[Closed] Just checked my pension pot...yay I'm rich....oh hang on...

I'd still rather trust my money with a good quantitative based investor like Winton Capital

Which will perform the same as just about any other investment fund over the long terms.

Only you lose out on the tax benefits of a pension.

That makes no sense at all.

I'd just rather be on first name terms with the people who are investing my money, a lot can happen in forty years. The amount of people that I've heard of who are going to be poor because the company holding their pension went under worries me.

I guess I like that extra bit of control and knowing that I can take all my money back at a moments notice and splurge it all.

Perhaps a mix, but I definately don't intend to entrust my retirement wholly to a pension scheme.

The amount of people that I've heard of who are going to be poor because the company holding their pension went under worries me.

And the same can happen to whoever you invest with.

I'd prefer to stick with my matched contributions and the uplift in tax to my own contributions for the sake of control.

Would be worth your while still doing the pension and the other investments.

[i]Edit[/i]

Perhaps a mix, but I definately don't intend to entrust my retirement wholly to a pension scheme.

Ah right so you are going to be putting money in a pension then 🙂

And no neither would I.

I'm 43 and have been paying into our work 'defined contribution' scheme for he last 9 years.
I put in 5% and my employer matches it.
No idea if it is any good, but I get 40% tax relief on what I pay in, and I figure it'll have to perform spectacularly badly to loose the 50% my company put it and start eating into 'my' money.

The amount of people that I've heard of who are going to be poor because the company holding their pension went under worries me.

Has this ever actually happened to a pension investment? Even if the company managing the investment goes bust you'd still own the investments themselves.

The fact that these days you can withdraw it in a lump sum, does make me feel better about it Gary. My reaction to them is more emotional than rational.

Has this ever actually happened to a pension investment? Even if the company managing the investment goes bust you'd still own the investments themselves.

I've read stories, but maybe they're just that - stories. I heard a while back the the pension protection fund is going to have to cover something like 90 percent of pensions in the future. If it's true, that worries me. Mismanagement, overselling and a protection scheme that is open to political risk......I dunno.

Mine is also projected to be somewhere around £8k a year equivalent. And the growth assumptions for it to ever reach a £350k pot are rather optimistic looking at performance over the last 5-10 years.

Draw down looks the best option, but don't forget that inflation means today's £8k "equivalent" will be a much bigger number in actual cash at the time - £8k of purchasing power now might then cost £20k, £30k, £40k in actual cash (nobody knows). So a £350k pot could get emptied pretty quickly.....

heard a while back the the pension protection fund is going to have to cover something like 90 percent of pensions in the future. If it's true, that worries me.

I think the 90% is more that that is the maximum amount that will be paid out to someone by the protection fund, assuming they haven't retired. i.e if the accrued benefits were £10k then the most they'd get is £9k. It's not that they expect to pay out on 90% of all pension funds, the UK tax payer couldn't afford that

I'd read it was roughly 90 percent of all pension funds, that they are something like 400 odd Billion in the red.

I'd read that it was something like 90 percent of all pension funds, that they are something like 400 odd Billion in the red.

What do you mean by a pension fund being in the red?

The pension funds can't meet their obligations to the pensioners. I'm cynical about pensions, if it smells to good to be true, it's probably because they are. Employers contributions are great and all, really though, I'd rather they just gave me pay rise and let me handle my retirement or spend everything before ending it all in a digitas clinic.

The pension funds can't meet their obligations to the pensioners.

You (and your employer) pay into a pension fund. That fund then invests it in something (a hedge fund, shares, government bonds, gold, cash, etc). It's just a savings account a that point.

At your retirement age you use that account to buy an annuity.

An annuity provider could be in the red if they've not balanced their books. But that isn't the same as your pension fund that you pay into. Usually you're paying into a fund managed by an investment broker, the annuity is bought from an insurance company.

