MSE News: Pension timebomb warning as Govt unveils saving scheme

lemontart

great save for old age - no worries of course as I am already in the position where I do not earn enough to cover my bills and am doing two jobs just to try and stand still and stop the slide further into debt I would like to know how I am supposed to conjure money up to do this or what else I have to give up as already skip meals, have no heating as cannot afford to run even if I could afford to get repaired,

dunstonh

I'm sure we all agree that what is needed is a high profile media campaign by the government to spread the word to those who can't understand the 200 odd page pension reform document!!

Its not really news though is it. The only new bit of information is the change in product name.

Hopefully the general election campaign might lead to more info being released.

Conservatives have talked about abolishing it before it even starts.

On that note I read in one news article that things might not be up and running until 2017? Does anyone know what that refers to? I currently work for a small company (4 employees) and no chance of a company pension. I am currently building up savings in cash and a stocks & shares ISA with a view to dumping a lump sum into my 'NEST' in 2012. Don't want to wait until 2017!!

It was first proposed back in the 90s. However, it kept on getting watered down and we ended up with stakeholders. Then some years back, it got revived and was meant to start in 2010. Then that was put back to 2012. Now it wont fully be in until 2017.

All but one of the companies that was interested in dealing with the administration have pulled out. The one company left hasnt committed themselves yet either. So, there could be further delays.

It is hoped that most companies that do start schemes will not use the Govt scheme as its not as attractive as using a personal pension.

cw18

I hope this scheme gives better returns that the old Stakeholders scheme....

We looked into that one when my DH took voluntary redundancy (as it was possible for me to pay into it for him, even though he wasn't working), but the forecasted pension (granted he was in his mid-40's) meant it wasn't worth it. In the end I put the money into a company AVC scheme (in my name).

dunstonh

I hope this scheme gives better returns that the old Stakeholders scheme....

It wont be any different. This scheme and stakeholders dont have any returns (positive or negative). What you invest in does that. The Govt scheme will only have 3 investment options. Most stakeholders have around 10-40. personal pensions have around 100-1500 investment options.

We looked into that one when my DH took voluntary redundancy (as it was possible for me to pay into it for him, even though he wasn't working), but the forecasted pension (granted he was in his mid-40's) meant it wasn't worth it. In the end I put the money into a company AVC scheme (in my name).

An AVC is virtually identical to a stakeholder. Indeed, with a couple of exceptions, the stakeholder is usually more flexible and has a better investment choice and often cheaper. That is why AVCs are largely obsolete nowadays.

cw18

Our AVC scheme seemed (and still does, though I can't pay in any more as I don't work there) quite a good scheme. I compared it to private ones (where I'd have to pay charges - didn't have to in the company one), and also past performance against some other company ones I could get the info on (where friends were members) - and it was definitely a better option.

dunstonh

. I compared it to private ones (where I'd have to pay charges - didn't have to in the company one),

I have never come across a scheme where there are no charges. For that to happen, the employer would have to pay them. Whilst that is technically possible, it would be extremely rare.

Who is paying for all the administration on the investments etc?

It is possible that the charges existed but were implicit (hidden) and not explicit (disclosed).

and also past performance against some other company ones I could get the info on (where friends were members) - and it was definitely a better option.

That is not exactly reliable though is it. The number of times I have heard people say their scheme is good (when it isnt) or bad (when its not) is staggering. Most of the time, people have obtained their info from friends or colleagues who themselves got their info from other friends and colleagues who dont understand it themselves but jumped to conclusions.

Opinions come into play as well. As an example, look at the following:

two people have identical pensions and both are invested in the same fund (say 100% UK equity). Both are inexperienced investors. One invested before a 43% stockmarket crash and saw their value drop by 43%. The other invested after the 43% stockmarket crash and saw their value double in the following 5 years.

The first one ends up thinking their pension is bad. The other thinks its brilliant. Yet they both have same pension and same investments. Both have different opinions though.

In reality, it has nothing to do with the pension as that is just a container You could have an Aviva pension invested in Asia thats made three times more than the same Aviva pension invested in UK equity in exactly the same period. Its the same pension. Just different investments. The one that didnt do as well is not bad. Its just invested differently (and with a different risk level).

When you make an analysis of the different options, you should never rely on other's opinions. Facts are the best way.

cw18

The company pays them - my employer was a financial company, so I guess that would make it more feasible for them to offer it as a 'perk' in the scheme

When comparing I used the official blurb from the schemes, that gets sent out with statements. I never rely on word of mouth alone for investements.

ozzage

Compulsory pensions ("superannuation") were brought in many years ago in Australia.

Like here, most Australians didn't know much or care much about pensions and retirement planning when they were young. I'm sure they still don't. When I left uni it was the last thing I was thinking about.

My employer had a scheme, I joined it, opted for the highest risk option because I thought it was cool, and forgot about it. That was in 1994.

I left Australia in 2004 not really having considered it since, although they sent me statements every year. Then I lost track when I left the country.

I looked into things a while back and found that I had AUD $20K in my Aussie pension fund.. and this was post-crash and with an expensive pension provider who'd been charging me massive inactivity fees since 2004! I've since moved it to a much better provider and if I'd done that sooner I would have had much more now but I can say this without any reservation:

WITHOUT A COMPULSORY PENSION SCHEME I WOULD HAVE HAD ZERO RETIREMENT SAVINGS

I can't rate the idea highly enough and can't believe it's taking so long to get introduced here! Of course I wish I'd paid more attention, made higher voluntary contributions at the time etc etc but the whole point is that although at the time I didn't know/care, I now have a little pot which has twenty years to grow further. I've since taken charge of my finances here but this scheme is of most value to those who wouldn't/couldn't do it independently.

jamesd

It's no more compulsory than the stakeholder pension option.

There are two compulsory pension schemes in the UK: basic state pension and second state pension, that's somewhat earnings-related, a link that's gradually declining to make it flat rate.

There also used to be a compulsion on firms with more than a small number of employees to offer a stakeholder pension if they didn't offer anything else. Employees could choose to opt in to that while for this new one they need to choose to opt out. Opt out because many people do nothing if asked to opt in so it's a subtle form of pressure to be included.

ozzage

But isn't it GOING TO BECOME compulsory? I thought that was the whole point?

edit: I see you can opt-out which I find rather stupid. In Australia you could also choose to administer your own somehow but I never looked into it, but you had to have SOMETHING.

I wonder if employers are going to quietly encourage people to opt out to avoid paying their share!