New Home Owners And Snagging Forum
Investments => Cash ISAs and saving accounts => Topic started by: The Prophet on November 14, 2012, 10:50:30 am
-
The FSA planning to force all pension schemes to use a more realistic basis for forecasting pension projections from 2014.
Currently, they make an assumption that your pension pot will grow 5%, 7% and 9% each year.
The FSA wants them to lower this using 2%, 5% and 8% for their "predications".
Even 5% is somewhat unrealistic and given that fees and commissions can account for 2% a year, most people would be doing very well to see 3% a year growth in their pension pot.
A reduction of 2% to the assumed growth could reduce final income projections by 38%.
A 35 year-old man, wanting a pension of £10,000 a year when he retires in 33 years time at 68, would need to save £600 every month 43% more according to Hargreaves Lansdown using the new "realistic" assumptions.
Pensions do enable you to withdraw 25% of the fund at 55 tax-free under current rules and all contributions to a pension fund are tax deductible.
But unused pension pots are taxed at 55% on death and all pension income from annuities etc. is subject to income tax.
To assume makes an 'ASS' out of 'U' and 'ME'