To my knowledge the PPF only covers defined benefit schemes. The employers contributing to these schemes pay a levy each year which builds up the fund - it is a kind of joint insurance scheme.

If you invest in a DC or money purchase scheme your investment is held by a fund manager and your pot builds up like any other investment - ie S&S isa.

Should add the PPF only steps in when the employer goes bust and can no longer make the necessary payments to the DB pension fund.

I think you are right that it only guarantees 90% of the benefits accrued.

You are also right the most DB schemes are in significant deficit - Brexit hasn't helped that position.

Mines showing a 26% increase in the last 12 months which is more money than I earned annually for the first 15 years of working life.

So I'll be taking 25% at 55 give some to the kids, spunk the remainder and work till I drop.

Happy to provide pension planning advice.

This is confusing to me, so what we are saying is unless your employer pays in it's a waste of money?
Pensions are tax efficient but if they lose money anyway you might as well pay the tax and invest elsewhere?
Someone explain the benefits of a private pension scheme for me I'm genuinely struggling to see any positives

This is confusing to me, so what we are saying is unless your employer pays in it's a waste of money?

No it's not a waste, just that employers contributions make it more worthwhile.

Pensions are tax efficient but if they lose money anyway you might as well pay the tax and invest elsewhere?

A Pension isn't some special type of investment it's just a tax efficient way of making the investment. Whatever criticism you can make against a pension investment can be made against any non-Pension investment.

Someone explain the benefits of a private pension scheme for me I'm genuinely struggling to see any positives

All a pension is is a savings/investment pot. Fundamentally it is no different to any other investment you could make with a couple of important difference. The first one is that you get to invest the money without having to pay tax on it. If you are normal tax payer and you put £80 into an investment it would start to grow from there. If you put it into a Pension fund the government would add another £20 to it so your fund would start growing from £100. Once you start doing the compound growth, because we are talking long time periods here, that becomes a huge multiplier. The downside of a pension investment is that you can't access it whenever you want, you have to be over 55.

Basically it's the best way of saving for your retirement. They are getting criticised now because of Annuity rates, but that's nothing to do with the saving side of a pension that's the spending side.

There's a much better write up here.

http://www.moneysavingexpert.com/savings/discount-pensions

I'd read that it was something like 90 percent of all pension funds, that they are something like 400 odd Billion in the red.
What do you mean by a pension fund being in the red?

Yeah, you're not wrong. There was an article in the FT yesterday about several Blue Chip companies with between 20-50% pension pot shortfalls, which they have little intention of addressing, preferring to keep the dividend at unsustainable levels.
Maybe it's in other papers too, as you won't get nowt if you dont't subscribe to the FT...
http://www.ft.com/cms/s/0/a0cf5e4a-7980-11e6-a0c6-39e2633162d5.html#axzz4KJ7reEmB

This is interesting too..
http://www.bbc.co.uk/programmes/b054qct9

Has this ever actually happened to a pension investment? Even if the company managing the investment goes bust you'd still own the investments themselves.

Yes it has, to a very big Pensions Co, a few years back. Can't remember the name though...

[url= https://en.wikipedia.org/wiki/The_Equitable_Life_Assurance_Society ]Equitable Life[/url]

That's the fella!

The law has changed since then to prevent it. Bear in mind though that that risk is there for every investment whether bound by a pension wrapper or not.

I reckon you try and save in as many formats as you can. Property or ISA or pension.

Whether you are sble to or not depends on many things. If you are single it's hard to move up the property ladder. If you can combine resources its easier. I'm on about 11 000 a year so there is not much left over for saving.

current pot value worth 12000 saving for about 15 years. Considering buy to let for a decent return.

Thanks Gonefishin but why are people slating them so much? I know several people who haven't retired because their pension didn't perform as promised.
Also is this true, you retire you draw your pension of you die before your wife she then gets 50% if she dies that's it pot gone? If they both died a week after retirement it's all gone up in smoke?

The amount of people that I've heard of who are going to be poor because the company holding their pension went under worries me.

