Good reads from around the Web.
Morning! We’re all too late I’m running late for today’s futile march of the damned, so I’ll just put this one out there.
According to the BBC:
An analysis for the Department for Work and Pensions (DWP) has suggested that workers under the age of 30 may not get a pension until the age of 70.
There are two new reports that have set the bell officially tolling:
- The drier report from the Government’s Actuary department is the one that’s mooting an extreme scenario in which the State pension age is lifted to 70, as soon as 2054.
- The State Pension age independent report by John Cridland is surprisingly readable, and his proposals seem a bit less brutal.
Sorry to be the bearer of bad news to anyone under 45 or so – and especially to the under-30s.
At least we’re expected to live longer! Get your own money compounding over the extra years, and try not to be reliant on the State.
Just in case.
From the blogs
Making good use of the things that we find…
Passive investing
- 10 headlines you’ll never see in the financial media – Dan Solin
- The cheapest portfolios in the world – Meb Faber
- Warning: The US stock market is an anomaly – Alpha Architect
- Diving into MSCI’s Global Investable Markets Methodology [Nerdy] – Krane Shares
Active investing
- Yet another reason it’s so hard to tough to beat the market [Graph] – Twitter
- An interview with Jim O’Shaughnessy [Podcast] – The Investor’s Field Guide
- How many defensive shares should you hold? – UK Value Investor
- The US market looks peaky. What should you do? – Meb Faber
- A Valeant update: Damaged or deeply discounted? – Musings on Markets
Other articles
- Your greatest asset is YOU – Of Dollars and Data
- Gradual improvements go unnoticed – The Irrelevant Investor
- It takes three to tango in ETF land – Abnormal Returns
- Dublin is top of the table for bankers fleeing Brexit [Data] – Movinga
- Idiots in investing echo chambers – The Psy-Fi blog
- An interesting study into cash buffers and family finances – JP Morgan
- The Intelligent Advisor podcast, with Carl Richards [Podcast] – Advisor 2.0
- Setting up a company? Thoughts on splitting the equity – Points and Figures
Product of the week: I’ve just signed up with Thriva, and have my first blood test sitting on the desk in front of me, waiting for me to get all vampiric on myself. The packaging is super elegant, like unboxing an Apple product, which does take the edge off. I’m more motivated though by the online dashboard it will create – and the fact I won’t need to badger my GP (again) after he told me a couple of years ago that a certain variable was out of whack then said “we’ll see if we need to worry in five years.” I do my worrying early! According to Thriva, if you follow my link you’ll get £10 off your first test (and I’ll get £10 to put towards my next one). But I can’t see any confirmation on the sign-up page, so keep your eyes open at checkout if that’s important to you. (Sorry to be a prick tease. Geddit? Prick? Never mind…)
Mainstream media money
Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.1
Passive investing
- Swedroe: Don’t underestimate emerging markets – ETF.com
- Great investment mistakes: The bear trap – Morningstar
- Do Smart Beta investment funds work? [Search result] – Economist
- The antidote to stock market hysteria – Forbes
Active investing
- History is no help when handicapping the bond market – Bloomberg
- Three ways the economic cycle could end [Search result] – FT
- Amazon, the world’s most remarkable firm, is just getting started – Economist
- Record number of fund managers think US stocks are overvalued – Bloomberg
- Another big hedge fund (Eton Park) throws in the towel – Dealbook
A word from a broker
- Three low-cost tracker funds for ISAs and SIPPs – Hargreaves Lansdown
- Reflation: An end to austerity? – TD Direct
Other stuff worth reading
- Are the wheels about to fall off car finance? [Search result] – FT
- Ben Carlson’s favourite (free) investing tools on the Internet – MarketWatch
- London property market ‘will resist price crash’ [Search result] – FT
- Under 40? Don’t miss this £2,050 tax-free ISA boost – Telegraph
- NIC U-turn ‘highlights benefits of self-employment’ [Search result] – FT
- How a hedge fund manager teaches his kids about money [Podcast] – Bloomberg
- An interview with Jack Bogle [Video] – CNN
- How and where buy-to-let still pays – ThisIsMoney
- New £1 coin: But should you hoard your old £1 coins? [Er…] – Telegraph
- Tesco isn’t ready for the new £1, and will have to unlock its trolleys! – Guardian
- Brexit threat to horse racing – Business Insider – & chocolate bars – Telegraph
- How pre-ordering coffee has turned into a nightmare [Search result] – FT
- Italy’s struggling economy has the world’s healthiest people – Bloomberg
- Surfing trendsetters can make an economic splash – Bloomberg
Groceries of the week: I’m stuck for book ideas this week, but I have noticed Amazon Pantry is running a special offer whereby if you buy four eligible items you get free delivery. Sadly I’m not really set-up to have a constant stream of Amazon delivery trucks passing my house every few hours to unload cans of beans and bottles of detergent at their whim. But maybe if you’ve got a butler or an au pair or a house miles away from opportunistic eyes so that your groceries can just be tossed over the hedge it could work for you?
