From: "Ellis" 
Newsgroups: uk.finance
Subject: Re: S Times: Pension saving could be 'pointless'
Date: Sun, 5 Dec 2004 19:54:57 -0000

> Sunday Times
> December 05, 2004
>
> Pension saving could be pointlessı
> David Budworth
>
> SAVING for retirement could be pointless for millions of people because of
> the spread of means testing, experts warned last week.
>
> Gordon Brown, the chancellor, affirmed his commitment to the means-tested
> pension credit in his pre-budget report. He promised to raise the credit
> next April in line with earnings.

 Perhaps a personal example will help clarify.  Next year I will be retired
and have a full state pension plus an occupational pension of £109 per week.
On the face of it I will be about £78 better off, after tax, than if I had
only the state pension and pension credits. However,  there is then council
tax of about £10 per week to take in to account. . I have to pay it but
would not have to if I had only the state pensions. This reduces my
advantage to about £68 per week.

Then there is the issue of  housing benefits for people who rent privately,
as I do. The local housing allowance here is £66 per week and people on
means tested benefits would get the full £66. Taking in to account my
private pension I will qualify for about £25 HB. So I am better off over-all
by about £17.30 for having my occupational pension than I would be without
it. (All worked out with the benefit of on-line calculators).

I am not complaining. I took early retirement some years ago and my
occupational pension has been very useful in helping me  keep afloat.
However, who in their right mind today would want to sign up for a modest
private pension  knowing that the face value of £109 would reduce to only
£17 a week, in real terms?

The moral of story seems to be that a small pension is next to useless. If
you are going to have a private pension make sure it is a decent one that
takes you well above the means tested levels.

  I believe the government has just had an inquiry in to the whole question
of pensions and it will be interesting to see what will be the outcome of
that. This issue must be a nightmare for financial advisors.

Ellis