Just how worthless are our pensions?
Discussion
I received my annual pension statement yesterday and was shocked to read that the estimated amount I would receive upon retirement (in today's terms)is down by nearly 70% from 12 months ago!
I have been paying into this together with company contributions for 13 years now and assuming I am lucky enough to live 20 years into retirement, if things continue as they are, I will see roughly half the money back that has been paid in!
Suffice to say the miniscule amount received each month will not even be enough to pay just for food. I knew pensions had suffered greatly, but how can things be going so badly that they are losing my money hand over fist as time goes on? I'd be better off just not paying in and saving the money.
I should add that the pension management is monitored by my company (a global consultancy with 17,000 staff), but no alarm bells have been ringing!
I will be speaking to someone on Monday, but I'm absolutely shocked by the situation.
I have been paying into this together with company contributions for 13 years now and assuming I am lucky enough to live 20 years into retirement, if things continue as they are, I will see roughly half the money back that has been paid in!
Suffice to say the miniscule amount received each month will not even be enough to pay just for food. I knew pensions had suffered greatly, but how can things be going so badly that they are losing my money hand over fist as time goes on? I'd be better off just not paying in and saving the money.
I should add that the pension management is monitored by my company (a global consultancy with 17,000 staff), but no alarm bells have been ringing!
I will be speaking to someone on Monday, but I'm absolutely shocked by the situation.
Defined contribution pensions (which this sounds like it is) that are invested in reasonable funds should have done well over the last few years and certainly shouldn't have dropped over the last 12 months... my fund (not what it is worth as a pension) has gone up by about 7%.
The pension you get from such a fund is based on the Annuity/Gilt rate - which has also gone up over that period.
In summary then, this sounds like a mistake or a misreading of what it is telling you... difficult to tell without seeing the details...
The pension you get from such a fund is based on the Annuity/Gilt rate - which has also gone up over that period.
In summary then, this sounds like a mistake or a misreading of what it is telling you... difficult to tell without seeing the details...
Well last year's statement noted I would receive about £5500 per annum (which is still a pittance) and this year its estimated at around £1500 per annum. I'd really struggle to live on the higher figure I know, but the revised figure wouldn't buy a cardboard box!
I opted out of SERPS many years back and money was paid into that by the government, but I froze that pension when I went to university. Need to get some professional advice I think.
I opted out of SERPS many years back and money was paid into that by the government, but I froze that pension when I went to university. Need to get some professional advice I think.
58warren said:
Well last year's statement noted I would receive about £5500 per annum (which is still a pittance) and this year its estimated at around £1500 per annum. I'd really struggle to live on the higher figure I know, but the revised figure wouldn't buy a cardboard box!
I opted out of SERPS many years back and money was paid into that by the government, but I froze that pension when I went to university. Need to get some professional advice I think.
With those two figures above, I suspect that you have misunderstood your two statements.I opted out of SERPS many years back and money was paid into that by the government, but I froze that pension when I went to university. Need to get some professional advice I think.
Might be best to get some professional advice.
Warren,
The way that pension information was laid out changed in April, due to new regulations. They now offer a FAR more pessimistic worse case scenario - is this the case here?
http://www.ftadviser.com/2014/05/07/pensions/advis...
The way that pension information was laid out changed in April, due to new regulations. They now offer a FAR more pessimistic worse case scenario - is this the case here?
http://www.ftadviser.com/2014/05/07/pensions/advis...
That's like saying 'without wheels and gears, a car is a total waste of money'. The quid pro quo for a pension always was tax relief in return for long term commitment, and setting aside money for the future never was a bad thing. If tax relief goes (as it might).. if we all end up saving via some form of super ISA anyway, but it doesn't mean that the principle of the pension was/is bad though.
Sure, there are bad pensions but there are good ones as well!
Sure, there are bad pensions but there are good ones as well!
Tonker,
I've been listening to a lot of fund managers and economists these past few weeks, getting a steer (or trying to). I don't want to invest my clients money and wealth for the benefit of the next 6+ months, rather, the next 6+ years.
In the bigger sense, the state wants quick access to as much money as possible, it needs it - it needs it to fund its insatiable appetite for wasting and spending it. It doesn't want money invested in long term bonds and it doesn't want it linked to gilt yields and volatile markets either because it trusts itself less than we are likely to trust it, and that's saying something. A bird in the hand is worth two in the bush.
The state wants it sloshing around and liquid to spend and be available.. why.. just what is Osborne's real motivation? He is doing it because he wants to divide and rule, not the people in this particular sense, but rather investment houses, life companies, fund managers. He might want to reduce the impact that these players have on carefully considered global markets, we've seen how the tail can wag the dog.
Let's consider the psychology of man and the scars that the past decade have left on mature savers. Given that people don't trust 'those bankers', and taking into account the fact that the average DC pot is conveniently under the new £30,000 threshold, what will folk do with their fund? They'll probably cash it in and put it into one of the conveniently timed State Retirement Bonds. It will ensure a ready supply of cash that George can dip into - in effect, will it be so far removed from a Gilt?
George is sticking one on the life companies in an unprecedented way. And his assertion that 'the people' should be trusted is politics at its worse, playing to bass emotions. This is, at best, the next big miss selling scandal for the financial services sector and possibly the one event that we'll look back on as when politics finally crossed into the realms of party self interest completely transcending the need for state or 'corporate' responsibility.
