Voluntary Tax to UK Government? - Page 2

Phil_MCR · #21 15.09.2010, 21:54

it doesn't matter if you manage to sacrifice and magically manage to save enough to buy you a 50k annuity, because very shortly, sterling will be debased so much though inflation, that your pension will become worthless anyway.

kodokan · #22 15.09.2010, 22:43

I'm hoping the answer is to build up a pension over a working life in Switzerland, then go and spend it in... oh, pretty much anywhere else in the world, and be better off!

Cashboy · #23 16.09.2010, 09:31

	Quote:	theOAP
	I realise this is an old topic, but it’s been bothering me. There have been some good discussions on the future of the UK system, but could we look at the current situation for a moment for those retiring in the UK? I’m going to make some simple assumptions. First assumption: the cost of a qualifying year is roughly £625. Second assumption: one extra qualifying year gives you £169 a year extra on your State Pension (£3.25 a week). If you ‘live’ on State Pension alone, you have (maximum) roughly £5,070 a year. You soon discover that you can’t ‘live’ in the UK on this amount. You require extra (means tested) benefits just for a basic lifestyle. Therefore you save, or invest, and sacrifice whilst below pension age. Upon retirement, the result is a yearly income of £17,500, or a total income of £22,500 a year. Because you’re age 65, your personal allowance is roughly £9,500 and you’ll pay 20% tax on the remainder (£2,600 tax). You’re now only slightly worse off financially than the average UK worker. You probably won’t qualify for any means tested benefits. The trouble is you don’t really fancy a lifestyle “only slightly worse than the average UK worker”. You sacrifice more. The result is a yearly income of £24,000 a year, or a total of £29,000 a year including the State Pension. There is one problem though. Your personal allowance is now only £6,475 a year (standard personal allowance) even though you’re 65 or older. You’re now paying £4,505 a year in taxes, or almost 90% of your State Pension. The extra £6,500 of income has only netted £4,600 after taxes. But your spouse refuses to fly Ryanair on holiday. So, more sacrifice for a retirement income of £50,000 a year. It would be comprised of a £40,000 pension, £5,000 UK State Pension, and £5,000 in taxable interest on a fair amount of savings. You’ve now followed the Government(s) advice and provided adequately for your retirement, and have some savings as well. It’s also £9,330 a year in taxes, with the last £6,125 of income at the 40% rate (that’s 40% tax on all your taxable savings income, plus. At least your ISAs aren’t taxed for now). At these income levels, you’re not only paying yourself for your own State Pension but you’re also paying nearly a full State Pension (in benefits) for your next door neighbour who has by choice never worked a day in their life. You now understand some of the motives behind the Governments need for you to be able to provide for yourself in retirement. You’re struggling to understand how, simply as a self-sufficient pensioner, you are suddenly part of the large group that is a financial burden on society. It appears to be the other way around. I agree with Andy02, the UK Government will not want old age “benefits” of some description to disappear. The UK has too many people locked into a “benefits lifestyle”. I recently heard (Michael Portillo, I think, on the “This Week” programme) that 1/3 of all UK households depend on benefits for at least 50% of their income. Well, he was a Tory. He would point that out. As Andy02 said, the UK and US systems are skewed to benefit the low paid. To some extent, I agree with Cashboy. “Who is the mug?” There’s a lot of sacrificing going on in some of those scenarios, and not by your next door neighbour. (Let me quickly say that I support benefits for those who have found themselves in unfortunate circumstances. Many do deserve assistance.) And finally for the OP, crazysniper. Obviously, you will decide which of the above scenarios you want to live in. If it’s £5,000 a year only, then the extra £3 a week won’t matter. You’re “guaranteed” a basic amount if your total income and assets are low enough (pension credits). If you have one of the other scenarios in mind, it is a pretty “paltry” sum. Even so, every Pound counts. But it’s not automatically £3 a week, (and for simplicity) it can be only £1.80 a week, or less, thanks to tax. Once retired, and provided you’ve sacrificed (or should that be “planned wisely”), tax brackets and inflation will be your real concerns. Go for your 2055 equivalent of the £50,000 scenario. You won’t have to fly Ryanair or whoever it is then, and you can imagine that with your tax payments you’re actually helping to prevent a few fellow old age pensioners from starving. Realistically though, it’s tax revenues, and won’t be used to pay pensions. It will just barely cover the expense of some MPs fact finding mission to Greece to discover ways of stopping these damned old age pensioners from being such a drain on the system. Most depressing of all, in the future we’ll look back on this situation as the good ol’ days. Most worrying of all, I sound like some right wing Republican! I know there’s nothing new here, and I apologise. It just seems that looking at the actual figures clarifies the likely possible pain for anyone planning to provide for their own retirement. Once all your income (from pensions, savings, investments, etc.) reaches £28,930 a year (with the reduction starting at £22,900), you’re treated for income tax purposes equal to anyone else who is working. The Chancellor has no intention of rewarding you in any way for your valuable diligence, even if you are on a State Pension. Any tax proposal that increases the income tax for those workers affects you equally, such as a change in thresholds or an increase in tax rates. This is not meant to discourage those who are planning for a self-sufficient retirement. It’s simply a reality check.

I agree with your statement:
"Let me quickly say that I support benefits for those who have found themselves in unfortunate circumstances. Many do deserve assistance."

However, there are too many "pre-mediated teenage pregnancy". Too many couples relenquish their responsibility for the care and welfare of their children on divorce/seperation.

Is it fair that I haven't had children because I did not feel that perhaps I could afford to have children (without state aid) or I did not feel I was responsible enough to bring up children and hence did not have any (say) and yet, I, with my taxes, have to subsidise others in probably the majority of cases.
And I can tell you, that people like myself will get less and so we may well make sure we have nothing on paper (foundations etc.) because we do not want to contribute to this.

