Are Pensions Worth It?
Negative interest rate? Interesting! No point contributing if that was the case.
You can find online calculators to do the check yourself, looking at my personal one it suggests you’d have about £1k annual income with a fund of £25k at retirement – but in reality you’ll have a lot more than that assuming in your pot by then. If you want to put down some figures we can see – how much you got now, how old are you, how much do you contribute?
I used to be a pension trustee so I know the subject well enough. I saw this as a remarkable piece of poor quality work by a pension provider. I am concerned that people will make incorrect investment decisions in such a case, which is why I’m looking for answers from the company concerned.Posted 5 years agoBlackhoundSubscriber
I managed to retire at 51 on approximately half pay. I started paying into a final salary pension at 17 and when AVC’s were introduced when in late 20’s I started these as well. Each £1 was matched and I got 20% tax relief on it. I also bought a second house with Mrs B when I was 40 which I got paid off when I was 50.
My best advice is:Posted 5 years ago
* Its all about risk. How much do you want to take.
* Don’t put all your eggs in one basket (I lost some money this way)
* If your pension includes contributed by your employer tahn this is good.
* Look at charges. A cash ISA is not necessarily great onterest but it is 100% safe (if less than £85k in one bank)and there are no charges. Look at effect of charges on other products.
* Look at a share ISA with someone like BestInvest where charges are lower. Where will growth be over next 20-30 years. India? Maybe South America. Get your ISA invested there. I heard China would be the next big thing some years ago and invested there for a few years. I was getting 25 to 32% annual returns for a few years.
On the last one I had a final salary pension, AVC’s, property and cash savings, the share ISA was a small risk.
* You can invest in wine, art etc if you know something about it learn about it or get good advice. Not for me though.thekingisdeadMember
My own view(and unsurprisingly I’m not authorised by the FSA 😀 ) is that unless your employer is also contributing or you’re a higher rate tax payer then you’d have to seriously consider whether a traditional money purchase scheme is worthwhile, the fees, which compound over the life of the pension can be eye watering (10s of thousands).
I’d be looking at a SIPP or a conventional stocks ISA if I wasn’t a higher rate tax payer or benefitting from employer contributions (unfortunately I only benefit from the latter…)
It’s worth noting that for an ordinary rate tax payer the ‘advantage’ of tax free contributions is a bit of a gimmick (that keeps the pension industry alive!) as you pay tax on the income, so think of it as deferred tax.
Dividends from an ISA are tax free, as you’ve already paid tax on the money put in.
Doing some quick sums, 100k in an ISA (not unreasonable to amass over 30 years) specialising in high dividend stocks would give a tax free income. FTSE100 dividend was 3.75% last year, so that’s £3750 tax free income, plus you’ve still got the 100k worth of equities to leave to your kids, which you don’t get when you buy a traditional annuity.
Also as others have said, for the guy thinking he must purchase an annuity by law, look at some of the other options like income drawdown etc. you don’t have to by an income, per se.Posted 5 years agobinnersSubscriber
I was in your situation. Freelance/self employed and paying a serious chunk in pension contributions for years. About 3 years ago, I looked at the statements and concluded that it was a completely pointless exercise paying anything more into it in the present climate. Or for the forseeble future
Just to repeat what I said on the other thread….
Does anyone under the age of 50 seriously believe they’re going to have what is presently taken for granted as ‘a retirement’? Then I think you’re living in cloud cuckoo-land TBH
By the time we reach what is now pension age, the whole concept is going to be regarded as a quaint little late-20th-century anachronism, that was simply mental in its lack of affordability.
There will be no state pension until you’re 86 or so. Then a subsistence level, possibly involving a blanket and some vouchers for soup.
And private pensions? Ha ha ha. I’m just waiting for the biblical scale mis-selling by the banks etc to be exposed, as they collectively shrug and explain that having taken all your money for 40 years, things didn’t quite work out as planned, and there’s not much left. And what was left, we paid ourselves in fees. Then a bit more.
How much return do you think they’re presently getting on ‘our’ investments? Compared to the predictions the private pensions were sold on? Reckon they’ll have stopped taking their fees and bonuses?Posted 5 years agobinnersSubscriber
I think what hasn’t been thought through properly is the impact all these changes are going to have on the wider economy.
How many of those garden centre’s are going be still there once everyone’s spending their twilight years working in B&Q for minimum wage? And what on earth is Tenerife going to look like outside the school holidays? Salford 6, that’s what!
Lake District Tea Rooms? Couch tours of Historic walled cities? Those companies that advertise elasticated slacks in the back of Sunday Supplements? Decimated!!!!Posted 5 years ago
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