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DH and I don't have a pension, should we be worried?

61 replies

bouncy · 27/08/2006 17:01

not something that we have thought about until now, we have heard so many bad things about pensions.

We aim to pay off mortage by the time we are 50 (if not before)

Any spare cash we have goes on to paying off larger chunks of the mortgage.

Should we really have a pension or is it best to pay off mortgage and then save big when thats paid off.

OP posts:
blueshoes · 29/08/2006 09:11

Tinker, the main risk of tracker funds is that associated with equities in general ie you could lose the capital you invested. Other lesser risks include equities being relatively volatile over the short term and not performing as well as anticipated at the time you cash out your pension into an annuity at retirement.

Tracker funds are funds which track a specified index, like the FTSE All-Share (UK) or Dow Jones (US) or basically any index out there, depending on which market you want your exposure to be in. As contrasted with actively managed funds, the management fees for a tracker fund are relatively low and you get the exposure in the market you select without management fees eating into the returns. The disadvantage is that because the index passively tracks the index, if that sector is doing badly in general, you do not have the hope of a competent fund manager picking stocks which would give you a better return than the index. But by the same vein, if you end up with a dog fund and a dog fund manager, your actively managed fund could likewise underperform the index at any time, with its high management fees to boot.

I prefer trackers over the long term (esp for pensions and Child Trust Funds) because all you want is really to follow the stock market as it climbs up over the decades, and any volatility in the meantime, can be smoothed out with dollar cost averaging (ie drip feeding amounts into the pension every month) and are largely irrelevant anyway until you decide to cash out on retirement.

By all means, seek the advice of a reliable IFA who can check the risk profile of dh/yourself to ensure that you don't get into any fund that is over your head. If your pension allows, you can choose a selection of funds, rather than just one fund and change it over time as well.

BTW, my company pension allows me to select a menu of funds, one of which invests in commercial property, so I have some exposure through my pension in UK commercial property as well.

Tinker · 29/08/2006 10:10

Thanks bluseshoes. Bit alarmed by this bit though "you could lose the capital you invested." But worth thinking about.

blueshoes · 29/08/2006 10:48

Tinker, yes, it is scary but it is a standard risk of anything you invest in, whether shares, property, gold etc. The safest investments where you do not have such a risk are fixed deposits/savings accounts with a strong bank/institution, where you just earn interest on guaranteed capital. But the cost of safety is that the returns of money in a fixed deposit are very low, particularly when you are looking at a 20-30 year investment horizon.

The longer the investment horizon, the lower the risk of losing your capital, because you can ride out any short to medium term volatility in share prices. Which is why it makes sense to take more risks over the long term (and with it potential capital gain), than to go for safety.

If your risk profile does not give you the stomach for equities, then my instinct would be to use the money to pay down the mortgage asap, rather than put it into a savings account.

tallulah · 29/08/2006 13:22

My DH enquired about a private pension 10 years ago when he was in his 30s. He was told he would have to pay in 75% of his net pay to provide enough to live on in retirement.

What, pray, do we live on in the meantime?

Twiglett · 29/08/2006 13:25

well you're not allowed to put in more than 17.5% at that age so I reckon he might have misheard

blueshoes · 29/08/2006 13:44

erm, Tallulah, 75% sounds highly unbelievable, unless your dh was intending to retire in a few years' time! . A more reasonable estimate would be along the lines of investing 10-15% of dh's gross salary over say 25 years? I am just guessing but I have seen a few estimates in my time and 75% sounds way OTT.

At that time, the 17.5% limit would have applied. Although I believe this limit has recently been abolished by Gordon Brown, at least in the case of my company pension.

Bramshott · 29/08/2006 14:14

I went to see a financial advisor a few years ago, who said that for the time being, with the stock market so volatile, he would be tempted to put any spare money into paying off the mortgage. Now this was a few years ago and the advice may have changed by now, but just to report what he said. Of course we didn't pay off the mortgage or start a pension, but had a baby instead, but never mind!

mumfor1standfinaltime · 29/08/2006 14:27

I have a works pension and dh has one too. It probably wont account for much when we retire but it is something. I also put some money into a savings account each month, for me and dh when we retire.
We don't own our own home as we can't afford it, house prices are too high in our area so we are forced to rent with a housing association. I think it's important to save even if it's a few pounds a month.
The good thing about our company pensions is that it also comes with life insurance, if anything happens to me or dh a lump sum and a pension will be paid out to the other party.

titchy · 29/08/2006 15:24

Dh and I piss every bit of spare cash we have up the wall, so we'll be dead by the time we retire, or in hopsital with chronic liver disease . Hey it's a plan!

tallulah · 31/08/2006 15:57

Blueshoes- he was only earning £10k at the time and because he'd left it so late there wasn't time to get the right amount of years in. Perhaps it worked out to 75% of what we had after the mortgage? Either way we couldn't afford it. Nor could we afford 15% of his gross now and he's 45. We've got 4 kids- they'll have to support us between them

blueshoes · 31/08/2006 19:49

Tallulah, . That makes sense.

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