You might laugh at this but if you really wanted to keep your house as an asset and wanted to play the UK scrounging system; how about this for an idea:
You put your family house in your name.
You divorce your wife before retirement.
You make sure that she has no assets or investment income on paper.
Ex-Wife now rents a room in your house.
You both reach retirement.
Housing benefit will pay her rent to you as landlord.
Ex-Wife now received single person state pension.
You received single person state pension as well. (these add up to more than a married pension and you are receiving rental income.)

PS: I think worrying about not flying with a budget Airline such as Ryanair may well be one of your least worries when you reach retirement.

lisa_bsl · #24 16.09.2010, 09:56

Wow all this pension chat

Im 27, contributed NI in the UK 16-21 then moved here - I expect nothing from the UK, I thought about voluntarily contributing NI but honestly I cant see myself going back to the UK anyway so decided not to bother.

I have however started a private pension in EUR - as a british national living abroad there are all sorts of offshore long term funds you can get involved with to build your pension. No crazy money a few hundred CHF a month at this point but its a start. There is also something called a Third Pillar account which you can put approx 6500CHF a year which is then locked in for your pension but you can offest it against your tax claim. This is in addition to the pension scheme your company will offer you.

I personally wouldnt rely on the UK government for security when you are older but maybe I am just a cynic now

I hope your enjoy der Schweiz!! I know I do

The_Love_Doctor · #25 16.09.2010, 10:25

	Quote:	Cashboy
	You might laugh at this but if you really wanted to keep your house as an asset and wanted to play the UK scrounging system; how about this for an idea: You put your family house in your name. You divorce your wife before retirement. You make sure that she has no assets or investment income on paper. Ex-Wife now rents a room in your house. You both reach retirement. Housing benefit will pay her rent to you as landlord. Ex-Wife now received single person state pension. You received single person state pension as well. (these add up to more than a married pension and you are receiving rental income.)

I think you'll find this is fraud, and you will be jailed for it... so you have forgot to mention that noone manages to link this post to you ;-)

It will probably work out better financialy if you were divorced but as soon as she rents a room in your house as a landlord you are conspiring to defraud the goverment.

There was a highly sophisticated case like this in the papers a few months ago where a member of the family buys a house after convincing the bank to give him/her a mortgage for it. they then rent this house to another member of the family who happens to be an unemployed single mum, who claims all sorts of benefits including housing benefit. which pays for the mortgage. do this say 10 times during the housing boom years in the UK (2000 - 2007) and you end up with assets that have gone up in value by at least 100% sell everything and you're quids in.

and yes they were found out after some eagle eyed bla bla bla spotted some inconsitancies and reported it and they all god screwed and will be spending a good old time in one of her majesty's palaces

Cashboy · #26 16.09.2010, 10:46

	Quote:	The_Love_Doctor
	I think you'll find this is fraud, and you will be jailed for it... so you have forgot to mention that noone manages to link this post to you ;-) It will probably work out better financialy if you were divorced but as soon as she rents a room in your house as a landlord you are conspiring to defraud the goverment. There was a highly sophisticated case like this in the papers a few months ago where a member of the family buys a house after convincing the bank to give him/her a mortgage for it. they then rent this house to another member of the family who happens to be an unemployed single mum, who claims all sorts of benefits including housing benefit. which pays for the mortgage. do this say 10 times during the housing boom years in the UK (2000 - 2007) and you end up with assets that have gone up in value by at least 100% sell everything and you're quids in. and yes they were found out after some eagle eyed bla bla bla spotted some inconsitancies and reported it and they all god screwed and will be spending a good old time in one of her majesty's palaces

1) I have no intentions of getting married.
2) I hope to be in a better financial position that I would not have to concider such a scheme.

The post as my other posts on pensions is to put in to perspective the situation.
I actually believe if you read my post above that there will not be a standard fixed pension; it will all be means-tested within 20 years.

#27 16.09.2010, 12:59

There are 2 sides to pensions. The government schemes which you have to join and receive a share of the total pot, and the private schemes which are riskier but pay out more.

For my first 40 working years I was always well paid, for the last 9 years I have been poorly paid or unemployed.

After working for 15 years in the UK, and paying extra "Graduated Pension Contributions" due to my good salary, I now receive CHF 300,-- per month pension.

After working 21 years in Switzerland, 15 years well paid, I receive CHF 1'180,-- per month.

My advice is to always check that you have paid correctly into the state schemes (I have) you can usually pay in extra if you have some gaps, but Switzerland does not allow extra payments during the 5 years before you retire.

You should also try and always save 20% of your gross salary in several "high growth but safe" accounts, spreading any risk across different banks and different markets. You need to be active during your lifetime changing your investments when necessary, and as we have seen recently, even big banks and life insurance can fail us. Some, for instance Barclays, got off lightly but others HSBC and Lloyds suffered.

The British love to invest in property, but when you look at the fees and the maintenance costs, then investing outside your own home it isn't very attractive.

Phil_MCR · #28 16.09.2010, 16:28

	Quote:	Ittigen
	You should also try and always* save 20% of your gross salary in several "high growth but safe" accounts,*

nice plan except that there's no such thing as a "high growth but safe" account

i think people investing in a pension will lose out. even those retiring about now will probably find that their pension pot is worth barely what they put in and will be locked into an annuity at an extremely poor rate. even worse, when inflation kicks in to make it next to worthless.

my plan is investing into some kind of inflation/indexed-linked asset and in the near term to survive the next wave of economic meltdown to hold onto hard assets such as gold, silver, oil, uranium, etc. agricultural commodities is something that i've been on the fence about, but might add to the mix.