Wol

Gina, I think I can see where you are misunderstanding what I believe we are talking about - and perhaps I am guilty of not taking into account active members. Also, not being a professional in the matter, I used the word "Private" to mean "Company" (pension) which perhaps confused you.

I will take my own case: I retired ten years ago and am in receipt of an indexed final salary company pension. I will be 65 in a year's time.

At that point I am told by my pension scheme (and I quote an email sent in reply to my query some time ago):

"....This will mean that on any element of GMP earned between 1978 and 1988 and on any element of GMP earned after 1988 where RPI exceeds 3% in any given year, the appropriate increase will NOT be paid by the DWP. I am afraid that the rules of the ***** scheme do not allow for the "missing" DWP increase to be paid by the scheme. I am sorry I cannot give you a more encouraging answer."

A previous letter detailed the amount that would not be fully indexed and that amounted to several thousand ££.

You certainly don't have to "put it any simpler" as regards for example pensions which are transferred to Australia during the active period - that's a given and obviously once the capital is established here there is no further involvement with the UK system.

As I said before, I would very much prefer to be shown to be wrong - we in the same position stand to lose a proportion of our indexed company pensions, in effect, as well as indexation of the state pension for living in one of the "naughty" countries - but nothing that you have said appears to negate the position that my own scheme holds.

There are probably not that many people in the same position so it's not surprising that it's not understood even by professionals.

Thanks for the reply anyway.

NedKelly

Hi GinaUK
An excellent couple of posts if I may say.
My thinking always leans towards the government wanting to screw me but they will be giving me a hugh discount on my pension as they are planning to reduce the NI contributions required for a full pension to 30 years. This means that because I live overseas I will not have to pay another 14 years of voluntary contributions to qualify for a full UK pension.

Your comments about the government taking it from those who cannot vote and from minority groups may be very true. I do not believe the government will pay me a full pension on only 30 years of NI contributions when I haven't lived in the country or paid NI or Tax for the last 15 years.

NedKelly

Wol
I am a bit mystified by your pension. Presumably you have a state pension which is not index linked and a separate company pension which is index linked. What does the company pension have to do with the state pension? It looks as if you are asking your company pension scheme to make up the difference in your total pension. WHy would they do that?

Wol

You too have the wrong end of the stick: as a "contracted out" pension member, and because of the incessant tinkering with pension schemes by successive governments, *part* of a company pension is actually integrated with the GMP part of the state scheme as I understand it. It's even more complicated because there are several parts to even that - but in essence whereas I and many others assumed that our final salary scheme was indexed it appears that is not altogether correct in that *part* of it is actually paid by the state and *some* of that falls within the same non-indexing as the state pension.

It's so complicated I think Gina, who is probably in the field herself, is unaware of some of the pitfalls - but it's something that (as I said at the start of this discussion) many people may be affected by without realising. I wish I was wrong!

by the sea side

Investing in property here is quite a big thing.I am in Qld and I am not sure if the other states do it differently but negative gearing is what they do here with property.If you by a house and as a first home buyer in australia you get $7.000 first home buyers grant.You have to live in the house for 12 months before you rent it out otherwise you will have to pay back the grant. If you are just buying with intention to invest your deposit is higher than normal and so is the stamp duty.However the returns from renting out the house tax wise on a yearly bases are worth while.You pay the water rates and council rates all tax deductible and there is some for wear and tear and of course the interest that you are paying.It is a good idea and possible. It is a good idea to see a good financial adviser.
We have a house we live in at the present time but my husband works out at the mine,we have recently got a house in the mining town for $90.00 a month with no rates.So we intend to rent this house out and live in the mine house which is very nice all refurbished. So there is money to be made and I am sure that you could do it.To my knowledge everything I have written is correct however I am sure some one with let us know if it's not.

NedKelly

Why would you want to buy a property, with all the associated headaches of renting and maintaining it, just so you can make a loss every year?

by the sea side

We have done this before loss??? Headaches sometimes.

NedKelly

I was a "contracted out" member with my personal pension plan which I then transferred into a SIPP. There was a 'protected rights' component which was the contracted out contributions and the SIPP manager put this into an interest bearing account as I was not allowed to invest this part into shares. I remember when I contracted out in the first place the 'wide boy' who recommended it in the first place didn't mention anything about the pension arising from it being restricted in any way but then of course he wouldn't have would he. I managed to transfer the whole lot, including the protected rights, to an SMSF here in Australia so when I am 55 I can take the whole lot as a tax free lump sum. It seems that your pension provider has taken the line that they are not going to index the contracted out part. Whether that is something that is forced upon them by legislation or whether it is something they have chosen to do off their own back (which would, of course, increase their profits) is something which might be interesting to find out. I was always under the impression that the contracted out funds belonged to your pension pot and were yours for the manager to invest at his discretion without any further reference. If you look at the FSA factsheet on contracting out it says:-

"What pension can I expect to
receive?
If you are contracted out, your
pension provider or financial adviser
will give you an ‘illustration’
estimating how much pension income
you might get based on various
assumptions such as inflation and
stockmarket growth."

Just supposing the pension manager managed to make 50% a year on the contracted out funds, I would expect a correspondingly larger pension. I think that what has happened is that because you have a final salary scheme the company are basically paying you as little as they can as I do not believe that legislation will dictate what they do with the contracted out part. Having said that I know nothing about pensions so ignore everything I have said and pay to see and expert who can advise you.

It is complicated but I think Gina has done a sterling job of explaining the situation in a way that most people can comprehend.

NedKelly

Link for the booklet mentioned above:-

http://www.fsa.gov.uk/consumer/pdfs/contracting_out.pdf

Wol

Again, that is no use in our case: the note at the bottom of P1 says "This booklet is NOtT for you if you are a member of an occupational pension scheme which is contracted out" (or words to that effect.

Wol

I agree that Gina has explained *an* aspect of pensions, but she seems not to understand the way the indexing applies in a particular case. I cannot blame her, it is very complicated and mired in a good deal of government disinformation (for example, the government slips in every year an undebated addition to the appropriate indexing legislation effectively exempting certain government employees from the lack of indexing on the GMP part of their Civil Service pension. They do this by instructing the treasury to "make up the difference" from the taxpayer.)

Given the total lack of understanding by the professionals, let alone the average joe like me, it is difficult to see where one could get adequate paid advice which would actually mean anything.

Country Boy

I'm not sure if this has been mentioned in any of the posts in this thread, but be aware that the UK Govt is proposing a pension reform bill that will kick in in 2012.

Part of this bill will limit the No. of years you need to contribute NI to gain a full state pension. At the moment it's 44 years (Male), but this bill proposes only 35 years (I think) so those 'topping' up their NI contributions now could be throwing money down the drain.

CB

Wol

I think that's been mentioned. I am sure it won't affect the non-indexing thing though, either of the state pension or what we have been discussing.

Unfortunately <g>.

lesleys

Wol,

You are not alone. See http://www.britishpensions.org.au/ and scroll to bottom of page. Click on SERPS & GMP.

Wol

Thanks - it's some time since I visited that site due commitments and that page must be fairly new. The whole subject has been intensely debated for years but within a small circle of those affected so it's no surprise that it's relatively unknown.