Like these links? Subscribe to get them every week!
- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩]
I fully expect that I’ll never receive a State Pension. The age will either continually increase giving a higher probability that I’ll be dead or it will be means tested by the time I’m eligible. My retirement planning therefore assumes £0 in State Pension.
I’m actually more concerned about access to private pensions. The government has shown their hand that they’d like private pensions to only be accessible at State Pension Age – 10 years although I can’t find that it’s yet become law. Under the original proposals I was still (just) at age 55 as I’m 55 in 2027 and it wasn’t going to commence until 2028. Will they bring that forward making it 57 (per the rules today), 58 (per Cridland’s age 68 proposal for my age) or higher when they inevitably tinker again.
I think I’m just going to assume access to private pensions at age 60 and make sure that works in my planning.
The only reason I’m considering a LISA for next year is that I expect my state pension to be non-existent by the time I get anywhere near there (I’m 24 right now).
I’ve already got a H2B ISA as I’m currently looking at buying a flat right now, so other than locking my money away, I don’t really see any downsides to the LISA? Getting the 25% bonus for 26 years is not to be sniffed at imo.
I always did my retirement planning based on access to private pensions at 57 but had a sneaking suspicion I might have to wait until 58. Doesn’t really affect me much as I’m focusing on using ISAs to unlock early retirement. Less than five years to go!
I’m not wealthy but this really wouldn’t bother me at all… except employment trends are accelerating in the opposite direction. I expect to be unemployable by 55 no matter what I do. There seems to be no recognition or attempt to reconcile this contradiction.
The thought of TI on the barricades tickles me. Although he’s got previous form!
“At least we’re expected to live longer!” That’s not quite what the most recent mortality stats imply. Though maybe they are just a blip. Maybe they’ll resume their rise when we enjoy the bracing effects of leaving the Bruxelles Empire.
‘thriva’? didn’t you get that for free on the NHS when you turned 40? You’ll be on 23andme next..
@ermine @anyone — If anyone was marching and saw a liberal elite cliche in a light grey jacket with a skinny very dark grey wool tie, looking a bit sheepish about chanting and drinking a huge latte for most of the march… that was me!
I think mine’s currently 68ish and I don’t feel I can expect to be able to retire before then, really. But I share Learner’s concerns – where will the jobs be? Will they be tolerable?
And the averages hide all sorts of things. There’s life expectancy, and healthy life expectancy. The rising pension age may eat up all of healthy life expectancy. But then, perhaps that was the idea behind the original state pension – it’s there for when you are infirm, not for an extended holiday. Unless we’re allowed to take the extended holiday first, and then deliver ourselves back into the hands of employers once we reach advanced decrepitude.
The other thing is, what’s the standard deviation around the average? Is there a big clump of us who will still fail to make it to retirement age at all, while others live to see the Queen’s birthday letter get dog-eared?
