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he's doing a presentation this afternoon, about our company pension scheme.
the thing is, i bet over the last few years my pension has performed really sh1ttly. and i want to ask him some questions about just how good our plan is compared to other company plans....but i don't know what questions to ask!
how do i say the words intelligently out of my mouth 🙂
what questions would you ask of the slimy salesman
sorry. i know this is very dull.
Ask him to compare to the performance of a FTSE tracker?
but if the scheme is performing worse than a FTSE tracker, is that a bad thing? or do all pensions gain value slower than a tracker?
should i expect my pension to perform much BETTER than a ftse tracker?
that's the thing, i have no idea what i should be expecting my pension to do
The best question is to ask why you should invest in a pension at all.
The safest return on investment (ROI) will be a building society then property investment is a higher risk but greater reward. If you have a mortgage then don't pay into a pension fund (with all it's charges) just pay off your mortgage.
Excluding final salary, pensions haven't really performed since, well, ermmm ever. The ones sold in the 80's assumed a 10% inflation rate, so all massively underperformed. The ones in the 90's were invested in property and have now underperformed.
All of this is just IMHO as I'm not a qualified Financial Services advisory regulated by blah-de-blah etc...
I'd ask what the fund management charges are and what's the salesman's commission. Performance against the FTSE is a useful indicator of how well managed it is (although not the whole story). Anyone can invest based on the FTSE 100 or whatever so if you're paying a lot of management charges you want it to be performing better than that (at least over 5 or 10 years). A lot also depends on what flexibility you have within the scheme, my pension I can pick and chose what funds to invest the pension but it's more like a private pension that the company matches our contributions in.
Ask him. On a state pension... can you buy back missing years?
Answers may overlap but:
What is the fund invested in?
Why is it invested in these areas as opposed to other sectors?
What macro economic factors are influencing your decisions?
What in your opinion will the effect of the withdrawal of quantative easing be to investment performance?
Ask him if he enjoys his job ?
The pension is far better than a BS account because of the tax breaks!!! if you are a high rate tax payer you get a pound in your pot for evry 60p you spend (effectively) because pension contributions get tax relief. A BS account will never match that. It also grows tax free just like an ISA....but you can invest far more in a pension each year than an ISA. However, a pension is not flexible like a BS account....you can't touch the money until you retire and then you are very limited on how much lump sum you can take.
If you want to save for your retirement a pension scheme is a must IMO, then suppliment that with personal savings if you can/wish to get the added flexibility.
I'd ask about the flexibilty the scheme allows. can you choose what level of risk on the investment you want? Often you can, low, med or high for example. Low risk will be lower return though. Ask if you can top up the pension contributions if you want to (say you get a bonus one year) or reduce/stop contributions if you need to (say the wife demands a new kitchen or a baby arrives). Does the scheme allow you to retire early if yoou choose to? Ask how the money is invested, how the scheme is managed, does the invested pot get moved to low risk, instantly cashable stuff on approach to your predicted retirement? (often it will be, over 5 to 10 years - so a crash like the last 2 years won't kill your whole lifetime's savings 6 months before retirement). Ask what the management fees are perhaps - they may not tell you, not sure if they have to for pensions. Ask for the details of growth rates over the past 20 years. past performance is no guarentee for future performance....but is an indicator IMO.
Listen carefully and have a good think about what you are told. Don't rush and sign anything. If you have more questions in a few days go back and ask (get a contact number today).
I'm lucky - I'm a civil servant with a final salary pension, but I still consider Additional Voluntary Contributions as a pension is a very effective savings mechanism.....and there is no guarentee that the tax break will always be there so investing a few quid now while it is seems worthy of careful consideration.