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sealaw2000

Is There Any Point Getting A Pension

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Just wanting to canvass opinion.

Are pensions actually worth it? I mean ok, you get a tax break when you pay in, but then you pay tax on your income when you actually take your pension, and the majority of the pension needs to be "invested" in notoriously bad value annuities. Given that pensions are really inflexible (ie the contributor cannot get his hands on the money paid in until retirement at 55 [is this right by the way]) then do the disadvantages outweigh the advantages? Surely it makes more sense to just put it all in an ISA...no cash break on paying in, but not taxed on gains, and totally flexible. Any thoughts?

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if you ever go bankrupt etc the money in your pension is safe.

if you have it all in an ISA it is not safe & you would have to use it all before you started recieving any handouts.

Probably wise to have a mixture of both.

If annuities put you off take a larger lump sum at retirement and invest it wisely, purchasing a smaller annuity.

Top Tip: drink & smoke heavily and you will recieve a larger pension payout each year. Cant figure out why though :blink:

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You get tax relief on the way in, tax free growth, and 25% of the fund tax free at retirement.

And when you're being taxed on the other 75% through an annuity it's when you're presumably not earning much / at all so the tax you pay is likely to be basic rate (whereas you may have gotten higher rate relief when contributing.

Pensions make really good sense if you're a higher rate tax payer, or if your employer is also contributing, or if you want to save large amounts that couldn't go into an ISA.

If you just want to save a couple of hundred a month though there's an arguement for sticking it in ISAs. Just don't be tempted to dip into it.

Just my opinion BTW.

Top Tip: drink & smoke heavily and you will recieve a larger pension payout each year. Cant figure out why though :blink:

It's because the annuity provider has to guarantee to pay you the fixed amount for life.

If you have a fund at retirement of say £100,000 and you are 65 and male you may live for another 17 years. The 100k has to buy income for that time so a calculation is run and the provider works out how much you'll get per year.

If you are 65 but a heavy smoker and drinker you'll possibly only live for another 7 or 8 years, so your 100k will buy a much higher income per year. The provider knows it's likely they won't have to pay out for long.

I've made all the numbers above up so don't have a go if they don't stand up to scrutiny.

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It's because the annuity provider has to guarantee to pay you the fixed amount for life.

If you have a fund at retirement of say £100,000 and you are 65 and male you may live for another 17 years. The 100k has to buy income for that time so a calculation is run and the provider works out how much you'll get per year.

If you are 65 but a heavy smoker and drinker you'll possibly only live for another 7 or 8 years, so your 100k will buy a much higher income per year. The provider knows it's likely they won't have to pay out for long.

I've made all the numbers above up so don't have a go if they don't stand up to scrutiny.

How do they know you drink or smoke?

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I stopped smoking last year but ever told the doctor so I when i ask for a pension i'll state i'm a long term smoker.

I planned this (for the pension) years ago. I just hope there aren't genetic tests by the time I retire as I come from a long lived familly and they'd cut my pension very quickly.

On a side note my only pension concern (10% chance) is a collapse of the fiat money system rendering my pension worthless so I plan to put away 5% in Gold and hopefully later 25% in property (I'll buy something later).

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The pensions industry is going to need a massive overhaul if it wishes to see my money again.

There is a long list of people who are continuously taking slices out of your pension pie. The Chancellor takes a slice when you cash it in and whenever he feels like it - remember his £4bn raid a few years ago when he decided to tax fund dividends? The so-called financial advisor who sold it to you gets his comission - this could be up front and or for the life of the pension. I'm not sure which I find worse. The pension fund manager needs his annual bonus for investing it so wisely (dripping sarcasm here.) Oh, and of course the shareholders in the pensions company need their slice too.

Tax free savings? What a joke! It's safer under your mattress - at least there you only have termites and inflation to worry about - and you can spray for termites. IMHO pensions are theft. I can fully understand why BTL is such a popular alternative, albeit more of a risk. It makes me ill whenever I hear the blatant lobbying of the pension industry. "People aren't saving enough for retirement - the government should compel people to invest in a pension." Stop stealing my hard earned cash and I'll consider it!

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The pensions industry is going to need a massive overhaul if it wishes to see my money again.

There is a long list of people who are continuously taking slices out of your pension pie. The Chancellor takes a slice when you cash it in and whenever he feels like it - remember his £4bn raid a few years ago when he decided to tax fund dividends? The so-called financial advisor who sold it to you gets his comission - this could be up front and or for the life of the pension. I'm not sure which I find worse. The pension fund manager needs his annual bonus for investing it so wisely (dripping sarcasm here.) Oh, and of course the shareholders in the pensions company need their slice too.

Tax free savings? What a joke! It's safer under your mattress - at least there you only have termites and inflation to worry about - and you can spray for termites. IMHO pensions are theft. I can fully understand why BTL is such a popular alternative, albeit more of a risk. It makes me ill whenever I hear the blatant lobbying of the pension industry. "People aren't saving enough for retirement - the government should compel people to invest in a pension." Stop stealing my hard earned cash and I'll consider it!

The Chancellor did impact negatively on pensions when he removed the rebate on tax on dividends, but it's in the governments interests to make pensions attractive so I wouldn't have thought there would be much more negative action from them.

You don't have to take out a pension through a financial adviser, you can buy one "off the shelf" from many outlets and get a saving on what would have been paid out as commission - often reflected as a reduced management charge.

If money is going to be invested, you'd expect there to be a charge for that. Charges are typically less than 1% of the fund value, good value really especially as it's in their interests to do well for you (1% of a higher amount earns them more money). If you want to do it yourself you can through a SIPP, but I'd leave it to the professionals if I were you.

