Only old threads available! I understand that at my demise if my wife isn't already a UK citizen she can apply to become one regardless of where she is at on the 5 year route. What I can't find is any info on pension arrangements,any ideas? Would she only be entitled to the married allowance pro rata from when she came here? Obviously if she returned back to the Philippines she would lose it but could she lump sum it prior to going then go?
As far as I am aware pension entitlement is now independent of your spouse and is solely dependent on your NI contribution record (your wife's contribution record). I'll dig up some more info when I get home, I think there is a minimum of 10 years NI required now. This where to start https://www.gov.uk/new-state-pension it'll be the new state pension rather than the old scheme I expect. Any state pension amount earned in this country as a result of her paying her own NI will continue to be available if she left to return to the Philippines but that would need at least 10 years contributions. State Pension only allows for a lump sum benefit for deferred benefits i.e. where someone does not retire at their state pension age, the deferred amount can be lump summed. Private pensions are another matter altogether, in a private pension it is her own money and she can choose how and when to receive it after age 55 (currently) within certain constraints.
The new State Pension came into effect in April 2016 starting at about £144 a week, people retiring before that date retire under the old rules which in some cases were more generous if you had never been contracted out of SERPS or the State Second Pension. The new State pension is worth about £168 a week, that's my current forecast and the maximum, I can't earn any more than that although by the time I retire in about 6 years it will be about £192 a week. Some people who also earned one or more of Graduated Pension, SERPS and Second State Pension can receive more than this if they have enough contribution years to mean that their pension under the old system would have been more than under the new system, in other words they won't lose out although they won't gain either. Also SERPS and SSP ended in 2016 no one can earn any more SSP and SERPS has been dead for a long time, Graduated pension even longer. Me I gain because I was contracted out for quite a number of years and because I was self employed and not in SERPS or SSP, at my initial forecast before the new system I would have received about £138 week, so I am £6 a week better off under the new system. So the point is that when the new system came into effect in 2016 everyone now earns their own pension through their own contributions, you don't get anything based on your spouse's contribution record so wives who never worked are in a difficult spot. Under the new system you need 10 years of your own NI contributions in order to receive any pension at all and 35 years in order to receive the full amount I detailed above, currently £168 a week, I think there is some kind of pro rata calculation applied to that 10 years, so I guess 10 years would get you just under a third of the current numbers. So work will get her a pension of her own and if she stayed in the UK she would probably get Pension Credit as a small pension would be unliveable. If she becomes a UK citizen her personal state pension entitlement will be the same as any of us, she will be entitled to draw on it pretty much anywhere she chooses to live so if she had 15 or 20 years UK NI contributions she would be able to get something in the Phils and further it would be index linked as the UK has a reciprocal Tax and Pension agreement with the Philippines, unlike for instance Canada where your UK pension is frozen at the amount you are entitled to on the first day you are eligible to receive it. If she stayed in the UK she would be eligible for various benefits under the current rules, this country will do a lot to make sure people are not in abject poverty https://www.ageuk.org.uk/information-advice/money-legal/ those additional benefits would not be claimable overseas. So basically married allowance does not exist anymore for anyone retiring after April 2016 but depending on her age and work history she could be reasonably provided for in this country.
Private Pensions, big subject, here's a few thoughts, but I would say everyone should have a private pension even if it is small. It is now mandatory for all employers to provide a workplace pension scheme and further employers are forced to auto enrol you in their workplace pension scheme no matter how crap it is unless you specifically opt out and even if you opt out they will reenrol you again three years later and you have to opt out again, really dumb as I will have to opt out on at least two more occasions. Employers have to make a minimum contribution and from April 2019 that is 3% you now have to contribute 5% for minimum of 8% I think it was quite low before April something like 1% for the employer I'm not sure. An employee can choose to opt out of a workplace pension and start a personal pension (or do nothing) but their employer is not obliged to make that 3% contribution to their private pension, good ones will, bad ones won't, if you have a bad one then it is probably better to stay in the workplace scheme just to get the extra money. I'm lucky my employer has always paid 6% of salary to pension that's 6% over and above salary and they match your own contributions up to 10% so if I contribute 4% the total going to my pension is 14%. In reality for the last few years I contribute 24% of my salary plus the 10% from my employer for a total 34% contribution and its still not enough. Saving in a personal pension makes huge sense because the government gives you a tax break on what you contribute, employer contributions do not count as taxable, personal contributions are discounted against tax, lower rate taxpayer gets 20% higher rate gets 40% this reduces your tax bill, if you are a higher rate tax payer then the real benefit is that your tax is lower while you are saving and if you are lucky you will only be subject to the 20% rate of tax when you retire so you save with a 40% discount and retire having to pay 20% on some of your income depending on when you take your private pension. For example if you had a pot of £300,000 today and you bought an annuity (bad idea) then you could get about 9000 a year pension in todays money your tax allowance is 12500 so if that was your only income it would be tax free. If you also had maximum new state pension as you were over retirement age you would get about £8800 in today's money add that to your £9000 private pension and you will likely pay tax at 20% on about £6000 of your income but you won't be paying NI which helps a lot. Further although it is not easy you can transfer a private pension abroad via a QROPS (Qualifying Recognised Overseas Pension Scheme) but generally I would say this is a bad idea, better to retain a bank account in the UK and get your UK private pension paid there then transfer what you need overseas. It's a big subject feel free to ask more question, I know a fair bit but by no means everything.
ive had state pension for 6 years now. its about £175 a week, i dont know why--i had been on long term incapacity for years, in fact my last national insurance stamp is worth more than a penny black.
