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lasiaf

Police Pensions Query

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lasiaf

Hello,

1. Was just wondering do you have to pay into the police pension scheme or could you decide to just go private or not pay anything at all?

2. Would private be better considering the changes that have been made to the pensions?

3. On this site http://www.policebenefits.co.uk/pension_scheme/ it says that if you were to serve for 35 years with a pensionable pay of £30k you would receive a £60k lump sum plus £15k for life. Does this seem accurate and how bad does it compare with the previous scheme?

Would really appreciate some answers.

Thank you for your time

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PennyG

1. There was a change only a few weeks ago to the effect that you had to be in a pension scheme with your employer (or something along those lines), so look that up and see how that may affect you first.

2. Yes or No. Depends completely on what and how you expect to do things in the future. You can't expect to get a simple answer to a very complex issue. In general terms, the police pension tends to get very good in comparisons to pretty much all other pension schemes.

3. Unless you are already in it, you cannot join the 'old' scheme, so rather pointless making a comparison.

Pensions can be a rather polarising topic (opt for the extreme of either good or bad) and much depends on personal circumstances.

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dr_bogenbroom1546620816

Working in pensions at the moment, even with the reforms that have come into play, the police pension is still very competitive. I'm seeing on a daily basis what effect the economy has had on current annuity rates - it's terrible!

There are some cops who have decided to opt out of the scheme and use the money they would be putting into the police pension into a second property, and even letting this out. The only thing is you don't get the tax relief you do with pensions.

I think it depends on your own circumstances are some people may already have pension schemes they have invested in from previous occupations i.e. the armed forces.

Please note these are my own opinions - I am not financially qualified and if in doubt seek financial advice :-)

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Matt C1546620078

Each to their own. I've got 12 years pensionable-service, but I've stopped paying in. It's now 'frozen'.

Instead, I use the money to 'overpay' on my mortgage. Once that's paid off, I'll look at starting an ISA...

I figure its better to 'spread your bets' when it comes to retirement. Especially given that they can change ANY of the rules, at ANY time, retrospectively and with no consultation or consent.

Remember, pensions are a bit of a 'carrot-dangle'. They tie you in. Remove choices. The figures they quote to you 'may' appear attractive, but remember they are just projections, not assurances.

You may your money, you takes your choice!!

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ededed

I'd rather take my chances investing in some magic beans that rely on any projections / promises from this Government about what my pension will look like in 30 odd years!!!

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pacmanjo

Matt, when you stopped paying in did you get any contributions back?

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kpeter201546620256
Matt, when you stopped paying in did you get any contributions back?

Not an expert but once you freeze it, you don't get anything back until payout time. However, If you fully leave the scheme at any point during the first 2 years then you are entitled to all payments from those 2 years back.

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Matt C1546620078

Pacmanjo: No, the money is frozen within the scheme.

That suits me just fine though, it's all part of "spreading my bets" for retirement. The total value is about 38k which obviously not be worth much, but I hate the idea of having of all of my eggs in one basket, especially when the western-world is facing the biggest financial change since the Industrial Revolution!

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Meditate

The moment you pull out of a public sector scheme you lose money as your employer no longer contributes - in effect a pay cut. also bear in mind that any money in the scheme is safe as changes cannot be retrospective. The public sector schemes even now are the most competitive and anyone thinking of pulling out needs some serious financial advice as pretty much all IFAs will tell you to stay in as coming out will mean you lose out.

Edited by meditate

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Matt C1546620078

Meditate: The problem with IFA's is that they can only give financial advice on the CURRENT financial situation. They don't have crystal-balls. They can't predict the future.

As for the money being 'protected', that's true in technical-terms, but its not protected from the government introducing, say, means-testing, or introducing a greater tax on annuity etc...

Confidence in pensions have been eroded. In 1950 the worker-to-pension rate was 10 to 1.

By 2050, it is predicted to be 1 to 1!

It's unsustainable, and the government isn't in a position to move quick enough to intervene. When it becomes 'critical', do you REALLY think they will leave a massive 'nest-egg' alone?

There may be laws to protect the money, but ultimately THEY write the laws!!

Each to their own. Personally, I think 'spreading' your pension scheme MAY reduce your final figure, but also reduces risk.....

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Meditate

Matt you are right in the above on a number of levels. Some IFAs are more 'independent' than others. By that I mean some have not been entirely objective and have recommended products that give them the highest commission. Spreading also makes sense and it is true that the cost of future public sector pensions is a concern and that govts can change the rules.