Let's not forget either, that if people have instant access to sufficient wealth, they can't claim state help in old age. And it also means that more money is exposed to Inheritance Tax. We have seen in this budget how HMRC is slowly being given more power over individuals in respect of countering tax evasion - that insidious creep into involving itself with more grass roots subjects is not so much an unintended consequence, rather, a natural evolution.
Pension providers are being offered an olive branch with the 'duty' they will have to offer face to face guidance, another slap in the eye for the adviser community. It will pour oil over troubled corporate waters at the expense of advisers, who, let's face it, act like scalded cats trying to be herded anyway.
This budget is not about that, it isn't about the equalisation of social mobility and retention of personal choice. It isn't about repaying people's faith - whether or not intended, this budget is about the state effectively carving up, annexing and silencing all opposition, and the long term centralisation and consolidation of control and wealth.
This budget is a lesson by Eton grandees in strategic political thinking that would leave Brutus gasping. I wonder too, how this might play out to the surly Celts north of the border in the run up to self imposed annexation and as for the 'opposition', Ed Milliband could divert an earthbound meteor, cure AIDS, solve global warming, consign famine to history, create a Middle Eastern love in.. and he'd still be treated like an idiot.
I've been listening to a lot of fund managers and economists these past few weeks, getting a steer (or trying to). I don't want to invest my clients money and wealth for the benefit of the next 6+ months, rather, the next 6+ years.
In the bigger sense, the state wants quick access to as much money as possible, it needs it - it needs it to fund its insatiable appetite for wasting and spending it. It doesn't want money invested in long term bonds and it doesn't want it linked to gilt yields and volatile markets either because it trusts itself less than we are likely to trust it, and that's saying something. A bird in the hand is worth two in the bush.
The state wants it sloshing around and liquid to spend and be available.. why.. just what is Osborne's real motivation? He is doing it because he wants to divide and rule, not the people in this particular sense, but rather investment houses, life companies, fund managers. He might want to reduce the impact that these players have on carefully considered global markets, we've seen how the tail can wag the dog.
Let's consider the psychology of man and the scars that the past decade have left on mature savers. Given that people don't trust 'those bankers', and taking into account the fact that the average DC pot is conveniently under the new £30,000 threshold, what will folk do with their fund? They'll probably cash it in and put it into one of the conveniently timed State Retirement Bonds. It will ensure a ready supply of cash that George can dip into - in effect, will it be so far removed from a Gilt?
George is sticking one on the life companies in an unprecedented way. And his assertion that 'the people' should be trusted is politics at its worse, playing to bass emotions. This is, at best, the next big miss selling scandal for the financial services sector and possibly the one event that we'll look back on as when politics finally crossed into the realms of party self interest completely transcending the need for state or 'corporate' responsibility.
Let's not forget either, that if people have instant access to sufficient wealth, they can't claim state help in old age. And it also means that more money is exposed to Inheritance Tax. We have seen in this budget how HMRC is slowly being given more power over individuals in respect of countering tax evasion - that insidious creep into involving itself with more grass roots subjects is not so much an unintended consequence, rather, a natural evolution.
Pension providers are being offered an olive branch with the 'duty' they will have to offer face to face guidance, another slap in the eye for the adviser community. It will pour oil over troubled corporate waters at the expense of advisers, who, let's face it, act like scalded cats trying to be herded anyway.
This budget is not about that, it isn't about the equalisation of social mobility and retention of personal choice. It isn't about repaying people's faith - whether or not intended, this budget is about the state effectively carving up, annexing and silencing all opposition, and the long term centralisation and consolidation of control and wealth.
This budget is a lesson by Eton grandees in strategic political thinking that would leave Brutus gasping. I wonder too, how this might play out to the surly Celts north of the border in the run up to self imposed annexation and as for the 'opposition', Ed Milliband could divert an earthbound meteor, cure AIDS, solve global warming, consign famine to history, create a Middle Eastern love in.. and he'd still be treated like an idiot.
Ginge R said:
Warren,
The way that pension information was laid out changed in April, due to new regulations. They now offer a FAR more pessimistic worse case scenario - is this the case here?
http://www.ftadviser.com/2014/05/07/pensions/advis...
Thanks, that would explain a lot! The way that pension information was laid out changed in April, due to new regulations. They now offer a FAR more pessimistic worse case scenario - is this the case here?
http://www.ftadviser.com/2014/05/07/pensions/advis...
Ginge R said:
Lots of nonsense.
Maybe it is a reaction to the fact that we have a pensions mechanism that isn't working right now because of the issues this thread is about. Maybe it's all due to the fact that pretty much anyone not in the pensions industry looks at the kind of return you get from pension schemes like this and, actuarial backup or not, they still come out as bad deals.The problem with pensions as they stand now is that people won't and don't want to pay into them because for all the tax breaks they look like bad deals. What is needed is a regime that does provide a basis for saving, one that does encourage people to take part and one where you don't feel that you are paying money into something you can't and never will be able to control what happens to your money.
The current annuity mechanism has been dead on its feet for some years, it's good that the Chancellor has recognised it and reacted to it.
Ginge R said:
Deep stuff
Very interesting, thanks. I thought of forwarding it to a couple of people I know in the industry but then thought 'no, because they will take only their industry's view and cannot/will not see the big picture'.I have been out-cyniced and that means you must be right
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