Sadly that link does not give you a formula, the details of the valuation are still hidden, all it explains are the rules .
You're retired under the old system Malcolm you must have some extra entitlement somewhere maybe a combination of SERPS you earned many years ago and some additional benefits because of your health. I have a pal who started claiming his state pension just a year or so before the change in 2016, he retired on £220 a week, no health issues no credits, must be close to the same age as you, he gets that much simply because he was never contracted out of Graduated Pension, SERPS or SSP, he also has a large private pension that he's still not drawing down.
No I don't think so, lump sums are only available if you deferred your state pension for 12 months or more. But I will check regards the ill health issue I have vague memories of something like that in some circumstances but I might be confusing that with private pension drawdown.
So is this link referring to state or private pensions https://www.gov.uk/personal-pensions-your-rights/how-you-can-take-pension
No I've had a look around and no you can't access state pension early. State pension is paid from the tax receipts of the existing workforce, this is NI, Income Tax and VAT there is no strict ring fence around any part of it, as far as I know, although in principle the employee and employer NI contributions are supposed to pay for it. Every year there are more retirees and fewer employees so the burden of the state pension is growing inexorably at some point it might not exist, my sister warned me of this 30 years ago worried that it might be happening now, luckily the state pension still exists but without young workers and a young large workforce the numbers become harder and harder.
Private pensions, a personal pension is a private pension. State pension is always referred to as state pension which is why I have been careful with my words.
I have three personal pensions, two of them are really personal pension accounts also known money purchase schemes, I also have a defined benefit pension from the SSEB (Scottish Power) defined benefit pensions are the gold standard they are very valuable as long as the company is still trading and as long as the pension reserve fund is properly funded. Most defined benefit schemes are now closed to new members basically because they represent a huge liability to the company providing them, this is what all the controversy around high street chain failures is about because people are losing their defined benefit pension because the company owners have not been properly funding the schemes and then the company gets wound up with a pension deficit, in other words the fund is not big enough to pay all the future liabilities of the fund so someone somewhere sometime is going to lose out. A defined benefit pension gives you a fixed sum proportion for each year of service, if you work for a company for 30 years you might get 30/60ths or half of your final salary, NHS pensions are or at least were like this my sister has one, it is index linked so increases every year, in the public sector it is referred to as a superannuation scheme but it is a variant of a defined benefit scheme. Defined benefit pensions were something our parents enjoyed and they did very well out of them but they are a thing of the past as people live longer and as businesses seek to save money and risk.
As a final point, just a comment on the value of the UK state pension. Today to get a personal pension the equivalent of £8,800 a year you would need a private pension pot worth in the region of £300,000 to £350,000, you would have to convert this to an annuity which is a guaranteed contract to (usually) pay you increasing amount each year until you die, annuities are a gamble, if you die early all that saving was for nothing the money vanishes into the annuity pool and helps pay for all the people who live for a very long time. The new pension freedoms mean that unlike in the past where you had no choice but to buy an annuity with your pot (or 75% of your pot) now you can drawdown slowly and keep the rest of your fund invested hopefully with it increasing in value over the years (no guarantees). Drawdown on a private pension makes sense if you don't think you will live a long time, the main benefit is that the remaining funds can be left to your survivors be that wife or family whereas with an annuity it all goes puff and vanishes into thin air. In my entire lifetime I will have earned close to about 2 million pounds, a bit over that probably maybe 2.1 million (top line before tax), almost half of that will have been in my final 15 years of work, this is in simple numeric terms not in value terms, I've not taken inflation into account this is just adding up 45 years of payslips and accounts (roughly), in my first 17 working years I earned about £200,000 so most of my lifetime and future lifetime earnings will have been accrued since I became self employed and then later a full time employee with my current employer. I've saved an eighth of that which is far too little and I have been helped by tax breaks for higher rate tax payers so that is not how much I actually saved as I got quite a lot of growth over the years. My point is that the UK state pension is very very valuable it still represents more than I personally have been able to save privately, long may we as a country continue to benefit from a state pension it represents a large part of what we ourselves pay in tax throughout our lives although that is not how it is funded as current workers pay for current retirees.