Insurance companies take years to make money on Stakeholder pensions these days, do you expect all the paperwork, brochures, staff set up costs, system design and maintenance to be free? Pensions are really loss leaders, drawing mass market attention to the company so they can sell Investments and Protection to the same clients.

In summary, not having a pension and instead keeping your money under the mattress (where inflation can erode it, pikeys can steal it and mice can eat it) is daft. If you actually believe that then I'd recommend not increasing your post count of '1'.

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The Chancellor did impact negatively on pensions when he removed the rebate on tax on dividends, but it's in the governments interests to make pensions attractive so I wouldn't have thought there would be much more negative action from them.

No, it's in the government's interest to (1.) stay in power and (2.) tax the voter as much as possible but not so that (1.) is compromised. I do not share your faith in this government or any other government, for that matter.

If money is going to be invested, you'd expect there to be a charge for that. Charges are typically less than 1% of the fund value, good value really especially as it's in their interests to do well for you (1% of a higher amount earns them more money). If you want to do it yourself you can through a SIPP, but I'd leave it to the professionals if I were you.

Sure, pay peanuts and get monkeys but I do not share your faith in "their interests" either. In good times or in bad - they still take their 1%. As long as you keep contributing that's going to be a 1% slice of a bigger pie every year.

Insurance companies take years to make money on Stakeholder pensions these days, do you expect all the paperwork, brochures, staff set up costs, system design and maintenance to be free?

Nope, refer to previous comment on monkeys. What I do object to are fund managers getting their bonuses (in good times and bad) when it is widely known that 80% of them consistently under-perform the market anyway. In the light of this how on earth can they justify the charges for the transfer of a pension to (one hopes) a better performing provider?

In summary, not having a pension and instead keeping your money under the mattress (where inflation can erode it, pikeys can steal it and mice can eat it) is daft. If you actually believe that then I'd recommend not increasing your post count of '1'.

No, I do not really believe that keeping money under the mattress is a good idea (and this should bring my post count to 2.) What I do believe is that pensions are a massive rip-off. The final salary schemes that our parents retired on have pretty much all been retired themselves. Unless, of course, you are lucky enough to work for the civil service and can take comfort in the knowledge that your final salary scheme will be paid in perpetuity by the unending revenue stream derived from my taxes.

The final salary pensions of yesteryear have been shown to be little better than pyramid schemes, paid for by the contributions of the new joiners. That they are no longer on offer is just an acknowledgment of this. Instead, we have the defined contribution scheme. The risks have been transferred from the fund and the employer to the employee. This is not necessarily a bad thing. It should decrease the number of those pyramid schemes going bust and leaving their members with little or no pension at all.

The move to DC schemes has shown the pensions industry for what it is - a massive rip-off. Too expensive for little benefit. Keep your hands off of my pie while I'm trying to grow it. For that matter, just keep your hands off my pie.

Edited by montyduke

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No, it's in the government's interest to (1.) stay in power and (2.) tax the voter as much as possible but not so that (1.) is compromised. I do not share your faith in this government or any other government, for that matter.

If the government doesn't make pensions attractive they foot the bill for state pensions / benefits which wouldn't be required if people had made their own provision. Economically it's in their interest. I see your point about the current govt. only caring about getting to the next term, obviously we can only agree to disagree.

Sure, pay peanuts and get monkeys but I do not share your faith in "their interests" either. In good times or in bad - they still take their 1%. As long as you keep contributing that's going to be a 1% slice of a bigger pie every year.

Fund managers (and people generally) are motivated by money, so I don't see the logic in your point. If I could take 1% of a fund and had the power to invest that fund I'd sure as hell do my upmost to make it grow as much as possible. That's before you add in the incentives that they get for being "top quartile", "best in sector" etc. It is absolutely in their interests to do as well as they can, which is better for all of us. You seem to think they sit back and do nothing every year?

Nope, refer to previous comment on monkeys. What I do object to are fund managers getting their bonuses (in good times and bad) when it is widely known that 80% of them consistently under-perform the market anyway. In the light of this how on earth can they justify the charges for the transfer of a pension to (one hopes) a better performing provider?

Most modern day pensions have no penalty for transferring. You're right that old ones did, perhaps these new terms are part of the overhaul you desire. With regards to your "80%" comment I'd simply quote Vic Reeves: "73% of statistics are made up on the spot." Some fund managers do underperform. Part of a financial advisers job if you have one (I'm sure you don't) is to keep track of your funds and suggest switches. If they do this effectively they can earn you several more percent per year, this justifies the 0.5% they may be paid.

No, I do not really believe that keeping money under the mattress is a good idea (and this should bring my post count to 2.) What I do believe is that pensions are a massive rip-off. The final salary schemes that our parents retired on have pretty much all been retired themselves. Unless, of course, you are lucky enough to work for the civil service and can take comfort in the knowledge that your final salary scheme will be paid in perpetuity by the unending revenue stream derived from my taxes.

Firstly, an apology for the post count comment, it was unnecessary. However with regards to the final salary schemes, it's demographics which make them not viable. I agree wholeheartedly that they should be canned for civil service members as well. The fundamental problem with pensions is peoples unrealistic expectation of when they can retire and on how much income. That doesn't mean that the pensions system is unjust.

I would be interested to know what alternative provision you're making. By that I don't mean specifics, I just mean it would be interesting to compare the growth potential you're getting with your current "pension" provision versus that of an average pension fund.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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