
6: Avoid paying employee or employer NI contributions, if you can pay in to your pension using salary sacrifice
7: Avoid losing child benefit if earning >£50k

8: Avoid paying  60% tax at earnings 100 - 125k

vand

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Re: UK State Pension Age to rise to 75
« Reply #27 on: August 22, 2019, 02:32:00 AM »
Some serious wisdom bombs on been posted on this thread alerady. I'll chip in with my thoughts...

While the "75" number is typical scary knee-jerk media fodder, there is little doubt that SPa will need to be raised, and will probably drag everything else related up with it.

The way it is looking at the moment, SPa for most Gen-Xers will probably be 68, and for Millennials 69 or 70, and I think its likely the access to private pension money will be linked to 10 years earlier. This is just a reflection of the balance betweeen life expectency and wealth accumulation for the general population.

Aspiring FIREes are atypical of the general population, so it follows that that we need to think outside the box and consider other options. I'm funding both Pension and ISA, and I imagine just about everyone else here is too. I only wish I had opened a LISA in the few months it was avaliable for me to do so (I'm 42), but that windows of opportunity has unfortunately passed me by now.

I do agree that this is one of the things that won't be changed politically until it is forced upon us as a society. Whoever is in office will kick the can down the road for the next lot to deal with. In a way this suits us, as you can bet that dealing with it "properly" with a system that is sustainable for everyone will mean much more restrictions than already in place. We don't design the system, we just play it to our own advantage as best we can.
« Last Edit: August 22, 2019, 02:37:52 AM by vand »

frugledoc

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Re: UK State Pension Age to rise to 75
« Reply #28 on: August 22, 2019, 03:38:48 AM »
Some serious wisdom bombs on been posted on this thread alerady. I'll chip in with my thoughts...

While the "75" number is typical scary knee-jerk media fodder, there is little doubt that SPa will need to be raised, and will probably drag everything else related up with it.

The way it is looking at the moment, SPa for most Gen-Xers will probably be 68, and for Millennials 69 or 70, and I think its likely the access to private pension money will be linked to 10 years earlier. This is just a reflection of the balance betweeen life expectency and wealth accumulation for the general population.

Aspiring FIREes are atypical of the general population, so it follows that that we need to think outside the box and consider other options. I'm funding both Pension and ISA, and I imagine just about everyone else here is too. I only wish I had opened a LISA in the few months it was avaliable for me to do so (I'm 42), but that windows of opportunity has unfortunately passed me by now.

I do agree that this is one of the things that won't be changed politically until it is forced upon us as a society. Whoever is in office will kick the can down the road for the next lot to deal with. In a way this suits us, as you can bet that dealing with it "properly" with a system that is sustainable for everyone will mean much more restrictions than already in place. We don't design the system, we just play it to our own advantage as best we can.

How about they change it so your NI contributions actually go into your pot of pension money?

And what about the vast swathes of work dodgers in this country who get everything for free and still complain?  I canít see people being happy working longer to subsidise those who have never worked, and.

We need higher taxes, better services and lower benefits

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Re: UK State Pension Age to rise to 75
« Reply #29 on: August 24, 2019, 04:22:04 AM »
Thanks to those that contributed additional reasons to invest in a pension where I was not capable. Itís a useful thread this one.  I hadnít included the 25% lump sum poppydog because I assume that will be gone by the time I reach this point, but I may be unduly pessimistic here.

I see Monevator has a posting on this subject this week.

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Re: UK State Pension Age to rise to 75
« Reply #30 on: August 26, 2019, 10:36:15 AM »
The problem with debating raising the state pension age in terms of increasing life expectancy leading it to pay out for longer is that healthy years for the average person are (AFAIK) not increasing at the same rate. If we assume that the state pension is a sort of universal backup and that those who can will be making some kind of private pension provision which would see them through to a state pension age of 66...67...70...75...80... whatever! then the age at which you can realistically expect the average person to be working is going to top out. IMO, expecting the average 70 year old to still be working full time is silly. My dad's nearly 70 and he takes care of himself and didn't work a physical job, but he'd struggle to spend all day at an office. It would probably exacerbate his existing minor ailments significantly. So what you'd get, I assume, is people going onto disability benefits as a stopgap between working and pension. The money comes out of a different (less gold-plated, ring-fenced) pot, but it's still being spent.

