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Good idea.

ProfilePosted byOptionsPost Date

wisechild

wisechild Report 27 Jan 2014 13:42

Apparently the government is proposing a scheme to help pensioners boost their weekly income if they won´t qualify for the new pension from 2015.
For every 900 pounds you give to the government, they will boost your pension by 1pound per week up to a maximum of 25.000 pounds.
No mention of the fact that you could die within a short time. Would the balance of the money be refunded????. I doubt it.
If you have money to spare, you would do almost as well investing it. At least it would still belong to your estate when you pop your clogs.
We may be getting on a bit, but personally, I´m not senile yet.

Porkie_Pie

Porkie_Pie Report 27 Jan 2014 13:49

And they think they are doing you a favour, That works out as bad a deal as twice the interest rate charged by some pay day loan companies :-S

Roy

Merlin

Merlin Report 27 Jan 2014 14:05

Sounds like a good Business Proposition, get a grant from the government to start up :-D then get a load of Mugs to give you £900 in return for £1. good profit margin. :-D :-D

OneFootInTheGrave

OneFootInTheGrave Report 27 Jan 2014 14:20

Yet another example of how some politicians think that Joe Public are a few cards short of a full deck.

If my memory serves me right, governments of all persuasions, have regularly tried to persuade people, who had a shortage of contributions, leading to them not being entitled to a full state pension, to purchase NI contributions to make up the shortfall so they could increase the amount of their state pension.

To top up their NI contributions, would have probably meant, many individuals paying out thousands of pounds just to get a few extra pounds a week.

Let's face it, many of those fortunate enough to have a few thousands spare pounds lying around, probably did not need an increase of a few extra pounds a week in their state pension.

As you said wisechild - a better return could probably be achieved by inveting it wisely.

RolloTheRed

RolloTheRed Report 27 Jan 2014 14:37

I don't think upcoming pensioners are a few cards short of a deck.

Taking a sum of £ 900 paid in ukgov is offering a minimum of £ 50 pa extra pension. For one year that is a return of 50/900 = 5.5% tax free. If you can find anything legal in the UK currently paying > 5% then do post it here. On top the pension is index linked whereas very few private pensions offer that any more. Taking account of inflation and index linking most pensioners would do better to take up the risk free ukgov scheme rather than relying on dwindling capital. Full take up would produce £ 1 388 pa index linked which is an excellent return especially for women who tend to draw pensions for 20 years and more. No wonder the scheme is capped.

Private pensions operate pretty well the same way the "pot" has to be put into a payout fund and recouping the capital after early death is very difficult to say the least.

Is £ 25 K a lot of money ? Well, it is the price of a decent though not top notch car, deposit on a small house or flat for a grandchild or about half what I need to fix the roof. Not exactly a fortune then.

OneFootInTheGrave

OneFootInTheGrave Report 27 Jan 2014 15:00

This must be the scheme wisechild is referring to:-

It is being reported that the Government will confirm details of a scheme to allow existing pensioners to boost their state pension entitlement by up to £25 a week in the coming weeks so says the Daily Mail.

Under the plan, which was outlined as part of the Autumn Statement in December, anyone who has reached state pension age or will do so by April 2016 will be able to pay between £900 and £25,000 to top up their pension.

The Government will increase peoples’ weekly state pension by around £1 for every £900 paid in, but the Department of Work & Pensions (DWP) refuses to confirm this figure and says pricing will be published “in due course”.

Speaking at a Headlinemoney event last week, pensions minister Steve Webb said the scheme will be particularly beneficial to women.

He said: “I’ve had pensioners say to me, ‘I’m getting a lousy return on my savings, Steve, please can I give you my money?’ And I felt I had been saying no for too long.

He said: “I’ve had pensioners say to me, ‘I’m getting a lousy return on my savings, Steve, please can I give you my money?’ And I felt I had been saying no for too long.

“The basic proposition is they give us their money, we ask the Government actuary what that equates to as a flow of income and from a Government point of view that is a neutral transaction.

“It seems to me this is especially good news for women as we will have to choose a unisex price but obviously the woman on average will get a pension for longer than a man and couples who have some capital between them may well want to use that capital to boost the woman’s pension as on average they are less likely to be a taxpayer than a man.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “On the open market, an inflation linked single life annuity for a 65 year old currently costs £1,468 for each £1 a week of income.