On the march too. Ever so middle class.
Cridland explicitly rejected means testing state pension and did not mention private pension age gaps. I read it hunting for that horror
All wool ties tend to look a bit sheepish
@TI
Great that you joined the march today. Alas I didn’t spot the wool tie but enjoyed meeting so many lovely passionate people from all corners of the UK and Europe appalled at this government driving us over the cliff.
On pensions, for our generation there seems little point in expecting too much from the UK’s (or whatever might be left of it) state pension, even if we live long enough to receive it. Clearly the current system is unaffordable but our current political masters know their core voter base.
What seems far less justified is the endless tinkering with the private pension access age. Pensions are already deeply unattractive for all except the highest earners and appear as if they will become ever more so. Another reason to focus on filling one’s ISA allowance first.
It was a good day to March.
Good chance the baby boomers will be the last generation to get the state pension as well as being the last to get decent value housing. I just hope there’s some ‘free’ health care left by the time I might need it but I suspect the boomers might take that for all its worth as well.
Drifting a bit off topic.
The linked article concerning the supposed abnormality of the US stock market returns over the last 70 years, caught my eye. Owning a passive global market cap weightend stock portfolio with over 50% US stocks, should I be alarmed?
The article supposes that the US stock market returns over the last 70 years are and historical anomaly. However the article contains a link to a research publication about stock market returns in relation to dividend payouts over the past 4 centuries concerning the leading markets of that time beeing the Dutch, British and US market respectively. https://people.stanford.edu/koudijs/sites/default/files/fourcenturiesofreturnpredictability.pdf
According to this publications nominal returns have varied through the ages, real returns however have been relatively consistent at 6% with 5% lows and 7.5% highs. In this respect the US market returns of the last 70 years are not abnormal for a leading economical power (whether these returns are representative for the global market as a whole is a different question all together). What is abnormal is the fact that dividend payments have dropped from 5% to 3% in favor of an increase in stock value. Whether this is a good or bad thing might be a matter of personal preference and tax regulations.
However the publication and the article linking to it, to me, do implicitly raise a serious question. Stock market empires like the ones mentioned can and do fall, and new ones rise. Is a global market cap weightend portfolio an effective counter to such a risk precisely because it is global and therefor contains the new rising star aswell. Or is it quite the opposite, and does the large proportionate allocation of assets to a strong market like the US make a portfolio vulnerable to the collapse of such a leading market? Put differently global market cap weightend vs an alternative weighting?
There might be a case for reducing your American weighting before China sinks one of those big nuclear-powered aircraft carriers. Or “targets” as I think of them.
@Ton: I worry about US exposure too. I sold off the last of my US-specific index trackers some years ago and these days all my US exposure is through pan-global funds; my attempt to “cure” the high US weighting inherent in those is:
– VLS60 holds its US equity allocation at a fixed 14.1% (which is nice because if the US surges ahead of other markets, Vanguard will be rebalancing into the UK, Europe etc, then buying back in when it falls).
– Match my VWRL holding with an approximately equal holding of VHYL (VWRL is currently 50%/8%/6% USA/Japan/UK; VHYL is 40%/10%/6% USA/UK/Japan so this isn’t actually that much of a “fix” at all; interesting to look at this now because I seem to remember VHYL having a significantly lower allocation to the USA in the past!)
Kudos to anyone who went on the march!
Like many people here I don’t expect to receive any state pension at all, and as far as I’m concerned that’s fine. I also think that the state pension should be means tested.
My chief concern is the NHS. I don’t know if I could afford to retire early if our healthcare system was like it is in the US.
Being cynical, I suspected the carpet would be pulled out from under us a long time back, particularly after reading ‘The Shock Doctrine’ which explained the Neoliberal program to roll back time to when the masses knew their place and only interacted with the elite when tugging their forelocks in obeisance. (Their lives confined to a shuttle between the factory/fields and overpriced-job-linked hovels, all the while keeping their mouths shut)
Like all looming bad things, they’re grooming us slowly into acceptance through weary resignation, ‘frog in the pan on the stove-style’. The only weapons we have to protect ourselves are knowledge, mobility, (go to another country that still has hope/better quality of life) and financial discipline. I agree with all those who said just aim to be totally independent, so anything no longer available you have already discounted and prepared for.
