Pensions - Are They Really Worth Having?

dunstonh

Now the fashion has changed and we are told it is better to invest in the same stuff but separately :rolleyes:

Its not fashion. Its common sense which has come from experience and quite a lot of hindsight. How many of those bog standard managed funds are diversified enough?

Eh? Gordon Brown has destroyed the UK financially? Could have fooled me ( have you checked how much your house is worth lately)?

The stockmarket started to recover in April 2003 when the war with Iraq started and has been doing very well ever since.By contrast the US market is flat.

You have shown one asset class, property, that has boomed in price. In 7 years, my house price has doubled. As it happens, my investment portfolio has doubled in the last 2 years. Which is better? Neither indicate much when taken in isolation like that.

You like quoting articles ed. So here are a few for you:
http://www.moneyweek.com/article/366/investing/markets/market-underperformance-brown.html
http://www.thisismoney.co.uk/news/special-report/article.html?in_article_id=394418&in_page_id=108
http://www.adamsmith.org/blog/archives/001096.php

al_yrpal

dunstonh wrote:

As it happens, my investment portfolio has doubled in the last 2 years.

Whats your hourly rate?

dunstonh

al_yrpal wrote:

Whats your hourly rate?

£150per hour. However, its not been rocket science. Its just picking from a diverse spread as possible and not being afraid to include emerging markets from across the world. I'm weighted overall to medium/high risk but i still have corporate bonds, gilts and property in there as well. I do a lot of rebalancing (take the gains out of the ones that go up and put them into the ones that go down). That accounts for quite a lot.

EdInvestor

And don’t count on a rebound any time soon, says Anthony Hilton in the Evening Standard. The pension funds’ move out of equities is only just beginning, tougher solvency standards for life insurers imply further downward pressure, and tax policy is still putting off savers. Brown is a major reason why the cult of equity in Britain has been “all but destroyed”.

This is a bit of a giggle.The "Cult of the Equity" was invented by actuaries at company pension funds and life insurers. It stated that it was perfectly OK to invest the vast majority of all the pension funds in the land in equities.This despite the fact that all pension funds have fixed liabilities and guarantees to pay out pensions to members.In the case of the life companies, their version of the cult was to invest most of the free assets in the With profits fund in the stockmarket - so the collapse of the Cult impacted on endowments too.

The net effect of this appalling blunder was that when the markets crashed in 2001-02, big black holes appeared in company pension funds and With profits funds - with the latter impacting on the solvency of the life companies.This meant the life companies were forced to sell more shares and buy bonds - and so before too long we had a major downward spiral in the stockmarket, with the whole thing feeding on itself.

The FSA eventually called a halt to this collapse by allowing the insurers to breach their solvency guidelines for a while to stop the downward spiral. But much of the money that left the market has not come back , because the insurers have been required to leave it in bonds, so at least the basics of people's savings are now safe (you can rely on your guaranteed sum assured but it's bye bye terminal bonus).

The Cult of the Equity was a thoroughly irresponsible idea which has ruined quite a lot of people's retirements: it was unique to the UK and this is is the main structural reason our market has underperformed other countries.

Nothing to do with Gordon Brown.

littld

al_yrpal wrote:

What a negative view - you have been reading the newspapers! That is because you are a 'lazy' investor (an investor is what you are if you have a pension). You cannot expect any investment to make money if you just leave it (that is what saving does, but at an abysmal rate of appreciation). The only way to make money grow is to work it, and that means moving it from where it's losing from time to time to where things are growing . From bitter experience I know that too many people (including me at one time) are either too busy, or too lazy to work with their money - that doesn't work. If your'e too busy consult a good IFA, if your'e too lazy get off yer butt!

The majority of benefit from an IFA seems to be to sue them when their advice goes wrong! Seriously, though, I appreciate I am being a bit negative. I don't think I am lazy - I'm actively seeking advice through this forum for a start.

I don't base my opinion on newspapers at all. I am not seeing the funds I am invested in growing. In today's climate, assuming things will improve (on the stockmarket) is just a bit too optimistic.

I'm not expecting a great rate of return, I just don't want to lose even more. As I said, I don't think I'm lazy, just want to protect what I invest. The benefits of the reliance on equities seems to have been for the City, advisors and fund managers, not the investors.

al_yrpal

I'm not expecting a great rate of return, I just don't want to lose even more. As I said, I don't think I'm lazy, just want to protect what I invest. The benefits of the reliance on equities seems to have been for the City, advisors and fund managers, not the investors.

Have a look at what sectors of funds are doing well here - https://www.trustnet.com - go to databases/unit trusts and Oeics/ima sectors. This will help identify growing sectors, and from that likely funds that have done consistently well in the last few years, enabling you to make some better decisions as to where and what to concentrate on. The secret is to look at your investments performance regularly, and take a little bit of interest in the world of business, then you can win. No-one has to confine investments to the UK. The detailed fund descriptions contain risk factors, so you can choose the level of risk you are comfortable with. You know investments can go down, so set about making yours go up!

deemy2004

netlang wrote:

A while back I decided to take control of some investments I did some research into 6 companies and put £500 of shares into each company. Also, as a little game I put £500 into 6 different phantom shares that I did not do any research on whatsoever (just liked the sound of the name).

As of this morning the real shares are showing -19.32 %
As of this morning the phantom shares are showing 67.46 %

What I am trying to show here is that I received professional advice on what and where to invest and it has not done very well. I took matters into my own hands and carefully researched and invested and did even worse. I picked some companies I liked the sound of but knew nothing about and they have done very well. So does this mean If I was wealthy and had loads of money to invest without any worries I would be even wealthier. Or maybe I am just unlucky.

It means avoid individual stocks and instead look for some good investment trusts ... hmmmm... like British empire securities ... wow now thats a price chart i LOVE !

Eventhough we had a stock market bear market - you have to have a portfolio of stocks ..... okay investment trusts if for nothing more than bragging rights of how much theyve gone up month on month... like what house owners used to say about their house prices rising by more than thier monthly salary

ReportInvestor

dunstonh wrote:

Yes it is. Old rule of thumb is that every 5 years you delay your contributions, you have to double the contribution that you could have done 5 years earlier to receive the same benefit. ie. £50pm at 20 ,£100pm at 25, £200pm at 30, £400pm at 35, £800pm at 40.

In the interests of site accuracy, could dh please acknowledge that this IFA "old rule of thumb" is wrong and misleading?

The thread soon got swamped with other arguments after I contradicted it on page 2.

dunstonh

ReportInvestor wrote:

In the interests of site accuracy, could dh please acknowledge that this IFA "old rule of thumb" is wrong and misleading?

The thread soon got swamped with other arguments after I contradicted it on page 2.

It's not an old IFA rule of thumb. I recall seeing marketing sheets from tied providers stating that circa 1995. Its one of those generalisations that you hear like taking your age and halving it to get a ballpark percentage.

It certainly is not misleading as its intention is still very valid. However, in these days of single digit returns (as average), its less accurate than it was n the days of double digit returns. Of course, those of us still getting double digit returns could argue that its still accurate

ReportInvestor

Thanks for your partial clarification, dh.

dunstonh wrote:

It certainly is not misleading as its intention is still very valid.

That's a non-sequitor.

dunstonh wrote:

Of course, those of us still getting double digit returns could argue that it's still accurate

But the prospect of double digit returns for two to four decades is not something that you, or any IFA, would ever formally offer to your clients.