Pensions

(24 Posts)
78bunion Thu 06-Dec-12 07:08:14

I am a professional too and became anti pension. The rules change all the time. They gradually take more and more from the pension. The charges are huge. People were hurt in the Equitable Life scandal. People's working lives have changed and many of us like work and want to do it until we die anyway if we are fit enough.

Also the state makes your income up to ao minimum level of about £200 a couple if you don't have a pension so those on low pay who do save can end up having similar amounts to those who did not save a penny and of course that might changeb ut even so you have so little power over the pension. I am going to take out the 25% cash at 55, the earliest I can as I just don't trust them and change after change comes about - yesterday's changes are another example - lowering of the maximum you can put in and you can see that getting worse over the years. By all means save but perhaps save in other ways.

Also people move jobs so very very much and if they do contribute to different work pensions they end up with scrappy little bits of pensions. Lots of women work part time. I think store some money away, perhaps use what savings you have to pay off your home mortgage as your first priority, may be buy a second property or land if you can afford it and pick work you can keep doing as long as you like. Invest in yourself and your children.

As mentioned above, I was 23.

I worked full-time, so why would I not compare myself to full-time earnings. Even when compared to all earnings, I was still below the median - which was what you asked me.

TalkinPeace2 Wed 05-Dec-12 16:57:54

That figure is only for full time employees,
the data set
www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-45793
table 4 shows the median as £15579 in 2000

so you were earning around the 40th centile - at what age .... 21?

I earned £14k, not £19k, and that was about ten years ago.

I have just looked at the ONS website and median weekly earnings in 2000 (when I earned the above sum) was ~ £375 per week, so £19.5k p.a.

www.ons.gov.uk/ons/rel/ashe/patterns-of-pay/1997-2005-ashe-results/index.html

TalkinPeace2 Wed 05-Dec-12 16:10:07

charley
did you earn £19k when that was the median wage?
ie within the last two years

Yes, it is a DC. He will get a state pension also when he is of an age. He also still works.

As I said, I did earn under £19k p.a. and still managed to save for a pension. As to to risk, there are a variety of funds to invest in, some a lot riskier than others, as opposed to trackers which I would say are less risky.

I still think a 2-3% return, before inflation, is pretty abysmal.

TalkinPeace2 Wed 05-Dec-12 15:19:03

is your father's pension a DC? Is it his sole income?

risk and reward - fine : but those who will never get rewards (the 50% earning under £19k a year) cannot afford to take risks as they are living hand to mouth.

Yes, and my background is in financial econometrics, so I think we shall have to agree to disagree.

As I have said above, it is all about how much risk you are prepared to take. To achieve a higher reward you typically have to take a higher risk - that is my personal choice.

I used to work in transfer pricing at a big-4 practice by the way so I am not financially naive. Personally, at the moment, I will be looking at income-draw -down rather than an annuity, as I prefer the control.

Personal pensions have been around for a long time and are paying out, well my father's certainly is, smile. Fees are also much lower now than they were when he first took his out.

Nothing in life is ever guaranteed, except death.

TalkinPeace2 Wed 05-Dec-12 14:42:51

charley
I'm an accountant. I look at the actuarial figures.
I love my interest only mortgage, I never took out PPI, I realised that my endowment would tank ten years ago.
There is absolutely no evidence that ANY personal DC pension scheme is going to pay out enough to live on.

As it happens, my first job (at 23) only paid £14k per year but I still paid into the company pension plan at a similar percentage, as the earlier you start the easier it is to build up a reasonable sized pot.

As I have said above, a private pension is obviously not for you, but that does not mean that it would not suit others.

My father had an ONB and he contributed to a private pension thirty years ago, so I don't believe that the two are mutually exclusive.

By the way, what were you burnt by, PPI, endowment policy, interest-only mortgage, some other mis-selling scandal?

TalkinPeace2 Wed 05-Dec-12 13:52:30

charleybarley
the headline fee is set at 1.5% - but as has been clearly documented by researchers - the hidden fees are another 2% on top

and if you can afford to give up 10% of your salary, you clearly earn far more than the half of the population who earn under £19,000 a year

and the 4 million self employed will get no employers contributions at all.

I agree with 78bunion

78bunion Wed 05-Dec-12 10:25:48

I would endorse save but not in a pension for many people.

argh, 'is' not 'isn't'

The charges on a stakeholder pension are limited by law at 1.5%. Don't you think that what they are actually referring to is varying the charges between 1.0% and the maximum of 1.5%?

So it would have to be the government that altered it - equally they could decide to remove the tax free interest on your cash ISA. Both of which the government is unlikely to do given how hard they are trying to encourage people to save for their retirement.

By the way Sipps are not just an option for smaller funds, DD has had one since birth, along with a shares-ISA, and these both are performing well.

Obviously, pensions are not for you, but some people are happy to take slightly more of a risk, than keeping it all in savings account, in order to potentially achieve a higher return.