A more practical consideration would be to find out if you can switch your private pension to one in a trustworthy, stable, first-rate country to protect against increasingly malevolent governance here in the future. Failing that, go to your GP while there still is one available and get as many happy pills as you can with repeat prescriptions. Then it’ll soon all be fluffy bunnies swimming around in the brexit. The empire will be back, so we can trade with anyone we want, how we want, by simply sailing up to anyone being difficult about terms & blow up their capitals (with the new tridents that work) after having taken back gunboat diplomacy. It’ll be wonderful; no need for experts then, see.
It’s dispiriting to see so many of you lacking faith that the state pension will still be around in decades to come, because if that belief becomes widely entrenched amongst the under-45s then that in itself will bring about its demise. It will be quite literally a self-fulfilling prophecy. The primary danger to the SP is not economic. There are all sorts of tweaks that could keep it going, and money can always be found by politicians when the political risks of not finding it are high enough. (Look at all the billions thrown at the banking system a few years ago.) And that’s precisely what we need, societally, to do – keep our collective expectations of getting a decent SP so deeply embedded that it would be political suicide for any generation of politicians to abandon or turn it into a means-tested benefit. There’s perhaps an analogy with mass programmes of immunisation. Just as their success depends on herd immunity (i.e., that immunisation of a critical mass of people provides protection for those not immunised), so a critical mass of people believing they will get the state pension in 50 years provides protection for everyone against its being attenuated to nothing. People decrying it are much the same as those loonies who won’t have their children vaccinated and so raise the chances of life-threatening illnesses for every child. As to “our current political masters know their core voter base”, the people with most to gain from from the SP system are not those currently receiving it (they’ve already started eating into the benefits) but those with decades ahead of them in which to build it up. What it is built up into – a decent pension or a very meagre one – will mostly be a function of what they have resigned themselves to, politically.
Assuming society in 30-40 years looks no more different to how we looked in the 1970s (i.e. reasonably different is okay, but not revolutionary change) then I think there’ll very likely be some sort of State Pension at that time. My main concern is the escalating minimum State pension age, and of course means-testing.
On the former, while we can all reasonably debate the nuances of raising the State pension age — e.g. I can understand why some women feel they equalization between men and women was brought in too quickly, even if I agree with the principle — surely few of us here who understand compound interest don’t quibble with the idea that as people live longer (and hence society as a whole ages) the State pension age has had to rise. I don’t really see that as evidence for the case that it will be scrapped; if anything it shows consideration to keeping it vaguely viable.
From my perspective, raising the age isn’t so bad from a total wealth returned point of view (although there is always a lottery element to longevity, so the more they push it out the worse your odds get) as from a freedom of decision making one. While the absolute amount of the State pension seems small (I’d hope!) in the long-term plans of most here, the capital required to generate the equivalent is not. So it clearly makes early retirement harder, even if it’s only peripheral to your plans. As @RIT said earlier, the assumption that access to private pensions will be limited it lockstep is the bigger issue for the likes of us. Thank goodness ISAs exist to spread the heavy lifting!
In any event, early retirement for lifestyle reasons is not really the State’s concern.
Means-testing is a risk. Means testing away the State pension looks sufficiently politically toxic at the moment as to seem very unlikely, but who knows what the future holds? However remember the State can effectively claw back a fair amount of the State pension from wealthier pensioners via taxes anyway.
When I look at how well pensioners have been treated by the State over the past 10 years — austerity for some elements of the young and poor, set against an expensive ‘triple lock’ for pensioners — it’s not clear to me why this same political reality wouldn’t fundamentally remain the same in the future. Are the young likely to start voting more, and the old less? I don’t really see it. Though perhaps there’s an argument that the big bulge of the Baby Boomers have triple-locked their own retirements, and that when they pass through the pipe then pensioners’ political pre-eminence will weaken?