What a load of nonsense.

Currently defined benefit schemes are underwritten by the Pension Protection Fund at 90%.

With Defined Contribution schemes, if they are FSA regulated UK companies, you still own all the investments, which will be spread over 100s of companies (unless you're a fool), so unless they all go bust, you're ok.

The real risk is sticking the money in unregulated bonds or Hedge Funds where you could lose everything, but no pension advisor would recommend this.

248 days till I take my final salary pension. 🙂

Point taken.

Still don't like the idea of not having access to the cash before I'm 55, maybe the NHS goes under and my wife gets ill - I would want that money to pay for the best treatment for her and **** whether I'm going to stave at 70. Maybe over a 40 year period the markets collapse hard, not being able to get at that money quickly and invest it in alternatives to shelter the value bothers me. At the end of the day, I don't trust some big faceless corporate to look after my money over a 50 year period. I'm 28, I've seen a number of market crashes now - what am I going to see over the next fifty years? The fact that defined contributions have tax benefits and the benefit of an employer paying in as well irks me - I want to look after my own financial future - not be paternally goaded into investing in a scheme where that money is kept from me.

There's a lot of myths being banded around here (as to be expected I guess). But a tax free, company contributed pension will give you a better investment out there than most other investments. And most pensions you can even choose where and the amount of investment 'risk' you're willing to take to make better gains.

Me, I don't have a pension, I simply haven't be able to justify one up until now and as such have basically invested into property–whilst keeping my head firmly in the sand. Now, at 38, if I were to put the minimum 4% (+3% company, 1% tax ) into a pension, come 67 I'd be looking at a potential income of about £3500 a year + state pension of about £9k at today's figures. That scares the crap out of me.

The only saving grace is that Mrs E has a public service pension. 😕

I'm 28, I've seen a number of market crashes now

Still don't like the idea of not having access to the cash before I'm 55,

Me neither, so open an S&S ISA and put [i]some[/i] money in there to tide you over between your retirement and age 55 or for long term rainy day money. (Also keep some rainy day money in cash!)

Equitable Life. Very complicated, its older funds where co-mingled so yes you owned assets but also the fund had liabilities ie guaranteed payments to older members and those guarantees where very high. I know as I had some money with them from the 1980's. Got compensation but small relative to fund growth we should have had.

Biggest compelxity imo with pensions is you don't know what the legislation will be when you come to retire, eg cash free lump sum, annuity, can you just take cash etc. Also you are a sitting duck for governments looking to raise money and seeing a "big juicy pot"

As Tom says I would suggest people have a mix of investments inside and outside pension. Also typically people would look at downsizing property or moving to a cheaper area.

Some good stuff mixed in here.

Some of the annuity figures look small but you have to plan to be done with a mortgage, any loans and whatnot by retirement time. i.e. reduce your outgoings a significant amount. Moving to a smaller house or cheaper neck of the woods (remembering you don't have to find work any more) is also an option. Plus there will be some state pension to add on.

Some employer contributions are excellent and can't be sniffed at. My wife's old joint would double her (pre-tax) contributions up to around 7%, which meant she had 21% of salary going in to the pot, and 93% going to her as salary.

I would aim to build up a fund of shares in an ISA (and get one in your partner's name). Despite crashes the stock market long term is where it's at. Take Sound Energy, for example, they have 'potentially' found a gas reserve the size of Belgium. The share has gone up 50% since August 22 and 600% over the year. It looks very much like this story will run and run for at least a year or 18 months. A little flutter on a firm like that could ease your worries about retirement but you'd never get such dramatic returns from a fund or trust. However, IANAFA and WTFDIK.

http://www.malcysblog.com/2016/09/tiptv-ceo-interview-james-parsons-of-sound-energy/

Is it? I'll be retiring at 55.

That's my plan. Currently making 22% contributions. May go - very - part time instead at that point if I'm still alive.