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Re: UK State Pension Age to rise to 75
« Reply #31 on: August 26, 2019, 01:00:28 PM »
This is not even a theoretical discussion anymore in Sweden, its a fact. Its actually one of the main reasons i started my portfolio more than 20 years ago, you could see where it was heading. Swedens number as of now(!) and its quite certain it won't get better...

Colums: Birth year - Until birth year - age for pension - as of

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Re: UK State Pension Age to rise to 75
« Reply #32 on: August 28, 2019, 02:19:02 AM »
So I've reviewed my new spreadsheet; if the personal pension access age (PPAA) rises in line with the SPA (so SPA-75 and PPAA-65 for this proposal), I already have waaaaaay too much in my SIPP. Even with maxing out an interest-only mortgage I'd still have way too much making no new contributions.

Sigh, government meddling.

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Re: UK State Pension Age to rise to 75
« Reply #33 on: August 28, 2019, 03:21:47 AM »
Wow @MrSnow  - amazing.  Here in Italy, everyone complains as the pension age is now 67.  In Sweden, do many people use private pensions and savings to retire earlier?

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Re: UK State Pension Age to rise to 75
« Reply #34 on: August 28, 2019, 09:13:03 AM »
Unfortunately not @Hula Hoop. Not only is the retiring age higher, the compensation is getting lower than before as well. If nothing is changed there are going to be a lot of poor retirees in 30-40 years.

Swedens still have a good retirement scheme from an international perspective, the problem is that Swedes are not accustomed to save privately which is going to lead to troubles when the public compensation gets lower.

Hula Hoop

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Re: UK State Pension Age to rise to 75
« Reply #35 on: August 28, 2019, 10:38:35 AM »
@MrSnow it's very similar here in Italy.  As an American and as a mustachian, I put money away for retirement but my Italian friends and colleagues think this is completely insane and/or impossible. It's just not something that they would ever think to do as, traditionally, the pension here has been quite generous. It drives me crazy at my work because my colleagues, even the ones who earn more than me, on one hand put no money away for retirement but on the other complain endlessly about how high the retirement age is now.  When I say "I don't plan to work until 67" they look at me uncomprehendingly.  I feel like it's a real cultural difference.

Manchester

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Re: UK State Pension Age to rise to 75
« Reply #36 on: August 29, 2019, 05:44:41 AM »
@MrSnow it's very similar here in Italy.  As an American and as a mustachian, I put money away for retirement but my Italian friends and colleagues think this is completely insane and/or impossible. It's just not something that they would ever think to do as, traditionally, the pension here has been quite generous. It drives me crazy at my work because my colleagues, even the ones who earn more than me, on one hand put no money away for retirement but on the other complain endlessly about how high the retirement age is now.  When I say "I don't plan to work until 67" they look at me uncomprehendingly.  I feel like it's a real cultural difference.

Maybe it's a European thing.  In the UK I don't know anyone else my age (25) who has a private pension, never mind ISAs etc.  Everyone wants to 'live in the here and now'.  It's the Instagram culture of going on exotic holidays, posh clothes, cars etc. 

I had a funny conversation with someone the other day.  Told them how much I have in a pension, savings, investments, home equity and they replied - 'wow, I wish I could invest that much, but I just have so much to pay for'.  I went on a rant about how it's their choice, but apparently they need the monthly £300 car, Netflix, Amazon Prime, £100 phone, meals out etc and simply couldn't do without them. 


In my circle I'm the odd one out for seeking financial security.


