Stakeholder pension – is there any point?!

Just received my annual stakeholder statement: the pension pot is 3K less than the 8K (including tax rebate) I saved into it over the last 12 months.

I know that “the value of your investment may go up as well as down” but I can’t help feeling that saving for my own pension (without employer contributions) is a mug’s game!

I think it depends how you choose to invest the money. Losing 40% of what you put in over the course of a year sounds like you have some high volatility areas in your pension pot?

Some schemes give low risk/return options that still give the tax benefits and at least you’re not likely to lose your money.

Also, bear in mind this is a long term investment so you need to look at how the fund has done over the past 5 or 10 years.

Given that the alternative is to not save anything I’d still say yes it is and even with an employer contribution the invetment performance would be just the same. You have to take the long term view on investments like this.

I think most people reach the same uncomfortable conclusion about private pensions whenever we read our annual statements. You ask yourself the same question:

Where did all the money go?

Personally; I’d have been better off if I’d have shoved it under the bed instead. Its no wonder the property market in this country has gone so bonkers! Its a damn site better option than a pension, if you can afford it (most of us obviously can’t).

I suspect that pretty soon the whole pension industry will be exposed in a scandal that will make the banking industries previous little indulgences (PPI miss-selling, libor rate fixing etc) look like a quaint, charming little small-scale little piece of mischief. The sums just don’t add up IMHO. It stinks to high heaven! But someone somewhere is getting very very rich. I think we can probably look to the usual suspects.

Anyway…. If you’re under 45, chances are you’ll never actually get to retire anyway. Unless you fancy living in grinding poverty. We’ll be working til we drop. With the exception of a gilded minority. The kind of retirements our parents are presently enjoying? Forget it! That will soon be but a distant memory. An expensive, never to be repeated experiment that took place for a lucky generation.

I’d wager that a good part of the “lost” £5k is in fees, the pensions administrators are a bunch of charlatans who do nothing for a huge fee.

I can’t help feeling that saving for my own pension (without employer contributions) is a mug’s game!

I thought the same thing. Currently putting mine in an ISA. It isn’t going up much but it isn’t going down either. Also the money is there if I need it at any time. Current vague plan is to take it out at some point and invest in something, probably property (very small property!).

What are you actually invested in? Can’t think of any asset class that has gone down about 30-40% in last 12 months.

If it’s stakeholder fees from the pension provider will be capped at about 1% so that’s not a big contributor (you’ll be paying less than £100 running costs).

Did you arrange it through an IFA or another intermediary and are somehow paying commission or fees to them?

Stakeholder fees are capped at 1%.

There has been a lot of volatility in equities over the last 12 months, so it’s no massive surprise the fund is down a bit. Over the length of the investment (10s of years), equities will always better cash savings, so just stick with it.

What are you actually invested in? Can’t think of any asset class that has gone down about 30-40% in last 12 months.

The pension is with Standard Life and is invested 1/2 in “European Equity” and 1/2 in “UK Equity”. My report doesn’t show details of how these funds have performed – I’ll need to do some digging.

If it’s stakeholder fees from the pension provider will be capped at about 1%

Correct. The fees are 0.8% over the year.

Did you arrange it through an IFA

Yes that’s the case. But the report doesn’t indicate that I’m paying fees to them. Perhaps I’ll ask!

Funds are not too bad:

http://www.hl.co.uk/funds/fund-discounts,-prices–and–factsheets/search-results/s/standard-life-inv-european-equity-income-income-inclusive/charts

http://www.hl.co.uk/funds/fund-discounts,-prices–and–factsheets/search-results/s/standard-life-inv-uk-equity-unconstrained-inst-accumulation/charts

Yes that’s the case. But the report doesn’t indicate that I’m paying fees to them. Perhaps I’ll ask!

You’re not. The funds might be giving them a kickback (paid out of your 0.8%) but they have to declare it to you in the offer letter.

Funds are not too bad:

Looking at those graphs, can’t see how you lost 30% – what period does the statement cover?

what period does the statement cover

Oct 13 to Oct 14

So you’re statement shows number of units bought with prices and dates? Should be easy enough to work out what’s happened.

pensions are long term investments – 30-40 years, so taking a 12month view IMO a bit pointless really

your money has just been used to pay someones bonus in the City, so they can retire at 40 and appear on the next series of Escape to the Country… 😉

your money has just been used to pay someones bonus in the City, so they can retire at 40 and appear on the next series of Escape to the Country

This. Just because the fund lost money doesn’t mean the investment manager shouldn’t get a six figure bonus for his efforts.

You’ll be able to see your money soon. When the fund manager is on Grand Designs talking about the £250,000 windows he’s just had imported from Germany

Oct 13 to Oct 14

Both funds are roughly break even over that period….