I think you also forget that as well as the tax rebate on pension contributions, employers also often make a matching contribution - in my case I paid 9.4% and my employer paid 6.6%, and which also increased with age. This would be a rather foolish contribution to overlook in my opinion.

The key in all saving is diversification of risk, hence in our household we hold, pensions, share ISAs, cash, properties, shares, gold, bonds, antiques, art, and even some premium bonds. We also have wine, but that is for personal consumption and is stored in the priest hole (so is very safe!).

As to Mr Madoff, I am a firm believer in, 'If it is too good to be true, then it probably isn't'.

OP - don't be sad, look at some of the websites I mentioned, and there are plenty of others, providing free, rational advice on how to save.

blindinglight Wed 05-Dec-12 07:46:47

Oh dear - I truly do know nothing about all of this sad

TalkinPeace2 Tue 04-Dec-12 20:33:14

Page 15 of the key facts document in your link
www.standardlife.co.uk/1/content/resources/uk_internet/PDFs/Retail/spp5.pdf
The Charges are not guaranteed. They are regularly reviewed and may be changed in the future

Sorry but I rest my case - the minute they have your funds in, they will up the charges.
The 1% is a sales hook, not a commitment

And the employers I work for have less than 20 employees = bugger all bargaining power.

Madoff was clearly fraudulent activity - with hindsight yes, but some of the top investors in the world did not see it beforehand ... otherwise he would never have got away with it for 23 years.

Here you go,

www.standardlife.co.uk/1/site/uk/pensions/products/stakeholder

By the way, as an employer, you would probably be able to negotiate a discount. Where I used to work, the management charge for my work pension ( a stakeholder) was only 0.6%.

I could cystallize the gain by converting the funds to cash but given a pension is supposed to be a long-term investment that would seem rather short-sighted. I could always convert to cash if I thought the markets were going to head down for a while.

I suppose it depends on the risk that you want to take, higher risk usually means a better chance of a higher reward. I would be very unhappy with a 3% return given how high inflation is at the moment. Hence, I am willing to take a bit more risk and invest in funds.

Madoff was clearly fraudulent activity and Octavian remains to be seen.

TalkinPeace2 Tue 04-Dec-12 20:04:43

Charleybarley
could you find me a link to the limit of 1.5% .... that lasts beyond the full rollout of auto enrollments
and the link to standard life that guarantees 1%

because as an employer, all of the schemes I've looked at have so many hedges, fudges and contingencies, I know that they will revert to 3% as soon as the law allows.

I get 3% on my ISA funds (tax free) - by fixing for a year or two at a time

and was that return on your Sipp crystallised or nominal
as of course every nominal fund value increase the day before the crash was wiped out after ...
Kevin Bacon had rather a lot of savings according to his paperwork - sadly it came from Bernie Madoff.
Until its cleared funds in YOUR bank its not real
look at the fine wine debacle going on at the Octavian warehouse at the moment ....

These two sites are both worth looking at for further information.

https://www.gov.uk/personal-pensions-your-rights/stakeholder-pensions

www.hl.co.uk/pensions#

You could consider a stakeholder pension, where fees are limited by law to 1.5%, although most providers charge less than this. I think Standard Life only charge 1%.

Some also give further discounts once the pot gets to a reasonable size.

I think your key consideration is whether you would need access to the savings before you are likely to retire - if so an ISA would be better than a pension.

Also, if you decide to opt for a shares ISA you will be choosing from the same funds as you would for pension investing, but without the tax rebate.

Cash ISA returns vary widely and tend be low at about 2%, and I don't see interest rates rising by very much in the next 5-10 years.

By the way, I am at home with DD so my Sipp only gets a 20% rebate, but still made an 11% return last year (after fees).

TalkinPeace2 Tue 04-Dec-12 18:30:18

If you have enough to make a Sipp worthwhile then yes,
as chances are you are getting 40% tax rebate
BUT
for basic rate taxpayers, paying into a conventional fund, they are a con.

When the fund grows 2% but the fees are 3% you are on a hiding to nothing, even with the extra tax break.

I have a Sipp which works really well for me as I can directly invest my pension funds. You can also invest in land and commercial property through one of these.

The key things are that you need to make sure that the annual management charges are not too high, and that you regularly review the funds that you are invested in for performance.

An advantage of pension saving as opposed to an ISA is the tax rebate that you get from the government for paying into one.

TalkinPeace2 Tue 04-Dec-12 17:38:58

Defined Contribution pensions are a con.

Save, Save, Save.
ISAs up to the limit every year for you and spouse and children, both cash and shares if you have the funds.
Spread bet savings into a mixture of places rates and terms
look at other investments like land (real land, not landbanking)

blindinglight Tue 04-Dec-12 13:36:10

I don't have one, I feel like I should buy also worry that I'll get fleeced of my money a few years down the line. Not sure why. I'll be honest I have no idea about pensions. Is there a definitive guide I should know about? Or where's a good place to start looking into them. Any advice appreciated!

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