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Pension Schemes Surge Back Into Surplus

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The shortlived shortfalls in pension schemes have disappeared. (This will disappoint the moaning minnies, of course, who seem to have enjoyed going on about the problem.)

That's yet another reason why people should avoid entering the totally unsuitable BTL market as an alternative pension provision.

The Independent

p

Edited by patprimer74

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This could be very significant.

All those who are saying properdee is my pension are watch all the crash signals and headline everywhere, then, they see this............could be fun :)

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I'm a trustee of our company's pension scheme, that doesn't make me an expert but it does mean I'm closer to the issues than many. I don't think we're out of the pension woods yet.

1. Don't forget many firms have now closed their pension schemes to new entrants, so improving returns aren't going to help those people. Many will still be tempted to BTL in lieu of a final salary pension scheme.

2. There's no guarantees the stock market will rise higher or even stay at the current level, look at the way the mini Chinese crash in March hit the UK market, and China's now an accident waiting to happen.

3. People are living longer, look at the additional pension fund gap that opened up at Boots recently when they fully factored in longevity.

4. Many schemes have moved funds from equities to bonds, and bonds are suffering from higher interest rates.

For what it's worth I think the BTL market is going to get murdered in the next two years, but if it does or if it doesn't we'll still be left with a huge pension problem in this country. I've got two young children and I've opened pension savings plans for both of them, many would judge that a bit excessive, but the way I look at it it's either that or they'll be working into their 70's.

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I'm a trustee of our company's pension scheme, that doesn't make me an expert but it does mean I'm closer to the issues than many. I don't think we're out of the pension woods yet.

1. Don't forget many firms have now closed their pension schemes to new entrants, so improving returns aren't going to help those people. Many will still be tempted to BTL in lieu of a final salary pension scheme.

2. There's no guarantees the stock market will rise higher or even stay at the current level, look at the way the mini Chinese crash in March hit the UK market, and China's now an accident waiting to happen.

3. People are living longer, look at the additional pension fund gap that opened up at Boots recently when they fully factored in longevity.

4. Many schemes have moved funds from equities to bonds, and bonds are suffering from higher interest rates.

For what it's worth I think the BTL market is going to get murdered in the next two years, but if it does or if it doesn't we'll still be left with a huge pension problem in this country. I've got two young children and I've opened pension savings plans for both of them, many would judge that a bit excessive, but the way I look at it it's either that or they'll be working into their 70's.

I've done the same for my kids, smart move IMO.

My company pension has totally outperformed property since 2002. The deficit was paid-off by the new owners.

I was talking to a guy who "owns" his home in this country and a house in France, his "investment" property. He was repeating the usual pensions disaster mantra, like most people do without looking for themselves, and telling me what a waste of time it was.

When I told him the return I'd seen on the lump sum I stuck in my pension back in 2002 (when the world was telling me not too) he was literally lost for words.

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I've got two young children and I've opened pension savings plans for both of them, many would judge that a bit excessive

Not to any man that appreciates compound interest. ;)

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Not to any man that appreciates compound interest. ;)

I try to put away the family allowance each month, and use this as a savings for my childrens future. If I did not save it I would probably spend it, (on useless rubbish) No I am not rich, and I work hard for the moment, but I live a life where by I don't feel a need to spend/waste money. The less I spend the happier I feel.

Less is most certainly more. ;)

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Guest grumpy-old-man
I'm a trustee of our company's pension scheme, that doesn't make me an expert but it does mean I'm closer to the issues than many. I don't think we're out of the pension woods yet.

1. Don't forget many firms have now closed their pension schemes to new entrants, so improving returns aren't going to help those people. Many will still be tempted to BTL in lieu of a final salary pension scheme.

2. There's no guarantees the stock market will rise higher or even stay at the current level, look at the way the mini Chinese crash in March hit the UK market, and China's now an accident waiting to happen.

3. People are living longer, look at the additional pension fund gap that opened up at Boots recently when they fully factored in longevity.

4. Many schemes have moved funds from equities to bonds, and bonds are suffering from higher interest rates.

For what it's worth I think the BTL market is going to get murdered in the next two years, but if it does or if it doesn't we'll still be left with a huge pension problem in this country. I've got two young children and I've opened pension savings plans for both of them, many would judge that a bit excessive, but the way I look at it it's either that or they'll be working into their 70's.

that's all very well & commendable, but I wouldn't like or rely on any private company giving me money back in 20/30/40 years time.

It's a different world now unfortunatly. :(

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i would worry about any pension scheme that invested heavily in just one asset class - surely they should be more balanced to reduce the impact of market falls?

Proper pension schemes are not invested heavily in one asset class - you're quite correct, it shouldn't be done. But putting your future income in one or more BTLs is.

