21 Year Pension Performance

CLAPTON

how much have you been contributing over this period?

Jennifer_Jane

'DFC' is 'Debt-Free-Chick' who kindly replied to your posting above.

Jen
x

UnhappyHarry

Jennifer_Jane wrote: »

'DFC' is 'Debt-Free-Chick' who kindly replied to your posting above.

Jen
x

Good job I didn't look it up in Google...:rotfl:

Here was I thinking that this was some regulatory body.

MrChips

Don't underestimate the power of compound interest. To estimate the average return over a period of 40 years to within a couple of percent of the actual figure would be a remarkable feat of prediction. However £1000 invested 40 years ago, would now be worth £7,040 at an average return of 5% p.a. and £14,974 at 7% p.a. (over twice as much!). So even if the projections are marginally inaccurate, the end result can be significantly different.

The moral - keep your investments under review and increase/decrease contributions if it looks like you will fall short of/overshoot your target pension.

UnhappyHarry

Thanks to all for their input, which I'll take on board.

I won't post any further on this, as I feel that the atmosphere is a little bit intimidating, for some reason, which is a shame, as it defeats the purpose of the forum.

Interesting PM I've received, though, which clearly indicates that my views are shared, but won't post as such for the same reason.....

jamesd

Well, not surprising it seems a bit intimidating when those who were confident enough about their points to reply in public said your expectations weren't so good. Doesn't mean anything bad about you personally, just that you were right that you didn't know enough about what to expect.

At the moment we don't know how much you've been putting in to it. Without that information and the current transfer value nobody is in a position to say whether you've done well or badly, whether they are saying it in public or in private and regardless of whether they like pensions or dislike them.

The key thing for you to do is decide whether you think this particular pension has done well or not and if not, change the investments inside it or move the money to another pension that offers a better range of investment options that you can use. If you're not comfortable doing that then you're probably best off seeking the assistance of an IFA.

EdInvestor

UnhappyHarry wrote: »

Back in 1987, I started a personal pension with Scottish Amicable (now Prudential).

Is the money invested in the With-profits fund? How much do you put in and have you increased the contributions to cover inflation over the period?

In 1993, the projected final fund value in 2012 was £55,200 - £105,000.
Last week, a new projection for 2012 was £30,400 - £34,800.

Two things have happened over the period to affect investment returns: one is the fall in inflation.The other is the fall in interest rates/bond yields from double digit to low single digit.. Investment returns would have been projected at something like 7%,9% and 12% in 1993. Now you are talking more like 5%,7% and 9%. Hence the lower projection.

Although I expected a deterioration, to go from a possible pension projection in 1993 of £12,300 pa to last week's possible figure of as low as £1,440 astounds me.

The other major thing that has changed is annuity rates. (An annuity is the pension income you buy with your pension fund). These have been affected by 2 changes - the much lower gilt yields/interest rates mentioned above and the big increase in the number of years people now live. As a result of the latter change, the pension fund has to be spread over far more years, so the annual income has to be lower. (Note however that insurance cos usually project pension income based an index linked annuity with spouse pension, guarantee etc. A plain level annuity will pay out somewhat more. Check here: https://www.fsa.gov.uk/tables (see Pension annuities). You may also be able to get a higher income if your health is sub par.

Is this what I should be expecting?

Post some more info about the pension as above.

If not, what do I do about it?

You should do a full review of all your retirement provision.Get a forecast for your state pensions here: https://www.thepensionservice.gov.uk Do you have other pensions/savings?

What many people have found is that although their pension income looks a lot lower, their house is worth a lot more than they had expected, so they can "trade down" to release funds from the property to top up the pension.Equity release from the home is another potential source of top-up income.source. By 2012 you may find this is am option.

Equally you may need to increase savings and a stocks and shares ISA may be a better bet than a pension for this additional money, as you get to keep the capital and the income is tax free. Planning like this has tax aspects, both before and after you retire.

UnhappyHarry

EdInvestor,

Although I said I wouldn't post further here, I must thank you for your answer, which is more in the spirit of these forums.

Most of the points which you raise, I have covered i.e. mortgage cleared, state pension projection received, big panic a few weeks ago to re-house Kaupthing Edge funds somewhere, annuity rates checked etc., so I'm not relying solely on this pension (good job...!!).

The private pension side is a bit of a mystery to me, and although I understand and appreciate some of the points made by others I'm still pretty unhappy with it and some other associated issues with Amicable/Prudential which I'm raising directly with them.

However, thanks for restoring my faith in the help and assistance which I've found in other forums.

Now I have finished. Many thanks.

EdInvestor

UnhappyHarry wrote: »

The private pension side is a bit of a mystery to me, and although I understand and appreciate some of the points made by others I'm still pretty unhappy with it and some other associated issues with Amicable/Prudential which I'm raising directly with them.

You may also be a victim of the decline and fall of the "With-profits" concept, which is another thing in itself .But without knowing any details, it's hard to make suggestions about what to do. If you are in the WP fund, does it have an MVR exit penalty if you want to leave? Equally, does it have a Guaranteed annuity rate attached if you leave it to maturity?

artha

EdInvestor wrote: »

You may also be a victim of the decline and fall of the "With-profits" concept, which is another thing in itself .But without knowing any details, it's hard to make suggestions about what to do. If you are in the WP fund, does it have an MVR exit penalty if you want to leave? Equally, does it have a Guaranteed annuity rate attached if you leave it to maturity?

Sorry I'm not offering any advice to OP but only sympathy as my AVC contributions (which are being discussed on a seperate thread) have taken a similar tumble over the years. When I started contributing at a similar time to you my annual statements didn'y give any meaningful projections. It was only from 1997 onwards that benefit projections were made. The high end projections (assuming a rate of contribution increase which I tried to keep up with) were for a projected pension of £14,100 (£4,680 at 97 values i.e at 7% inflation)

My most recent statements have been much more guarded. At March 2008 the projection was £1,410 at todays values.

My advice is to take with a pinch of salt any early projections, understand that projections are intended to make you feel comfortable but are only based on crystal ball gazing and that the lowest prediction now regulated by the FSA (?) is probably the the safest prediction. After having said that nothing invested is safe. Am I being too cynical?