Advice for first time pension planner

jem16

mickflynn39 wrote: »

This is well worth a watch. http://www.youtube.com/watch?v=gajTHiHW8iA&NR=1

Only if you believe the rubbish being served up.

Some of your earlier points have been valid but now you are just using sensationalistic news reports that will give people the completely wrong idea about pensions.

Both of your links have been well discussed on here.

The Dutch pension - https://forums.moneysavingexpert.com/discussion/2645481

Panorama programme - https://forums.moneysavingexpert.com/discussion/2771172

Even the contributors to the programme have hit out at the way it was presented.

http://www.moneymarketing.co.uk/1019690.article?cmpid=MME01&cmptype=newsletter

mickflynn39

Only if you believe the rubbish being served up.

Some of your earlier points have been valid but now you are just using sensationalistic news reports that will give people the completely wrong idea about pensions.

I don't mean to be sensationalist and I didn't realise that the issues had been discussed thoroughly before. All I'm trying to do is point out that the TER is not the whole story and there are hidden charges that need to be taken into account. This is a point that most people seem to disagree with me on. I was just trying to back up my case. I also doubt that Panorama would have got their report 100% wrong. For example the point that the shares get traded a lot more than they used to can be a hidden cost that the unsuspecting can get caught out by.

jem16

mickflynn39 wrote: »

I don't mean to be sensationalist and I didn't realise that the issues had been discussed thoroughly before.

Perhaps a search first would have helped.

All I'm trying to do is point out that the TER is not the whole story and there are hidden charges that need to be taken into account. This is a point that most people seem to disagree with me on.

Nobody is disputing that charges have to be taken into account, hidden or otherwise. Although as all pension illustrations contain a section for reduction in yield which shows the effect that charges would have on the growth I would hardly call them hidden.

However charges cannot be taken in isolation from performance and it is totally useless to simply look at the highest charging.

I was just trying to back up my case.

Then back it up with serious and realistic information rather than sensationalistic media reports that concentrate on the worst case scenarios.

I also doubt that Panorama would have got their report 100% wrong. For example the point that the shares get traded a lot more than they used to can be a hidden cost that the unsuspecting can get caught out by.

No they probably didn't get it 100% wrong but the bit that was wrong is what will catch those supposed "unsuspecting" out. There were numerous posts on this forum following that Panorama report that proves that the only point most took from it was the pensions have very high charges and should be avoided.

People have to take more responsibility for their pensions and not simply just stick some money in and forget about them. Jane in the link you gave has put £25pm in for 20 years - what exactly was she expecting to get back?

dunstonh

I also doubt that Panorama would have got their report 100% wrong.

It wasnt 100% wrong. However, they made a number of errors. Some of which were very very basic. Others actually had nothing to do with 2010 issues or even anything to do with UK pension provision. e.g. Eq life was a legacy issue. Dodgy Qrops transfers are done by overseas companies, not UK companies. Worst of all was taking future money terms (in respect of total charges) and presenting them in todays money terms. If you pay £80,000 of charges over 40 years then that is not £80,000 in todays money. Yet that is how it was presented and then compared to the total premiums over the term. That last one did the most damage yet the calculation was totally wrong.

mickflynn39

Perhaps a search first would have helped.

Panorama has an excellent name for unbiased reporting so you would not assume that a search would be required to check out one of their programmes. Hindsight is a wonderful thing.

mickflynn39

Nobody is disputing that charges have to be taken into account, hidden or otherwise. Although as all pension illustrations contain a section for reduction in yield which shows the effect that charges would have on the growth I would hardly call them hidden.

However charges cannot be taken in isolation from performance and it is totally useless to simply look at the highest charging.

I disagree. There can be hidden charges. The annual management charge or TER is not always the full story as some pension providers would have you believe. Performance is important but not past performance as they would have you believe. No-one can predict the future so starting with a fund with low charges is not a bad place to start. 80% of actively managed funds (therefore more expensive) fail to beat index tracker funds.

dunstonh

Panorama has an excellent name for unbiased reporting so you would not assume that a search would be required to check out one of their programmes. Hindsight is a wonderful thing.

Panorama used to have an excellent name for unbiased reporting. For a number of years though it has been dumbed down and made a number of errors in the name of sensationalist reporting. Not just in financial services but in many other areas.

80% of actively managed funds (therefore more expensive) fail to beat index tracker funds.

That is also a myth that isnt correct. Just go and check the UK All companies sector and look where the index trackers are. They are all around mid table. So, if they beat 80% of active managed funds, how is it that around 50% of the funds perform better? If you eliminate passive managed funds (which are a waste of money) then the active managed funds do even better.

The annual management charge or TER is not always the full story as some pension providers would have you believe.

I have never seen a provider make any such suggestion.

mickflynn39

That is also a myth that isnt correct. Just go and check the UK All companies sector and look where the index trackers are. They are all around mid table. So, if they beat 80% of active managed funds, how is it that around 50% of the funds perform better? If you eliminate passive managed funds (which are a waste of money) then the active managed funds do even better.

What you say is correct at this moment in time. My 80% is over the long term not the short term.

mickflynn39

I have never seen a provider make any such suggestion.

They like to imply that the annual management charge or TER is the whole story. It's called being economical with the truth. They put all the onus on you to be clued up and ask the relevant questions hoping that most people will be naive so they can get away with hidden charges.

mickflynn39

£100pm in your 20s can get you over £10k a year pension in todays terms. £100pm at 45 (in todays money) will get you around £1500 a year pension.

Dunstonh, you accuse me of posting myths. The one above is the biggest myth of the lot. I put my rose tinted glasses on and used the Financial Times pensions calculator. I made the following assumptions.
1. The fund would grow by 5% a year (4% is nearer the mark and over the last 10 years it's been less than half of that).
2. None of the fund would be converted into a tax free lump sum.
3. My age was 25 and I would retire at 65.
4. I wanted a pension of £15,000 which would increase in value by 3% per year to counteract inflation.
5. My contributions were to rise in line with inflation.
6. Inflation assumed to be 2.5%.
7. No spouse or dependent's pension.

Using the following management charges which included all hidden charges (don't forget I've got my rose tinted glasses on) the contributions required were as follows:

2.0% £767 per month (includes tax relief)
1.5% £690 per month (includes tax relief)
1.0% £620 per month (includes tax relief)
0.5% £555 per month (includes tax relief)

I rest my case. Just for a laugh I would appreciate it if you could provide a breakdown of the fantasyland figures you quoted.