Just as an illustration:

I pay 6% contributions, my company pay 12%. I am a higher rate tax payer, so, for every £100 I earn, my £6 contribution only costs me £4, but £18 goes into my pension pot.

Last year my investments grew by 30%, so my £4 turned into £23. I don't know many hedge funds who could do that!!

Even in a bad year, if the fund fell by 20%, my £4 still turns into £14, so even in a falling market my money still does very well.

Equitable Life. Very complicated

a shame as Equitable and London Life were the only ones using salaried salespeople so they were the only pensions that didn't suffer badly because of the commisions the sales people wouold get out of your fund.

Used to get recommended by Which a lt because of that, I think.

London Life stopped selling pensions as well, then got bought by AMP, passed around a bit and is now with Phoenix Life.

I was a bit late starting with a pension as i wanted to save everything for a house deposit - perhaps not the most efficient long term use of money, but has left me with a relatively small mortgage that i have a realistic chance of paying off by the time i'm 45.

My company match 100% of my contributions up to 5%, so its a bit of a no brainer as no other investment is going to give me what is effectively 100% growth before taking into account any potential growth of the investment fund.

Rainy day fund is in place (although needs moving somewhere more efficient), and starting to look at options to fund early retirement.

elliott-20 - Member
There's a lot of myths being banded around here (as to be expected I guess).

Quick query as there seem to be few clued up people here. How big a pot would I need for 24k a year at age 55?

I'll ask again, Is this true, you retire you draw your pension of you die before your wife she then gets 50% if she dies that's it pot gone? If you both died a week after retirement it's all gone up in smoke? i.e. you could of contributed hundreds of thousands of pounds and your kids see nothing?

[i]Quick query as there seem to be few clued up people here. How big a pot would I need for 24k a year at age 55? [/i]

I'll stab at a million, give or take a hundred grand either way.

@danstw 30% is an outstanding return well above the market norm and the vast majority of hedge funds. Hedge funds today are targetting around 10%. I don't think we can use that as a benchmark for the rest of us.

All I am saying is that in my 35 years of working my external investments in things like property have massively outperformed my pensions. What Tom and I are saying is that you should have both. Also the most significant issue with a pension is your pot buys you a pension with no value at the end, zero. If you have, say, a buy to let property its yielding 5% min today versus equiv 3.5% from an annuity pension and when you die you still have the asset which has almost certainly gone up in value.

If you have a work scheme with employer matching and are paying higher rate tax then a standard pension is a good option but do not discount external investments as they can grow faster and you have much more flexibility

Also fwiw I manage money for various types of clients including pension funds.

That's really interesting. I am 55, but not retiring for another 5 years. Just compared my predicted pension at 60 with what annuity the predicted pot could buy. Even if I exclude having an annuity payment to my partner or guaranteed terms of payments, the pension is way way better...

Mitusminkey, mine will pay my kids till they are 24 if my partner dies. But I think pensions vary so hugely for your question to be very hard to answer.

Also the most significant issue with a pension is your pot buys you a pension with no value at the end, zero.

i.e. you could of contributed hundreds of thousands of pounds and your kids see nothing?

Yes, if you're silly enough to put it all in an annuity.

@br depends if you want it to rise with inflation or be a fixed amount. Probably around £750k today as ultra low interest rates are killing annuity rates as the two are closely linked.

£750k in property would give you £35k+ pa and in 25 years property is probably worth £2m (conservative) and your estate has that money, so ignoring inheritance tax for the moment ...

pension £25k * 25 years £625k
Property £35k * 25 years plus £2m = £2.875m and this is very cinservative as the rent you go up with the property value (so in 25 years by my calc rent would be around £100k pa)

So property outperforms pension pot by nearly 5 times

Now in practice you'd have both, company scheme plus external but it shows why property is such a powerful investment. With hindsight I would have done much less in voluntary payments into my pension

@suburban in practice very limited imo. Pensions are fundamentally based on buying annuities.