Pension or bank account

novice-saver

jaydh wrote: »

Thanks for the advice. What happens if it zig zags down when I come to draw money from the pension? Thats what im worried about, at least with a bank its safer...

IMHO.

Provided the fund managers know when you're planning to retire, I'd expect them to alter the profile of your "portfolio" in the last few years leading to retirement, so that an increasingly large portion is in lower risk investment.

In the early years a large portion will be (relatively) high risk (potentially high return).

Managed that way you shouldn't get caught too badly by a drop in the market, but still have a good return.

jamesd

jaydh, yes, you'll have options about where to put it. Ask your pensions/payroll people who to ask and they should be able to tell you who can tell you more.

When you're investing in the pension you should be smiling at times like those we're having now because they mean that prices are lower than average. Buy cheap and sell high is good. It's only bad news for those who need to sell to retire and dunstonh has written a bit about how that should be handled.

dunstonh

Provided the fund managers know when you're planning to retire, I'd expect them to alter the profile of your "portfolio" in the last few years leading to retirement, so that an increasingly large portion is in lower risk investment.

That isnt the job of the fund manager and its not within their remit. If you invest in a UK growth fund then the fund manager has to invest in the UK stockmarket. It is your job to choose your investments or the job of your IFA (tied agents cant as its not their remit either). Also, fund managers arent going to know when you are planning to retire.

jaydh

Great advice people, thanks.

Think I should call Friends Provident and find out what my money is being put into and the current risk level to check its not minimal.

bendix

jaydh . . with the greatest of respect, I think what you really need to do is read about pensions and investments and truly understand them. Your current knowledge seems basic, and that is perhaps overstating it.

Your pension arrangements are without doubt the single most important financial issue you will face in life. If you don't get to grips with them when you are relatively young, you are effectively condemning yourself to a VERY miserable last third of your life.

I can't express it any more starkly than that.

dunstonh

If you are in your 20s then just 2% a year difference in performance could double your pension in retirement. So, it is important to look at the investments and understand what they are doing and what potential they have and how volatile they could be in short term and if its better to have a proper rebalancing portfolio or be in the jack of all trades managed fund or a random selection (hit and hope) or another defined strategy of sorts.

bendix

yeah, i agree with whatever dunstonh just said.

EdInvestor

dunstonh wrote: »

That isnt the job of the fund manager and its not within their remit. If you invest in a UK growth fund then the fund manager has to invest in the UK stockmarket. It is your job to choose your investments or the job of your IFA (tied agents cant as its not their remit either). Also, fund managers arent going to know when you are planning to retire.

Many people don't realise this of course.

They aren't aware they have to manage their investments themselves or get an IFA to do it ( and even those who get an IFA often are,n't aware that they have to pay extra to have their investments monitored over time.)

It is no wonder given this fog of ignorance that people are shocked when they discover, often too late to fix the problem, that their pensions will pay out much less than they expected.

With the kind of pensions we have these days, there is basically no escape from managing your money yourself.Thus IMHO you might as well face up to the fact, learn the basics, get a SIPP and do the job properly, saving your self money on advice fees en route.

dunstonh

It is no wonder given this fog of ignorance that people are shocked when they discover, often too late to fix the problem, that their pensions will pay out much less than they expected.

Most common reason for shortfall is because they started paying £20 in 1988 and never bothered to increase it. Unrealistic contributions coupled with obsolete plans are probably the two biggest issues.

However, what you say above doesnt really correspond with your next sentence

With the kind of pensions we have these days, there is basically no escape from managing your money yourself.Thus IMHO you might as well face up to the fact, learn the basics, get a SIPP and do the job properly, saving your self money on advice fees en route.

if they were not capable of understanding the need to get their investments reviewed and updated in a personal pension (or stakeholder) then how is moving into the more expensive SIPP with far more ways of making mistakes going to help them?

Whether its stakeholder, personal pension or SIPP doesnt matter really. That part is just access to increasing numbers of investments. Its the fact that you review it that matters.

Jennifer_Jane

Agree with EdInvestor. More and more these days, people have to take responsibility for their own pensions/investments, etc. This is one of the reasons why I did the Financial Planning Certificate.

What might be good, however, is if there were some short or night school courses which might help people learn about things. We have people at work who don't understand that they should be monitoring their pensions, but just complain that the pensions are no good.

Perhaps this would also give people more confidence in talking with their Financial Advisors, too, if they understood things a bit more.

Edit: agree with Dunstonh too, of course, he had posted whilst I was still typing.

Jen
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