Pensions - BBC take - Is there any hope?

Loughton_Monkey

Earlier today, while sipping my usual very large gin & tonic, I found myself browsing the BBC News website during some ghastly adverts.

As you would expect, the grand 'old hat' [sorry 'News'] about Public Sector Pensions grabs a few of the headlines.

In particular, I was drawn to the BBC's own 'guide' to pensions, and more specifically to the "Your Views" section.

http://www.bbc.co.uk/news/business-11938045

The purpose of highlighting this is twofold.

(a) So you can (like me) get exasperated and be glad that you will be long in your grave well before today's youngsters retire.

and

(b) So that you may prepare your own very diplomatic, helpful and constructive responses to these people once they decide to post the same observations on this forum. [Although this is mainly in the case of Bendix]

Here's my very favourite collection from the BBC's own selection'.

I had a work-place pension, almost 50% of my contributions went in fees. I will not pay in any more - what is the point in lining someone else's pockets? I'm 30 now and honestly believe that by the time my generation does get to retire the state pension will be dead. Private pensions, irrespective of provider, do not provide even close to the promised return and companies have repeatedly raped their pension funds. Mac, Marlow

I have advised my sons not to contribute to a pension plan because they will lose control over their own money. I have contributed to one since I was 28 and it has been a complete waste of money. The pension companies have taken huge management fees while investing unwisely. Even when the value of my pension was falling there was nothing I could do to save it - the money would have been better off in a building society. Angela Smith, Annan, Dumfriesshire

Why would an intelligent person invest money in a fund over which they have no control yet, in doing so, give ultimate control to the political whims of whatever government happens to be in power at the time - and which is likely to change with time? Chris, Wiltshire

And I think my favourite of all...

I still have not started a pension and I am 36. To be honest isn't that what National Insurance is for? If not then why do we pay it? I would like all the money I have put into NI to be used for me. Wayne Martin, Tilbury, Essex

Who says that Britain has 'lost the plot'?

hugheskevi

Talking of BBC and pensions, I happened to glance at their guide about how to get started with a pension

Bear in mind the tone of this is pitched at those without any knowledge of pensions. This is one of the Q+A:

So, do I have to sort all this [pension] out myself?

Yes, at the moment you have to do most of the legwork.

No mention of an IFA or helpful links, or even discussion of the merits or otherwise of taking a pension from a high street bank. Just a totally unhelp answer that would surely dissuade most who knew nothing of pensions in to looking any further :think:

FLAPJACK

The quotes displayed really show the apathy out there...

One instance I had of "Trying" to advocate the usefulness of paying into a FS scheme to someone in their mid 20's (with a new 85k interest only mortgage!) and had just got the p/w from the pension scheme which was a statement for her to sign saying that she didn't want to be enrolled in the scheme!!.

After trying to tell her how important it was to JOIN the scheme the answer I got was...."Do I really look old enough to worry about a Pension"?? So I tried another tack...."What savings vehicle do you have to pay back your mortgage?" Answer: What? I'm paying it back each month...you think I'm thick or something??. But do you pay into anything else connected with the Mortgage... NO was the answer.
Obviously someone did a good job on her selling her that mortgage ( I can only hope she must have had an endowment....or would they let her go on her way without a savings vehicle?).

Her final comment really summed up the era (mid 90's) "Anyway the place will have doubled in price when I sell it"....I don't think a 2 bed terrace in a dodgy part (still) of Manchester would ever get to the heady heights of 170k.

And now look whats happened to the market.....love to meet her in 25 years time. I felt for her though as she was old enough to be my daughter.

So it's no surprise to read the comments of today.

I reckon anyone with an ounce of sense should show their kids this site to show just how people can get themselves in such dire straits ......not always of their own making either. And how quickly the finance industry turn on them ruining their lives for a considerable time.There must be a few "heartless" people in the finance sector who sign people up knowing disaster is awaiting, but of course they have sales targets to meet havent they.

Ok someone will say "They signed up for the card/loan/mortgage etc so they are at fault"... to a degree yes but it's not entirely their fault if they are not savvy enough to understand what they are getting themselves into. But the person the other side of the desk IS (thats their job)...it's like giving a 5 year old a box of matches then wondering why he burnt the house down.....he didn't know any better!.

casey_junior

[QUOTE=Loughton Monkey;41888774

In particular, I was drawn to the BBC's own 'guide' to pensions, and more specifically to the "Your Views" section.

http://www.bbc.co.uk/news/business-11938045

The purpose of highlighting this is twofold.