I suspect despite what you paid in the value of the fund is greater so although it looks like 30% of the years contributions it actually relates to a smaller percentage of a larger overall fund?

But then what would I know I still don’t have a pension. Currently hammering overpayments into the mortgage as that is saving me interest as opposed to loosing me money in a pension pot.

Personally I’d love some good financial advise, but I’m not convinced such a thing exists!

Personally I’d love some good financial advise, but I’m not convinced such a thing exists!

Pour as much money as you can afford into a pension….

Thanks for all the comments – if nothing else they’ve made me smile 🙂

Clearly I need to stop being so ill-informed and find out how my hard-earned salary is being used!

your money has just been used to pay someones bonus in the City, so they can retire at 40 and appear on the next series of Escape to the Country

As opposed to other schemes where those who won most in the property boom are now taking out everyone’s pensions to retire on.

>Stakeholder fees are capped at 1%.

That’s not good. My employee pension charges 0.35% for the cheapest funds, and there’s a wide choice. In the open market the Fidelity FTSE tracker charges just 0.07%, although there’ll be a platform fee on top of that.

Anyone who doesn’t recognise the value of pensions doesn’t understand them. You pay in, and in return your employer and the govt roughly double it. If you then invest it badly that’s your look out, it doesn’t make pensions a dodgy product!

My employee pension charges 0.35% for the cheapest funds

Hmm not sure about that – well maybe the platform charge is a good chunk extra? Those funds are pretty much trackers I guess? My last company used Aviva and was on their cheapest rates – or so I was told. I compared to HL and they were pretty good overall. I’m now with Interactive Investor for my SIPP though as better for larger funds.

>Hmm not sure about that – well maybe the platform charge is a good chunk extra?

Nope, 0.35% is the lot, and it’s not a tracker. I work for a big blue chip, they can (and do!) drive a hard bargain with their suppliers.

Well that is low but closer to 1% would still be pretty good. Some of mine are over that but chosen for their performance.

Would expect those funds to be about flat (say +/-5%) for that period. Are you definitely comparing your contributions with the value of your fund?

Reason I say that is there will be lots of info on there – for example a projected pension amount. This will assume you pay same amount in for x years and retire at age y, so will generate an estimated fund value and tell you what your annuity might be.

Anyway…. If you’re under 45, chances are you’ll never actually get to retire anyway. Unless you fancy living in grinding poverty. We’ll be working til we drop. With the exception of a gilded minority. The kind of retirements our parents are presently enjoying? Forget it! That will soon be but a distant memory. An expensive, never to be repeated experiment that took place for a lucky generation.

I’m 31. Hoping my defined benefit Civil Service scheme will mean things don’t end up quite that dire.

Hoping my defined benefit Civil Service scheme will mean things don’t end up quite that dire.

I’m sure Osbourne has other plans for you……

This is why we need nice young immigrants – to help our pension pyramid scheme…! I’ve been lucky enough to be able to put a good chunk into my pension so unless the Gov’t works out how to grab some back I’ll be in a better position than most.

If the youth of today ever wake up and start voting, I can’t see the generous tax reliefs which apply to pensions lasting much longer…..

Without the tax reliefs not sure many would bother with pensions at all which would just make things worse; the higher rate relief could go eventually though.

I’m sure Osbourne has other plans for you……

He can’t privatise the entire civil service… I think 😀

It’s looking increasingly like a standard state pension for all won’t exist by the time we retire (I’m 41) so I wouldn’t bail about of a private pension provision if you’re in one. |Don’t forget you get 25% back as soon as you put your post-tax income into a pension, which is better return than a non-pension investment and even a BTL

No but he can close the pension scheme as it’s a bottomless money pit and push up the age you can claim it.

Seems like a pretty poorly managed fund, from memory my last statement was up 16% so my advice would be get some money in a pension early and let the interest do the work.

I was looking though some of my pension stuff last night and one thing jumped out; that while one of my pensions had gained 10% in value the actually assumed pension at 65 had gone down by 5%…

in value the actually assumed pension at 65 had gone down by 5%…

So many unknown variables go into that calculation that it’s not really worth worrying about. Generally as we live longer each year, it’s only going to go down…..

Once we run out of antibiotics and people start dying from minor cuts and grazes, pensions will look a lot better!

I worked backwards from the pot size I think I need when I retire and assumed 7% growth. I wonder how many people have a good idea of their required pot size?

I always thought being at the mercy of annuity flogging sharks was the draw back so the recent changes have made me feel a lot better about my pension pot.
Well that and finding 20k in a forgotten account!

I wonder how many people have a good idea of their required pot size?

http://singletrackworld.com/forum/topic/how-much-could-you-live-on-very-early-retirement-question