“This suggests that the Government may be offering this new scheme on very generous terms.”

Porkie_Pie

Porkie_Pie Report 27 Jan 2014 15:23

My dad had a small private pension? in the hope of improving his standard of living in retirement,

The end result was that the exta income resulted in him having to pay full rent on his council bungalow and full council tax,

others who never saved anything get theirs rent free and pay zero council tax? making him worse off than the rest, who is the mug?

Is this not just a way of government trying to put pensioners income above the level where they can claim benefits like rent and council tax rebates to top up the low state pension.

Roy

OneFootInTheGrave

OneFootInTheGrave Report 27 Jan 2014 15:40

You know what the say about "all governments" - what they they give with one hand they will take back with the other ;-)

wisechild

wisechild Report 27 Jan 2014 16:00

Can´t say I know many pensioners who have a spare 25k hanging around......or not even a 25k pot of savings.
What may be a reasonable amount to some is a completely unattainable fortune to others,
Suspect that Porkie may be right. The government wants to stop paying extras to pensioners. So what happens to those who either can´t afford to pay the extra, or who choose not to? :-S :-S

RolloTheRed

RolloTheRed Report 27 Jan 2014 16:19

You should try and get out more, try a different golf club plenty of pensioners have £ 25 K and up. The problem is that most of those with a spare £ 25 K have their pension sorted.

The govt scheme - if it goes ahead - is especially good for women, and anybody with an incomplete contribution record eg living overseas class 3 not paid.

wisechild

wisechild Report 27 Jan 2014 16:41

Rollo
I am a woman.
I worked for 42 years & paid full contributions.
I was also a single parent & for 15 years, provided for my 2 daughters with very little input from their father.
I have never owned a property, nor been in a position to belong to a golf club, nor build up a nestegg of several thousands of pounds.
I live abroad now, but didn´t move until I was over pension age, so there is no question of my having a deficient contribution record.
I am ineligible for help such aa pension credits, which I accept, but there is no way I could pay several thousands of pounds to the government to boost my pension. As far as I am concerned, my liability for NI contributions ended when I retired
I know that there are countless people in a similar position.

RolloTheRed

RolloTheRed Report 27 Jan 2014 18:39

The governments proposed scheme is for people still of working age and especially 55+. Nobody is ever going to come up with a scheme to jack up existing pensions in the UK or anywhere else.

wisechild

wisechild Report 28 Jan 2014 06:54

We seem to be at cross purposes here Rollo.
the scheme which allows people to purchase contributions to make up a deficit in their pensions has been operative for a very long time.
The proposal I am referring to is a new one & is specifically aimed at people who are retired, or will reach retirement age by 2016.
These people will not be eligible for the new flat rate pension & the government is proposing that they should pay sufficient money into the pension scheme to give them an equal amount of pension as those in the new scheme.
.Hope tis explains things more clearly.

+++DetEcTive+++

+++DetEcTive+++ Report 28 Jan 2014 10:42

Anything the Government suggests ought to be viewed with suspicion.

However, although everyone's situation is different, the age group it's directed at are likely to have inherited part of a relatives (mother/father) estate in the last few years.

Considering the current interest rates - even high street ISAs are abysmal - if the calculations made by Rollo are correct the scheme is worth investigating.

Sharron

Sharron Report 28 Jan 2014 12:39

I am not mathematical, a bit number blind actually, but am I right in thinking you would be getting your £900 back over eighteen years at the rate of £1 per week?

RolloTheRed

RolloTheRed Report 28 Jan 2014 13:29

yes and no.

Yes, the scheme would pay out £ 52 p.a. for each £ 900 paid in ( 5.7% ).
However the payout would be indexed linked and thus in cash terms over time with inflation at 2-5% p.a. most of those who joined the scheme with reasonable health at 65+ would do much better than investing their savings in some fund or the other at the miserable rates currently on offer and then watching their capital eroded by inflation.

If the payouts are tax free then there will be a big rush to join up.

A scheme like this would be very attractive to a lot of people but not those who have worked most of their lives on low incomes with not much in the bank.