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Re: UK State Pension Age to rise to 75
« Reply #37 on: August 29, 2019, 06:45:22 AM »
@Manchester - it does sound like a general European thing.  Obviously, spendypants types live in the US too but the difference is that the message has been loud and clear for 30 years or so to save in a private pension (401(k) or IRA) for retirement and there are tax breaks for these things in the US.  People who are paying attention in the US know that they shouldn't plan to rely entirely on Social Security (state pension) in old age.  Here in Italy, there are no tax deferred retirement accounts as the whole idea of saving privately for retirement is a relatively new thing and seen as 'foreign' and 'only for the ultra rich'. 

My friends here aren't crazy spenders but they seem weirdly helpless in the face of the increased retirement age.  At the same time, they all think we must be paupers as we don't own a car, put our kids in handmedowns and don't spend a month at the beach every summer and go skiing in winter. 

mubington

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Re: UK State Pension Age to rise to 75
« Reply #38 on: August 29, 2019, 10:07:21 AM »
So anyone care to guess whether private pension age will go above 60 in next 20 years?

In percentage terms. 1% chance? More ? Less?

shelivesthedream

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Re: UK State Pension Age to rise to 75
« Reply #39 on: August 29, 2019, 10:52:32 AM »
@Manchester My impression, certainly among the middle classes, is that in the UK people vaguely know they should be saving for retirement but they either have no idea how much and so go with some ridiculously low amount they read online somewhere or think it's too hard right now and they'll do it later (failing to appreciate compound interest or the hedonic treadmill).

I have a random question, though. Most people use their pension pot to buy an annuity, right? Can you buy an annuity with non-pension-pot money?

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Re: UK State Pension Age to rise to 75
« Reply #40 on: August 29, 2019, 10:54:14 AM »
For someone reaching 60 in the next 20 years I would guess at <5% chance of private pension access being over 60. Access being equal to 60 a much greater chance IMHO, maybe 20%.

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Re: UK State Pension Age to rise to 75
« Reply #41 on: August 29, 2019, 11:24:09 AM »
Crumbs thatís a question. Iím 42. I was preparing for 58 but am now going to prepare for 62 so I guess that means I think there is a greater than 50% chance it will go above 60.

Iím no expert SLTD but I assume that is possible although without having benefited from the tax relief I assume that wouldnít be a great deal. Hopefully someone wiser than myself will be along to provide a better answer shortly as I know very little about annuities.

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Re: UK State Pension Age to rise to 75
« Reply #42 on: August 29, 2019, 01:38:08 PM »
I have a random question, though. Most people use their pension pot to buy an annuity, right? Can you buy an annuity with non-pension-pot money?

Hi SLTD. I'm not an insurance industry insider, but part of my paid role is as pension trustee (eek) and responsible for our company's non-final salary pension schemes. The information I've reviewed suggests that since 'Pension Freedoms' were introduced, most retirees choose anything but annuities (despite their lack of volatility). I believe it is still a small minority of retirees that choose to take their pension pot (or 75% of it - the rest in cash) and buy an annuity, although it has been climbing a little in recent times. I'm sure somebody who actually likes this subject will have the statistics.

In respect of your random question, insurance companies would be happy to sell annuity products to anyone, funded from any source of cash. It doesn't have to be from a pension pot. In the distant past, final salary scheme rules (and practice) meant that annuities were / are bought as a means of matching the crystallised liability (i.e. a new pensioner) with an income stream - thus discharging the scheme's obligations. I believe defined contribution schemes also required at least 75% of a pension pot to be invested in an annuity. Clearly that's 'all changed'.

Annuities as a product aren't necessarily top choice for many people, but I do wonder if there is a general level of ignorance about the benefits. If you have one pension pot upon which you are completely reliant (alongside state pension), then a low risk route to a guaranteed income is to buy an annuity. If you already have your base income requirement covered in other ways, then consider your broader options.