On balance, if I was a betting man (and I guess I am) then I’d say a universal income in 30-40 years looks more likely to me than no universal State pension. But I think we all agree we need to hedge all these bets! 🙂
Pension ages should rise with longevity, but the GAD report talks about changing the fraction in retirement from 33.3% to 32%. Its that kind of nibbling that might occur, as pensions haven’t lasted that long in the last century, so the expectations can be rolled back.
Looking at the problems the government had means-testing child benefit (a change I agreed with) with a cock-eyed threshold system that was all to easy to avoid through tax loopholes. If that was the best they could do without upsetting a Tory power base, I can’t see pensions being means tested, unless NI is abolished too, and we’ve seen how difficult it is to change that with grandfathered rights
The remit of the Government Actuaries Department (GAD) was restricted to doing calculations based on setting SPA based on the assumption that no more than one third (33.3%) of adult life is spent in retirement. The elements to be used in those calculations (bar from a bit of rounding that would make only about a years difference in timetable) had already been determined in advance. So the GAD were being asked to produce figures which the Pensions Minister already knew the answer to in advance.
However the Pensions Minister moved the goalposts last year and asked GAD also to do figures based on a 32% percentage as well. The 32% percentage if used changes everything and would mean the SPA increase to age 68 occurs just after the increase to 67 in 2026 to 2028.
The Cridland report remit was to look at the wider social and other factors in setting SPA and so was less resticted in its scope.
However crucially rather than recommending the increase to SPA to age 68 take place based on the precribed method based on the 33.3% proportion, Cridland made an arbitrary judgement to make half allowance for out of date mortality projections. So instead of using the lastest prescribed 2014 projections used by GAD, half allowance was made for both the 2012 and 2014 projections.
If the prescribed formula approach is used (with 33.3% and the 2014 projections) then SPA would increase to age 68 with a transition period from 2039 to 2041.
However with the arbitrary Cridland adjustment to use part allowance for out of date mortality projections the increase to age 68 with a transition period from 2037 to 2039.
So I would say the Cridland subjectivity to arbitrarily suggest bringing forward the SPA to 68 earlier is the brutal thing here. Not saying it may not be justified, but if we define ‘brutality’ as suggesting an increase in SPA sooner rather than later then it is ‘brutal’
On a separate point it is completely reasonable in my view to stick with a universal SPA for the reasons he states. But his suggested support for those who can’t work to age 68 is brutal also, as the support is so limited in nature.
The GAD on the other hand are just following instructions to do some calculations with no element of subjectivity on their part. The 32% proportion is a late change to the prescribed formula and method, which the Pensions Minister came up with. If that is used then it is an arbitrary change by Government to bring forward the SPA to age 68, relative to their earlier prescribed method.
> It’s dispiriting to see so many of you lacking faith that the state pension will still be around in decades to come, because if that belief becomes widely entrenched
I think the readership here is quite atypical so your concern should be alleviated. I am over 55 but I’ll be a little surprised if/when I get to draw a SP unmolested by means-testing. But most people just don’t have the choice, if they are going to get to retire at all it will be on the SP.
And the full SP is a great value annuity – it costs about £270,000 to buy a single-life inflation-linked annuity of ~£8k p.a at 67. If the average mid-fifties DC pension has 53k in it then the SP is going to be transformational for the vast majority of people.
Given the rise of UK national debt in the past decade, I won’t be surprised if they suddenly announce a cut in pension money or retirement age going up to 75 years of age.
For example, Greece retirement shot from 57 years to 67 years in eight years, although they rose from a lower base.
All it takes is for the UK 10-year bond rates to rise above 5%, which would push interest costs to levels are require cuts to government expenditure.