The best way of ensuring an income in old age is to save a lot of money for a very great number of years (e.g. 20% of salary for 40 years) and then having the funds invested properly and with all influences like longevity considered. That's what pension companies are trained to do. Some people seem to think there's a simpler and cheaper way of doing it - I've never seen it.

p

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...but I wouldn't like or rely on any private company giving me money back in 20/30/40 years time.

I'm not sure what you mean by 'private company' but if by those words you mean a pension trust or an insurance company, then I think that they are about as safe as you'll ever get. The only safer investment you could hold is by direct investment in gilts.

The extreme alternative - BTL in your own name - is about as unsafe as anyone could get because you have no control on this single asset market nor on any future government's legislation. Don't forget that it wasn't so many years ago that very strict controls were introduced for rented property. It's easy to imagine how circumstances could again come about that would drive a government to introduce similar controls. Just listen to the anger amongst the members of this group.

p

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The shortlived shortfalls in pension schemes have disappeared.

Of course we all know what happened the last time that pension funds were showing book "profits" on the back of a toxic wasteland in the equities and debt markets.

Party like it's '99 all over again?

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Of course we all know what happened the last time that pension funds were showing book "profits" on the back of a toxic wasteland in the equities and debt markets.

Party like it's '99 all over again?

Then it's quite simple - stay out of pensions. It's your decision. But make sure you base this very important one on facts - you could be very long retired.

p

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Then it's quite simple - stay out of pensions. It's your decision. But make sure you base this very important one on facts - you could be very long retired.

Indeed. Choice. Facts. And not astroturfing from an industry that on the whole excels mostly at pressure sales to captive audiences ("you could be a long time retired" - please, give us a break...) and not at all at genuine value investment. Pensions and annuities are also completely at risk of the shifting sands of politics - and I strongly suspect, population demographics to boot.

Surely news that the pensions industry is on the up and up is a short term buy signal for pensions providers and an equally strong reduce signal for the underlying product they provide? Sharpen those shears, the sheep are coming.

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I try to put away the family allowance each month, and use this as a savings for my childrens future. If I did not save it I would probably spend it, (on useless rubbish) No I am not rich, and I work hard for the moment, but I live a life where by I don't feel a need to spend/waste money. The less I spend the happier I feel.

Less is most certainly more. ;)

This is a really good idea. I like it :rolleyes: I'm definately going to do this when my kids are born. damn I love this site :rolleyes::rolleyes:

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Surely news that the pensions industry is on the up and up is a short term buy signal for pensions providers and an equally strong reduce signal for the underlying product they provide? Sharpen those shears, the sheep are coming.

christ, not another one who hasn't got fkg clue what they are talking about - do a search for someone called realistbear and post on his threads - the 2 of you will get along just fine

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christ, not another one who hasn't got fkg clue what they are talking about - do a search for someone called realistbear and post on his threads - the 2 of you will get along just fine

Too oblique for you? Or are you so naive that you think that the sharp suited pensions salesmen won't look to turn fears about a turn in the housing market and greed over what's evidently been possible through traditional pensions since the market bottom into product sales? Herd sentiment is being massaged - either profit from this or don't, it's all the same to me.

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Too oblique for you? Or are you so naive that you think that the sharp suited pensions salesmen won't look to turn fears about a turn in the housing market and greed over what's evidently been possible through traditional pensions since the market bottom into product sales? Herd sentiment is being massaged - either profit from this or don't, it's all the same to me.

no, i think you are ignorant as to the pensions industry and how it works, but like to make dramatic sweeping statements in the hope of making yourself sound clever

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ParticleMan,

Explain to us how you plan to provide for your old age. What we're looking for is a guaranteed income, perhaps index linked, between the ages of about 60 and 90. I've told you what I think is necessary i.e. 20% of salary for 40 years into a traditional pension scheme. What do you suggest?

p

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Explain to us how you plan to provide for your old age. What we're looking for is a guaranteed income, perhaps index linked, between the ages of about 60 and 90. I've told you what I think is necessary i.e. 20% of salary for 40 years into a traditional pension scheme. What do you suggest?

part of the problem with pensions is that true cost of even a basic comfortable retirement is only recently becoming evident - i think the figures you suggest are a pretty good guideline but when you actually delve into how much people are paying you find that few pay anywhere near that amount, many pay around 5% and lots pay nothing - people need to be educated that if you want a comfortable retirement you need to pay for it during your working life

btl is popular because the concept behind it is that someone else pays your contribution for you

Edited by the end is nigh

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part of the problem with pensions is that true cost of even a basic comfortable retirement is only recently becoming evident - i think the figures you suggest are a pretty good guideline but when you actually delve into how much people are paying you find that few pay anywhere near that amount, many pay around 5% and lots pay nothing - people need to be educated that if you want a comfortable retirement you need to pay for it during your working life

btl is popular because the concept behind it is that someone else pays your contribution for you

When you say that it has "only recently becoming evident" I think it has always been 'evident' if people cared enough to check. After all, the subject is not rocket science. We can easily see from the financial pages of newspapers how much retirement income a set lump sum e.g. £10,000, gives you. It then doesn't take a degree in Maths to work back from ones 'wished-for' pension figure to see the total lump sum that needs to be built up. Simple tables provide the calculation of how much monthly/annual contributions are needed. Bob's your uncle!