Just realised I rambled .... oops, happens a lot. Sorry.

shelivesthedream

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Re: UK State Pension Age to rise to 75
« Reply #43 on: August 29, 2019, 03:40:37 PM »
That's really interesting - thanks! I'm interested in buying an annuity when I'm old but before I go crazy to cover my basic expenses. But I'm currently weighted 9:1 away from pension investments as I'm self-employed and our life has been a bit turbulent these past few years. (Plus I may inherit my father's SIPP at some point.) I know most people on this forum have a too-much-in-pension problem, but I didn't want to have a too-little-in-pension problem!

cerat0n1a

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Re: UK State Pension Age to rise to 75
« Reply #44 on: August 30, 2019, 05:44:05 AM »
I've seen an article about why buying an annuity might be a smart move in some circumstances (possibly on Monevator.) Getting to an age where you don't feel comfortable looking after your own investments, for example.

UK Dancer

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Re: UK State Pension Age to rise to 75
« Reply #45 on: August 30, 2019, 07:21:59 AM »
This one, most likely: https://monevator.com/annuities-guaranteed-income-for-life/

This made them seem a very sensible choice in certain circumstances, though no doubt those circumstances will all have changed by the time we get to the relevant age/life stage...

shelivesthedream

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Re: UK State Pension Age to rise to 75
« Reply #46 on: August 30, 2019, 08:12:00 AM »
I've seen an article about why buying an annuity might be a smart move in some circumstances (possibly on Monevator.) Getting to an age where you don't feel comfortable looking after your own investments, for example.
This one, most likely: https://monevator.com/annuities-guaranteed-income-for-life/

This made them seem a very sensible choice in certain circumstances, though no doubt those circumstances will all have changed by the time we get to the relevant age/life stage...

Very much enjoyed the literary notes. Based on my family history I expect to live a long time and go mildly senile but not crackers enough to be unable to live independently. I think it would be a load off everyone's mind if the amount I could sign over to the donkey sanctuary or to help out that nice Nigerian prince in one fell swoop were limited.

former player

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Re: UK State Pension Age to rise to 75
« Reply #47 on: August 30, 2019, 08:22:34 AM »
I've seen an article about why buying an annuity might be a smart move in some circumstances (possibly on Monevator.) Getting to an age where you don't feel comfortable looking after your own investments, for example.
This one, most likely: https://monevator.com/annuities-guaranteed-income-for-life/

This made them seem a very sensible choice in certain circumstances, though no doubt those circumstances will all have changed by the time we get to the relevant age/life stage...

Very much enjoyed the literary notes. Based on my family history I expect to live a long time and go mildly senile but not crackers enough to be unable to live independently. I think it would be a load off everyone's mind if the amount I could sign over to the donkey sanctuary or to help out that nice Nigerian prince in one fell swoop were limited.
Agreed, but it's not just that.  If you live into your 90s or 100s, even in good intellectual health, from everything I've seen your bandwith for dealing with investments and taxes and withdrawal rates vanishes as what strength and interest you have goes into daily living and manageable pleasures.  At that point the certainty of a regular income covering day to day expenses coupled with the ability to write a cheque from a savings account to cover larger expenses is exactly what is needed.

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Re: UK State Pension Age to rise to 75
« Reply #48 on: September 02, 2019, 06:25:59 AM »
@shelivesthedream  - my knowledge on annuities is incredibly limited.  I'm certain you will be able to fund them away from pensions, however I'm not sure if you'd get a deal worth pursuing? 

@Hula Hoop - I think us Brits have a lot of faith in state welfare in the form of pensions.  Most people assume that their state pension will help them retire, and if not, there's always social housing.  We have the NHS so no need to worry about health care.  In the US, people are a lot less dependent on the state providing for them, so it's more ingrained in your culture to provide for yourselves.  Hopefully in Italy some progressive companies see a hole in the market for decent investment vehicles - but their current government seem more keen on vilifying migrants, rather than improve the quality of life for residents, so I doubt any tax advantaged pension plans will be introduced.

Hula Hoop

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Re: UK State Pension Age to rise to 75
« Reply #49 on: September 02, 2019, 09:37:08 AM »
@Manchester yes it's unlikely that the current Italian government would do anything sensible like create tax breaks for pension savings but you never know.  Now that the Lega are on the back foot, maybe the PD and 5 star movement can go back to being a 'normal' government.  Who knows?  I'm not a fan of 5 star but they did bring in a form of universal basic income which was kind of interesting.