My personal view is that I am fully expecting to get state pension when I reached the state pension age (I am 31 this year). My plan is basically investing/saving enough money for retirement provision (10% of the salary into S&S ISA and 25% of the salary into private pension) so I can retire earlier, once I reach the age to use my private personal pension fund as an income (55 ATM). So by the time I ran out of the original savings (like withdrawing £8,100 a year), the state pension will start. Of course, I will be personally miffed if the government increased the age you can access the private pension from 55, as I will be relying solely on my personal pension fund to give me the retirement income along with the state pension as second. The works pension on the other hand is pretty miserable (Unless I decided to work in public sector for their generous pension which I am likely to do in the final decade before I retire).
I am personally quite weary of LISA as the amounts are taken into account for benefits and bankruptcy. It would be a shame if you save all the money into LISA only to find yourself to be made redundant and have to use up all your savings to sustain yourself (while paying 25% hit bonus and all growth on these 25% bonus back along with 5% penalty!). Not so cool after all and I would personally suggest that one should think very carefully if you want to open it. Having said that, it is likely I will start transferring the fund from S&S ISA marked for my retirement into LISA once it is opened. Just need to see the details on LISA beforehand.
Only time will tell. 🙂
@Tyro
> What it is built up into – a decent pension or a very meagre one – will mostly be a function of what they have resigned themselves to, politically.
This is true. cf Americans who believe the US can’t possibly afford universal healthcare, therefore private health insurance is the only conceivable model.
I’m less worried about the tweaks to state pension age, or even personal pension access age as they can be planned for (save more into ISAs etc). However I am concerned about the chance that state pension would be means tested.
I wouldn’t begrudge those who honestly needed the state pension to survive on in retirement because they were on low wages their whole lives or otherwise unable to save into a pension.
However, I would be pretty miffed if just because I’d taken responsibility for myself and made sacrifices to save into a pension instead of wasting my money on unnecessary lifestyle trappings like cars, clothes and other trappings to “keep up with the Joneses” like some of my peers (and most of my friends to be honest) they ended up benefiting to the tune of c.£270,000 (£8,000 pa state pension). That’s a lot of money and might even get me out on the streets to demonstrate if they threatened it…
these sorts of questions along with issues with the NHS do make you wonder whether you want to pay a penny more NI than you absolutely have to?
Salary sacrifice avoids NI but probably in the Chancellor’s sights. In any case, these national bills have to be paid so any government will need to source the money from those who can afford to pay. One point though, given the low level of state pensions, and the unlikelihood that this will increase by much in real terms, why, on a site devoted to financial independence, is the state pension age much of an issue? Even if you are only half successful in your investing ambitions the odds are that in the future your access to the pension will be curtailed anyway.
I’m sure I’ll get shot at, but I firmly believe the State Pension age should go back down, even to age 60, and it should be means tested on a sliding scale. The govt should of course move to such a means-tested system on a gradual basis, so people’s long term planning is not ruined. But there are thousands of people who have done / are doing real work, not paper pushing in an office, and whose health condition will just not get them to age 68 or 70 in work – at what age would anyone reading this feel happy about bricklaying outdoors? Or cleaning toilets? Or standing all day in a shop? And if you have done a physically demanding job all your life, how long will you have left to enjoy this pension income anyway? Meanwhile if you have assets in the £millions and live to 100 you still get this income – surely that is outrageous. State benefits of all sorts are meant to be a safety net for those who were unable or unintelligent enough to build up sufficient funds to look after themselves – not a savings scheme. If you want a State guaranteed savings scheme, buy NS&I products. The State is up to its eyes in debt and that means some middle class perks have to end. And I take the point it’s not fair that some irresponsible people will then get it and others won’t, but that’s just the sad contradiction of any welfare state – we have to queue longer than we’d like to get NHS treatment, or even go without some expensive medicines, partly because some people don’t look after themselves very well, correct? In any case, it’s about £8kpa (taxable) we’re talking about, so it’s not going to fund that much old-age feckless spending.