I don't really understand pensions properly, despite having 2 - my old private pension from when I was self employed plus one with my current employer. What happens to that money if I die at, say, 67 like my father did. If a pension of 300,000 to 350,000 pays 8,800 a year then I'd have to live to about 100 to get that money back. Is it not better to withdraw the full amount, put it in a high interest account, and pay yourself from it? That way, if I die at least I know my wife gets the balance. Is that what "drawdown" is?
If you withdraw all of it you will pay tax at 40% on 75% of it withdrawing all of it is madness, DO NOT DO THAT PLEASE . You can withdraw 25% tax free the question is what happens to the rest If you have that kind of pot then you should think about going into what they call a retirement account, that means you transfer your fund or funds to a type of pension account that allows you to drawdown a bit at a time, most normal pension accounts have a requirement to buy an annuity at maturation and you don't want to do that because the money is then locked away forever. My example is based on about a 3% rate on an annuity this is what you might get if you were healthy and didn't shop around too much, annuity rates are crap right now, my numbers are slightly pessimistic but that is because I am trying to roughly account for a few percent growth each year so I was being pessimistic. Annuity, die at 67 all of the money goes poof unless you bought a guarantee (which will reduce your annual income) a guarantee can allow some money to be paid to a dependant for a period of time often it is 50% of the pension you would be due from the annuity so they don't get that much and it will be time limited usually 5 years, a 10 year guarantee would mean a much reduced annual pension. Drawdown, the funds are all yours and your dependants, either wife or kids, will get the remainder of your funds after any creditors although pensions are a special case and can sometimes bypass creditors. There are no safe high interest accounts that pay more than 3% currently and that's about what you would get in buying an annuity. You have a choice at retirement, take 25% of the whole fund tax free, and then buy an annuity which will last 1 year or 50 years however long you live, or go into drawdown which means your money could run out, in other words no one has given you any guarantee when you are in drawdown, you have no guaranteed income, your fund might shrink in a bad year because the stock market or the bond market had a bad year, at least with an annuity you have the assurance that you will get what they state in the contract. But with drawdown you can leave the remainder to your family.
edit: The text highlighted below in red is wrong see my note at the end of the post. A retirement account allows you to crystallise a portion of your fund every year without going into drawdown, in other words say you had a fund of 500,000 you could crystallise 40,000 and take 10,000 tax free as long as you don't touch the 60,000 remaining in that crystallised portion of the account you still have options for saving and you are not paying tax, you could do that for five years and each year the remainder of your uncrystallised pot might have grown so in the example you still have 400,000 uncrystallised + 60,000 in your drawdown account that you have not touched yet, the following year you can do the same again but your 460,000 may have grown to 487600 if you get lucky and get 6% investment growth, so the following year you can crystallise another chunk again tax free and get growth on the remainder, you can keep doing this until it is all crystallised at which point you have to take income from your crystallised funds which will still be large, once you drawdown and take income your tax position changes and you have to pay tax on the income but only if your total income exceeds your tax allowance. Remember that after age 66 (for me) you are also getting your state pension which if you are around my age means you will get about 190 quid a week plus whatever you choose to drawdown, I reckon by then the tax allowance will be 14,500 a year so 18,000 to 20,000 total will give you a decent income with minimal tax, actually no tax while you are crystallising portions rather than all at once. Eventually you will pay tax on income from the crystallised portions so maybe by the time I am 70 the state pension will be about 10,800 and then it is my choice of drawdown on my private pensions, but the annual tax code allowance will be a lot higher by then so I will keep more out of all of it. edit: this is a complicated subject and I am writing off the top of my head and these replies are brief thoughts, there are many many subtleties when it comes to pensions regards continued saving, tax, risk and so on, I can give detailed answers on specific questions if any are asked, but only up to the level of my own experience maybe some others like Markham might be able to comment as well. edit: 22nd Nov 2019 My arithmetic above is wrong, I state 40,000 crystallised then taking 10,000 tax free then I talk about 60,000 remaining that was wrong the remaining crystalised funds are 30,000 not 60,000 and the total remaining uncrystallised pot would be 460,000.
My defined benefit pension with Scottish Power is worth £61,000, the pension I will get from it is about £1500 a year that's PER YEAR I will be very very dead before I see a fraction of that 60 grand It is possible to transfer defined benefit pensions to a private provider but no bu**er will do it, there is a mandatory requirement that if the fund is worth more than 30,000 pounds you have to take financial advice from a qualified financial advisor and every fecking one of them will not touch the job with a barge pole because they are s*** scared of being sued for mis-selling Current quotes are £3500 to get someone to rubber stamp it, I know exactly what I am doing I have funds much larger than this but I have to pay these people huge amounts to move my money from one place to another, the logic is to prevent people from being defrauded and that is a good reason, a laudable goal, but what the hell I know what I am doing, I will never see the value in that pension at £1500 a year whereas if I can move it my kids can benefit and I can take a larger cut on the 25% tax free portion basis edit: just in case you missed them please read my earlier replies above as well.
