From: "Andy Pandy" 
Newsgroups: uk.finance
Subject: Re: Pension planning
Date: Fri, 8 Apr 2005 19:04:48 +0100


"Old Git"  wrote in message
news:d3642h$fvk$1@domitilla.aioe.org...
> With all the means-tested benefits the Government hands out, it seems to
> me that it may be better to have no savings at all than a modest amount.
> We could be going without in order to save for a pension which would be
> much the same as we would receive with Government top-ups if we spent
> our money instead of saving.

Yes. This is very often true - the people with the lowest incomes in retirement
end up effectively being taxed at the highest rate when benefit withdrawal rates
are taken into account. You may get 22% tax relief on pension contributions, and
then end up paying 40%, 85%, or even 100% "tax" on your pension.

Suggest you check the pension credit website, which has a calculator - you can
work out the effect that having a small private pension currently has on your
pension credit entitlement:

http://www.thepensionservice.gov.uk/pensioncredit/home.asp

You can check what you get in housing benefit (if renting) and council tax
benefit (whether you own or rent) from a calculator on your local council's
website, or if it doesn't have one try the following one (the rules are
basically the same nationwide except in some areas where I believe housing rent
allowances are used):

http://www.chiltern.gov.uk/benefits/wbc-sp-04.htm

> I realise of course that Government pension benefits can change over
> time, but then so can the returns from one's private pension. As an
> increasing number of voters are likely to be victims of the "pensions
> crisis", it seems unlikely to me that any future government with a
> desire to get elected would cut back on pension benefits.

Exactly. Pensioners are the most likely group to vote, and hence tend to get
treated the best. Higher tax allowances, higher benefits, higher applicable
amounts (the base for means tested benefits).

In addition, this government seems committed to increasing the *means tested*
benefits pensioners get (eg the PGC, applicable amounts) in line with earnings,
but the *contributory* benefits (basic state pension, SERPS) only in line with
inflation.

> My wife has never earned enough to pay any tax or N.I. contributions.
> Will she qualify for any state retirement benefits, or will we be
> entirely dependent on my own pension income and savings?

She can get a basic state pension (not means tested) based on *your* NI
contributions (IIRC it's 60% of what you get).

Any means tested benefits you get (eg PGC, council tax benefit etc) would be
based on your combined income and savings.

> Where, if anywhere, can we obtain impartial advice on what is best to do
> in this situation?

Not easy. Financial advisors have nothing to gain. The last thing the government
wants you to do is rely on means tested benefits in you old age. The "correct"
advice is to save as much as you can - but this could end up being money down
the drain.

Advise yourself - read up and understand the rules and work out what is best for
you.

--
Andy