@ The Austrian, I agree. Most of the majority of the population (who won’t agree) will most likely have ideological or moral reasons against it, which is ironic given that this is a finance site; where you would assume people would do a cost-benefit analysis on options.
I see a basic safety net as the price of living in a civilised society and the refusal to provide it as stupid because you’ll just end up paying for it anyway, indirectly. Desperate people who’re broke and have no hope get depressed and will then turn to illegal means to survive. So if it doesn’t pay them a form of basic income, the state will just pay at least the same on controlling them. It will be unnoticed by the electorate as increases in budgets for the police, judiciary, prisons, NHS, emergency state accommodation etc., etc.
@The Austrian the problem is that the state pension is presented as a saving scheme, paid for by NI. If you wanted the state pension to means tested, you’d need to break that link. NI is daft, as it nominally pays for the NHS, but access isn’t constrained by contributions, and pays for pensions, except the income level to get a qualifying year is so low that most people vastly overpay, but need to as the benefit given for a minimum year’s contribution is far too generous. And their are NI loopholes you can drive a bus through.
But to remove NI you’d have to increase income tax by 5%+, hitting pensioners who love to vote, and it would take 40 years to unroll the inputs to the fund, and 80 for the outputs.
JoeCrystal, I think if you are 31 now you’ll be lucky to be able to draw on a private pension until 57 at the earliest, if not more like 60.
I’m hoping I’ll still be able to access it at 55 as I’ve under a decade to go, which is hopefully too short a time for them to move the goalposts.
It does seem like they eventually want to tie it to 10 years below the state pension.
I don’t think the state pension will be means tested, the whole policy of getting rid of Pension Credit was designed to incentivise people to save in a private pension knowing they would be better off than the feckless who do nothing, not more or less the same.
So that leaves the state pension age being increased, and losing triple lock as the likely policies to save money.
To me this still makes SIPPs a clear winner over ISAs until you build up a pot large enough to pay an income of about £12k pa, with no income tax on the way out, at least until you are 70 and the state pension kicks in. So until you reach at least £400k (100k tax free lump sum and drawdown on the remaining £300k) there is zero tax on the way out. Stuff the rest in ISAs.
I think means testing for the state pension will happen at some point in the future but seems like injustice to ‘punish’ those who have been careful with their money and saved what they could. Yes, there are people who genuinely cannot save enough/anything for their retirement so how to differentiate from those who could have saved but just frittered their money away on their lifestyles instead?
Anyway, just ordered my Thriva kit and got the £10 discount so hope you get yours for your next test.
What’s the betting the Government goes ahead with the increases even though life expectancy isn’t rising as fast as the figures Cridland used. http://www.bbc.co.uk/news/business-39429039
@Tyro.
I agree with you 100%. TI has been marching over Brexit and that is what we will have to do over the state pension. I understand that it is prudent for everyone to be as self sufficient as possible but a lot of comment here is a kind of hellish combination of whipped dog/survivalist!
If the political and economic elite think they have managed to cow everyone into accepting that they will not get a pension or any other welfare program for that matter then they will see it as politically doable to get rid of these benefits. A self fulfilling prophesy indeed.
@ SemiPassive, I agreed regarding the likelihood of the higher age for accessing the private pension at 60. I don’t use SIPP but I get your very useful points. 🙂 Clearly a plan to follow until the pension rules get amended again!
Just to follow up my comment “because I seem to remember VHYL having a significantly lower allocation to the USA in the past”… I did some digging into how the FTSE All-World Index and FTSE All-World High Dividend Yield Index’s regional allocations have changed over time (last 4-5 years anyway); results are here: http://money.stackexchange.com/questions/77793/how-has-the-country-exposure-of-the-ftse-all-world-high-dividend-yield-index-and/77860#77860 but the short story is VHYL was indeed just ~32% US at its 2013 launch c.f today’s 40% (and VWRL must have gone from 46%-53% US over the same time period).