On the flip side though public sector pensions are safer than private sector schemes and are far more generous. My approach to investing for life after work is as follows. First public sector pension. For what you contribute both your employer and the taxpayer add to it (public sector pensions pay out far more than what you would get from investing a similar amount in the private sector or personally). second would be ISA but, the rate is really poor now so I am not convinced they are as good as they have been. Third is removing all debt including mortgage (actually the priority is to remove all debt before doing number two with the exception perhaps of removing the mortgage - reason being number two gives you some additional rainy day money for unexpected situations).

Given that the public sector pension also gives you a lump sum so long as you have enough for covering unexpected expenses and can cover your salary for say six months then I tend not to worry too much about saving significant amounts and will spend on some luxuries whilst I can (working in a hospital tends to alter your perspective somewhat!).

My stance on the affordability and the govt altering the goal posts is that they are doing that now by introducing the universal pension. In effect they seem to be saying that the state will give you a £144 approx per week and the rest will be down to you. If they try to take more money off those with a pension then it is difficult to see how they can target the public sector only. If they hit pensions then it will be those without a public sector pension that will suffer most as there 'take home' is less than those who have worked for many years in the public sector.

Its a sliding scale approach really but when you look at it in terms of returns for your money the public sector pension schemes win every time. Investing in additional property or reducing a mortgage will not usually beat the pension and, the pension is about as secure as you can get.

My caveat is I am not a financial adviser but I am a bit of a zealot on this one in that those in the public sector do need to think very carefully about what they gain or give up by opting out. At some point if we are lucky we will reach pensionable age and it is best to be without regrets as much as we can. Sometimes it may be the correct thing to do to come out of a good scheme but in my experience this would definitely be the rare exception than the norm.

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Matt C1546620078

Meditate: I took the advice of an IFA in the 1990's and bought into an Endowment Mortgage.

I've been wary ever since!

I've approached retirement provisions from a slightly different angle. The way I see it, it is far better to clear your feet of debt first. I overpay by hundreds of pounds every month, and 'save' having to pay 5% interest on that amount. When you think that you can easily pay back DOUBLE what you have borrowed on a house over a 25 year-term, that just makes sense to me, even over and above paying into a mortgage!!

Remember, once a house is paid early, it is yours to sell, rent or live in for 'free'. With a mortgage, the provider holds all of the cards, and dictates the terms to YOU, which can be changes without consultation or consent at ANY TIME!

I'm beginning to wonder if 'traditional' pensions (a bit like Endowment Mortgages) are a 'dead' financial instrument?

If that's the case, the sooner you stop paying in, then perhaps the less you will lose in the long-term?

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Gripper

Meditate: I took the advice of an IFA in the 1990's and bought into an Endowment Mortgage.

I've been wary ever since!

I've approached retirement provisions from a slightly different angle. The way I see it, it is far better to clear your feet of debt first. I overpay by hundreds of pounds every month, and 'save' having to pay 5% interest on that amount. When you think that you can easily pay back DOUBLE what you have borrowed on a house over a 25 year-term, that just makes sense to me, even over and above paying into a mortgage!!

Remember, once a house is paid early, it is yours to sell, rent or live in for 'free'. With a mortgage, the provider holds all of the cards, and dictates the terms to YOU, which can be changes without consultation or consent at ANY TIME!

I'm beginning to wonder if 'traditional' pensions (a bit like Endowment Mortgages) are a 'dead' financial instrument?

If that's the case, the sooner you stop paying in, then perhaps the less you will lose in the long-term?

I just wonder how much money that IFA made, on your endowment.

I can see your idea, to pay off what you owe,by using your pension payments.

But having done 12 years, you have done a lot of the hard years.

Did you get a pension forecast,for when you retire?, as the lump sum would probably be large enough by then, to pay off what you owe.

And you would get an increased pension, at the end.

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Meditate

The question I would ask is that by coming out of the police pension scheme you are able to pay off the debt on your house but what about when you retire and need an income to live on - where will that come from and how much will it pay? Will it rise with inflation? will it provide your significant other with a pension allowance of 50% if you die? will it provide a lump sum as well as the pension without actuarially reducing your annual pension? - These are the advantages of the public sector schemes.

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Tim in the South

I can't imagine NOT paying into the scheme. When it's time for me to retire, I will need all the money possible to have a really good quality of life. Not paying into this scheme, would mean lots more disposable income now - but at retirement? Only state pension. Not enough.

I appreciate for some, who join now, it may mean a reduction in income - but you know that before you join. Some things in line you just have to take for granted - paying into a pension fund is one.

It may not be as good as it used to be - but the amount you pay monthly will be nothing compared to how much you get in pension at retirement.

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