(a) So you can (like me) get exasperated and be glad that you will be long in your grave well before today's youngsters retire.

[/QUOTE]

It's good to see someone in the finance sector has empathy with those who have caught on to the failings of the pension sellers.

dunstonh

Who says that Britain has 'lost the plot'?

its clear from those comments that people just dont have a clue and rather than learn and understand, they decide to make decisions that will see them lose a fortune based on bad information.

had a work-place pension, almost 50% of my contributions went in fees.

No such beast exists. The Mac from Marlow is basically wrecking his retirement based on false information.

Loughton_Monkey

had a work-place pension, almost 50% of my contributions went in fees.

Curiously, imagine someone lucky enough to have bought 100 shares in Microsoft 25 years ago. My understanding is they would have cost you $2,100. If you sold them today, you would have received 9 stock splits and the combined value of your shares would be $750,000.

So if my stockbroker had charged me $2,100 to maintain and ultimately sell these shares, would I be right to scream blue murder about having been ripped off to the tune of 100% of my investment? Even the three fading OAP's on "Rip Off Britain" wouldn't even fall for that one!

dunstonh

Can you imagine what people would say if savings accounts had to explicitly show the net interest margin (the charges)?

jamesd

"had a work-place pension, almost 50% of my contributions went in fees."

dunstonh wrote: »

No such beast exists. The Mac from Marlow is basically wrecking his retirement based on false information.

All money purchase pensions are such beasts. Pension pot of £100,000 with say 1.5% in annual charge = £1,500 a year in charges, so 100% of the contributions are going in fees for contributions of £125 a month and 50% in charges for contributions of £250 a month.

dunstonh wrote: »

Can you imagine what people would say if savings accounts had to explicitly show the net interest margin (the charges)?

It's not a savings account but for the median loan size and approximate current A* 36 month market loan rate, Zopa is taking about 35%* of all of the money paid by borrowers on their loans, leaving investors who are putting their money at risk with 65% of the pie.

Some of that shows up on their loan illustration, which gives an APR of 9.1% and underlying rate of 6.4%. From the 6.4% comes a 1% Zopa fee and 0.5% estimated bad debt plus tax on that estimated bad debt if it happens, all taxable (the bad debt is deducted after tax except for those lending as a business).

*median loan size around £3,500, £130 revenue when it's sold (added to amount borrowed), 1% ongoing lender fee if it's paid over three years is about £55 (mean balance at 7% is around £1827 over the three years, 1% on that times three is £55). Total interest paid £405, lender gets £350, Zopa gets £55 so Zopa's total cut is £185 and 34.5% of all revenue from the loan before bad debt goes to Zopa. Bad debt allowance is 0.5% a year in the A*36 market, £9 total over the three years at average balance. Expected gross-equivalent interest after bad debt for a basic rate tax payer drops to £338 and the Zopa cut rises to 35%. Early repayments are common and increase the cut that Zopa gets, higher interest rates, including in higher rate markets, decrease it.

jem16

jamesd wrote: »

"had a work-place pension, almost 50% of my contributions went in fees."All money purchase pensions are such beasts. Pension pot of £100,000 with say 1.5% in annual charge = £1,500 a year in charges, so 100% of the contributions are going in fees for contributions of £125 a month and 50% in charges for contributions of £250 a month.

Yes but on a £125pm contribution (assuming no increase for ease of calculation) it will take around 25 years to get to that stage and 18 years on the £250pm contribution.

It seems rather unikely that a 30 yr old would be paying 50% of his contributions in fees.

moonrakerz

Loughton_Monkey wrote: »

Curiously, imagine someone lucky enough to have bought 100 shares in Microsoft 25 years ago. My understanding is they would have cost you $2,100. If you sold them today, ................... the combined value of your shares would be $750,000.

If you had bought shares in Barclays Bank 5 years ago; today, including 5 years of dividends being added, they are now worth 53% of what you paid for them -

BUT, the man in charge of this amazing company just pocketed over £20 Million, in salary, bonuses and matured share options for being one of the best "bankers" (I was tempted !!!) on the planet - funny old world, ain't it ????