As to the idea that BTL results in someone else making the contributions for you, this could be true. But it's much truer for a standard pension scheme. In addition to ones own contributions, employers usually are prepared to throw in a bit. Then the taxman throws another lot e.g. if you're a 40% taxpayer, it's 66% i.e. £40 for every £60 you put in or if standard 22%, it's £22 for every £78. Then the capital growth is tax free (well, tax deferred). In the meantime, you don't have your fund invested in one single asset. It really is a no-brainer. People who go for BTL as a pension fund haven't a clue.

p

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After all, the subject is not rocket science. We can easily see from the financial pages of newspapers how much retirement income a set lump sum e.g. £10,000, gives you. It then doesn't take a degree in Maths to work back from ones 'wished-for' pension figure to see the total lump sum that needs to be built up. Simple tables provide the calculation of how much monthly/annual contributions are needed. Bob's your uncle!

As to the idea that BTL results in someone else making the contributions for you, this could be true. But it's much truer for a standard pension scheme. In addition to ones own contributions, employers usually are prepared to throw in a bit. Then the taxman throws another lot e.g. if you're a 40% taxpayer, it's 66% i.e. £40 for every £60 you put in or if standard 22%, it's £22 for every £78. Then the capital growth is tax free (well, tax deferred). In the meantime, you don't have your fund invested in one single asset. It really is a no-brainer. People who go for BTL as a pension fund haven't a clue.

p

generally agree with what you are saying, however i should have been more specific in stating where it is only in recent years that the true cost of pensions is becoming apparent, and that is with the life and pensions companies who provide them - one of the issues is the way in which bonuses have been allocated to returns in past years - basically they have been too generous and current retirees are paying for this now - part of the problem with a pension is that you have to buy an annuity with 75% of it and people are having a bit of a shock when they find out what they will get

in terms of looking in the paper to find out how much you need to save, again that isn't strictly true - 10 years ago every £10,000 would have bought you an annuity paying roughly twice what it will now -we can only guess what it will pay in 10 years time

you really do need a degree in maths plus an awful lot of actuarial training to understand the full complexities of it all! :lol:

i think btlrs conveniently forget about the tax advantages pensions give

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ParticleMan,

Explain to us how you plan to provide for your old age. What we're looking for is a guaranteed income, perhaps index linked, between the ages of about 60 and 90. I've told you what I think is necessary i.e. 20% of salary for 40 years into a traditional pension scheme. What do you suggest?

p

A little from column (a) and a little from column (B) - a little balance and a lot of personal ownership in managing personal long term investment goals. Pensions don't cope terribly well with short term or casual employment and this is increasingly prevelant. What also leaves a poor taste is the constant, almost paternal drum of "trust us" coming from this industry when it's quite clear that there have been spectacular fund failures in the recent past and that the stresses to the funds themselves are far from over with the demographic pyramid beginning to invert and that managed fund performance has been largely index pegged (or underperforming) to boot.

For my own old age I have a mix of employer sponsored (money purchase) pension provision - the tax treatment, compounding, and "free lunch" aspect of the employer's contribution make this an obvious pick. However, having being taught to be abrasively cynical by the environment in which I now find myself, I am working under the assumption that there is a sizeable risk of default or renegation or even changes to tax law punishing the prudent still further. So this provision is backed with full use of ISA allowances, individual equity holdings, and cash savings, hedged against some smaller holdings in precious metals and some larger holdings yielding in foreign currency. I do not own a flatscreen tv nor do I own an iPod - basic cashflow management within the household is something I enjoy, as a sport - I'm a higher rate taxpayer and although I recognise my present commitments are minimal and will increase, I've banked a shade under 50% of take-home in savings for each of the past five years in addition.

I live within my committments, present and future, and once the insanity of this decade's HPI is restored will likely as not look to enrich this by starting a family in a house bought outright in cash. In the mean time, I'm perfectly capable of my own research, and just not interested in sales pitches, whatever the intention.

But if you believe some, I haven't got a clue what I'm talking about - so perhaps this is all a pack of cobblers too.

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...I am working under the assumption that there is a sizeable risk of default or renegation or even changes to tax law punishing the prudent still further. So this provision is backed with full use of ISA allowances, individual equity holdings, and cash savings, hedged against some smaller holdings in precious metals and some larger holdings yielding in foreign currency.

So, you're doing very much like a proper pension fund would do, including the risks, but without all the tax benefits and without their expertise. How much worse off do you think you'll be by following this course? Perhaps 30% of eventual income?

p

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