With great power comes great responsibility
11 July, 2017
This week has been epic. Literally. Yes I finally bit the bullet and moved out of London, joining the armies of commuters. Oof. By the time I arrived at the office on Day One I felt like Leo Di Caprio in The Revenant as he stumbles half-dead into the frontier settlement. I'm sure it will get better. (!?!)
To money matters and this week, the Supreme Court stamped out remaining inequality for gay couples around pensions, ruling that an ex-army officer’s husband should have the same pension rights as a wife, and be able to inherit his full pension. Unbelievable that we needed the Supreme Court to rubber stamp this in 2017...?
And in further pensions news an important report from the regulator has been released on what exactly people have been doing since so-called Pensions Freedoms were introduced in 2015. Basically we can now get our hands on pension money we have saved into a “Defined Contribution” pension at the age of 55. Sounds great, right?
But the problem is that we don’t like pensions. We don’t trust them. So lots of people are yanking their money out, taking a big chunk in a single tax year, paying more income tax than they need to. Sometimes giving up future tax-free investment growth in a pension in exchange for comparatively low growth in cash OR sticking it into illiquid buy-to-let property.
Twice as many people are now using ‘drawdown’ rather than ‘annuities’. Drawdown is basically when you still have skin in the game, your money is invested and you drip-feed out a regular retirement income from this chunk of invested money. An annuity is when you trade in your pensions savings in exchange for someone giving you a guaranteed and fixed annual retirement income till you pop your clogs. Much as I see the benefits, drawdown can be tricky to get right. Muck up the timing and you could run out of cash. There could be tax consequences.
So I’d like to leave the last word to my pensions spokesperson, Yoda. “With great power comes great responsibility.” Do think about seeing a financial adviser for at least a few hours to understand what you’re looking at. (Here’s some thoughts on finding a good one (https://www.boringmoney.co.uk/quick-reads/how-can-i-find-a-good-financial-adviser/).) Or you can always contact free Government resource The Pensions Advisory Service (https://www.pensionsadvisoryservice.org.uk/).
And if you're still working, doing commuter hell 😀 and you’d like to retire before you’re 93, check out our Best Buys (https://www.boringmoney.co.uk/best-buys/personal-pensions/) and set up a simple DIY pension from £25 to £50 a month! How many of us don’t do something because we get paralysed by choice? Sometimes it’s a case of JFDI… All 5 providers in our pensions Best Buys are A-OK and I would be happy if any of my friends or family went with any of these guys.
Finally thanks for your feedback on our new site (https://www.boringmoney.co.uk/) since launch. 1 in 3 visitors have generated their personalised financial fitness plan (https://www.boringmoney.co.uk/quizzes/6-point-plan/), you’re spending an average of 6 minutes in our Best Buys and we’ve released our short audio guides with Investing for Beginners (https://www.boringmoney.co.uk/audio-guides/) and a Guide for the Self-Employed (https://www.boringmoney.co.uk/audio-guides/)getting early traction.
Have a great weekend. I am in panic-inducing negotiations with Sky post-move to get everything back up and running before Game of Thrones starts on Monday. Yes. It's time for bloodshed and dragons and all manner of unmentionables again! Fab.