I found this quite interesting - a talk on Quantitative easing and its effect on Pension Annuity Rates... [video=youtube;3kAM-E9toV0]http://www.youtube.com/watch?feature=player_embedded&v=3kAM-E9toV0[/video] Just bear in mind though, this video has been produced by a Personal Pension provider.
Yes but not in the old fashioned sense, the money does not get directly into the economy and so far at least it's not free money as the bonds that the bank buy's with it have to be repaid. It is however one of the main reasons that we are getting 66 peso to the pound instead of 80 or 90 peso to the pound. I've not watched the vid but my understanding is that it is effectively cheap loans to the government which allows the government to keep the yields on GILTS artificially low, as a result annuities that are based on GILTS end up providing lousy returns now, made worse by the requirement that you eventually have to buy an annuity (the law may have changed on that now not sure) so you basically just have to cross your fingers and pray that when you come to retire that annuity rates will be better, problem is a great deal of the governments debt is in long term bonds and the UK is pretty safe in terms of bond rates for the next ten years which probably means that a lot of peoples options will not be great even then. Income drawdown is a possibility but the rules on that have changed recently too, the maximum you can take out that way each year is now limited to the equivalent you might get for someone of the same age who has purchased an annuity but at least your funds stay invested and your spouse will get the lot if you pop your clogs, once you are in annuity land your spouse will only get what protected benefits you have purchased as defined in your annuity. I'm saving a lot each year now but my fund will still be a pittance by the time I retire, my employer pays 6% and matches on top of that anything I pay in up to a cap, so currently I am getting 10% of salary saved and it's still not enough, I really need to up my savings to the maximum my employer allows and to be honest I should add even more on top of that. When you think that 13 years ago a fund of 100,000 could have gotten you a return of 10,000 a year or more and now you would be lucky to get 6000 a year (very lucky) you can see the impact.
People are living longer too and that has also brought down annuity rates and, in about six weeks, annuity rates for men will align with those of women too. Quantatative Easing also has the effect of increasing inflation, so with people living longer after retirement it is even more important to link your annuity to inflation but that is a big hit on your annuity during the early years of retirement, so you may well delve into the 25% tax-free lump sum. For those those with smaller pension pots drawdown may not be an option, just because of the risk of losing your pension altogether. But your annuity rates is, effectively, determined when you buy that annuity and with annuity rates at an all time low and still falling, many may decided to continue working after retirement age, hoping that annuity rates will increase. I am 62 next March and I wonder if annuity rates will have crept up by the time I am 65. My income is pretty low at the moment but I already have reached my full state pension contributions so I may be able to maintain a similar level of income when I retire anyway. But there seems to be talk of a minimum pension for everyone and that may mean we all lose graduated pension, SERPS and State Second Pension in retirement. On top of that, the government is also removing the increased personal allowance for those over 65, which would probably put me in a taxable bracket after retirement, unless I chose to put some of my monies back into a pension after retiring. The older you get the more complex one's financial affairs become. But old age also makes it less easy to understand it all!
No I don't think they will be able to take away graduated pension, SERPS and SSP benefits already accrued but they may well adjust the proposed higher pension to nullify the effects to some extent. I was contracted out of SERPS for a long time and having been self employed for a long time didn't qualify for it anyway, but I had a lot of years when I was contracted in too, about 19 years I think and 14 or 15 contracted out. Didn't know they were removing the additional personal allowance that's a bummer.
I just got a Pension Forecast. My estimated pension (at today's rates) is: £127.14p/week. That includes £19.69p/week Graduated, SERPS & S2P. I think the proposed minimum State pension minimum is £140 when it comes in in 2015-16. I hope that my personal pension pot will be around £80,000 so maybe around £4,000/year income from that (after taking 25% tax free lump sum). I own my own house and also get Disability Living Allowance of over £50/week, so I can survive on that. In fact, that is pretty much what my income is at the moment!
Oh, I just checked... The proposed State pension of £140 is at 2010 rates! My forecast (at 2011 rates) is £127. I would be better off under the new proposals! But, one problem, I will not qualify as only those born after April 1951 will qualify and I was born in March 1951. Although it is possible to defer state retirement it seems that this would not entitle me to a pension under the new rules! Ah, well, at least I will get £200/year heating allowance from the government starting this winter.
I have 12 years to go, if I make it that far I might have a total of about 14,000 a year from State pension and the various pensions I've collected over the years, which will be a major drop in income for me. The job I am in has zero promotion prospects, it's going nowhere, my only hope would be to restart my own business but the industry has changed so much that it is much easier said than done. I don't own my house and having had to sell mine will never be able to afford another home in this country, so I will rent for the rest of my days.
You may wish to consider signing this petition then... http://epetitions.direct.gov.uk/petitions/31778
