MSE News: Generation 'not saving for retirement'

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  • wiggerswiggers Forumite
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    dunstonh wrote: »
    You can get 0.2% on pensions now. The days of high charges on pensions are gone. If you still paying high charges then its because you are choosing to do so.

    My employer's DC funds are all around 1%, some significantly higher. I have no choice. And where are these 0.2% pensions?
    If your outgoings exceed your income, your upkeep will be your downfall.
    -- Moe Howard of The Three Stooges explaining economics to brother Curley
  • dunstonhdunstonh Forumite
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    Sorry but I think you come from a biased standpoint especially with career prospects taking a risky turn, but the public are rightfully very wary of "investments", banks bankers and the various associated salesmen.

    I'm sorry your career prospects are taking a risky turn. However, my experience differs totally from what you say. Investors are rightly wary of bankers and salesmen but advisers are not suffering the issues. Indeed, advisers are benefiting from that. People are increasingly looking at quality and choice and taking more interest than they used to.

    I am not biased against one tax wrapper or another. I will use those most suitable. Indeed, its pretty hard to understand how you can accuse someone of a bias on tax wrapper.
    OK you have queried my responses but many of us don't understand what linked funds in fact some of the pensioners that invested in Barclays "safe" portfolio lost more than 40% of their investment.


    They didn't lose more than 40% of their investment. Consumer protection correctly stepped in and put it right. However, none of that was linked to pensions. Barclays were correctly fined for what was an error that a 10 year could have spotted.
    Enough to scare many to "leave well alone".

    You are not comparing like for like in anything so far. Its a bit like seeing a helicopter accident on the news and saying you will never travel in a car again just because the share the fact they are vehicles.
    My employer's DC funds are all around 1%, some significantly higher. I have no choice. And where are these 0.2% pensions?

    Many of the investment platforms offer index tracking funds at 0.1% to 0.4%. External managed funds still cost more (typically around 1.5%)
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • dtsazzadtsazza Forumite
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    wiggers wrote: »
    So they're encouraging us to put more money into pension schemes so they can cream off their extortionate charges for doing !!!!!! all. True you do get a big chunk of tax back, but it immediately starts getting eroded by fees and inflation. Great.
    A "pension" as such is just a tax wrapper. It's not compulsory to put your pension money into a managed investment fund - if you find the charges extortionate, you can hold your money in cash inside a pension and still get the tax rebate (so invest £800 and your pension contains £1000).

    The reason why this is so rare (to the extent that you presumably weren't aware of it) is that even with the "extortionate" charges, the return from investments is greater in the long-term than the return from cash. Even if management fees were some 3%, a fund that returned 8% growth compared to 3% for cash would still be worth investing in.

    All that really matter is the relative, net (post-fees etc.) yields. If cash pays better than funds - fees, then keep your pension in cash. Otherwise, you're cutting off your nose to spite your face if you take a smaller return just to avoid fees.

    Perhaps more importantly, a pension is a tax-friendly wrapper where your money is automatically worth 25% (or more) extra due to tax rebates. No matter what kind of financial instrument you choose to invest your retirement savings in, you should do it in a pension where possible to benefit from the tax incentives.

    Now if you'd phrased your post as "some managed funds offer mediocre returns for high fees", then I'd agree with you. But this is just an incitive to - as with everything in life - shop around for the best deal, rather than going with whatever your bank pointed you to.
    Loopgames wrote: »
    The pension industry is set up to make money from you - if you find you actually make money from your investment - woohoo - that's a bonus. You'll be lucky to get the same value of your money (taking account inflation).
    Ditto as above. It's not an excuse to spend it all now and be destitute in retirement, you just need to choose your investments properly. And there are many pensions that let you select your own funds from a wide range, with the standard AMCs for those funds.
    wiggers wrote: »
    My employer's DC funds are all around 1%, some significantly higher. I have no choice. And where are these 0.2% pensions?
    That is unfortunate. If your employer is contributing to the pension, then that's just the downside to getting an immediate 100% boost to your contributions. Stick with it for the free money, and if/when you leave that job (i.e. your employer stops contributing) move the pension to a better provider with a wider range of investments. (I'm currently in this situation, and that's what I intend to do).

    Oh, and even if you don't move, don't sweat it too much. It'll take over 86 years before the extra 0.8% charges completely erode the free money from your employer, so unless retirement age increases dramatically over the next few decades, you'll always be better off even with the higher charges.
  • GeegeesGeegees Forumite
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    There are people in low paid posts who cannot afford to save. They rarely go out, they buy food and clothes from discount stores, don't have holidays, don't run a car and live one week at a time. A major purchase like a pair of shoes can easily topple them into debt.
  • LoopgamesLoopgames Forumite
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    Thrugelmir wrote: »
    What's fundamentally changing is acturial life expectancy tables. With longevity comes additional cost as the available pool of funding is spread more thinly.

    There is no other solution than to save more in some form or another.

    This point of view puts everyone in some kind of pool system whereby like insurance you have to all put money in a pension pot so that you prop up the system to hopefully pay you in the future at some point assuming economic parameters are generally the same or better.

    What really is happening is that financial institutions encourage today's young people to 'save for tomorrow' to really pay for today's pensioners.

    There are many other ways to invest your money and ways in which you control that money 100% of the time. But we aren't educated to understand how this works because it doesn't help the financial sector benefitting from your money.

    So all this talk about generation not saving it's just about not saving into their funds. Imho of course:D

    Also some families look after their elders as part of the culture. This is the best way to plan for the future. Although it's become a foreign concept to expect family to support you - easier to expect a foreign institution to support you in your old age than your nearest and dearest. Talk about topsy turvy world.
  • atypicalatypical Forumite
    1.3K Posts
    Peston makes some good points in his recent blog about the incoming opt-out pension scheme:

    "But what concerns some is that employers, who will decide what to offer their staff, will have a choice between Nest and literally any other pension scheme available, subject to almost no regulations or restrictions imposed by government ... since pensions are complicated products, it may also lead unscrupulous financial firms to design pension schemes where the true costs and risks are hidden."
  • ThrugelmirThrugelmir Forumite
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    atypical wrote: »
    Peston makes some good points in his recent blog about the incoming opt-out pension scheme:

    Hopefully a "Richard Branson" style individual will step forward to challenge and transform the industry. Providing a simple cost effective no frills scheme for the majority.
    Real insurance claim quote : -

    "Going to work at 7am this morning I drove out of my drive straight into a bus. The bus was 5 minutes early.".
  • dunstonhdunstonh Forumite
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    Thrugelmir wrote: »
    Hopefully a "Richard Branson" style individual will step forward to challenge and transform the industry. Providing a simple cost effective no frills scheme for the majority.

    You would think that but the Virgin stakeholder pension which has been available for 10 years now is pretty much one of the worst stakeholder pensions going.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Loughton_MonkeyLoughton_Monkey Forumite
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    The headline here is not 'news'. Just a statement of what most of us understand as the obvious.

    Just as 'obvious' is the selection of so-called 'excuses' to be found above. It's really a bit of a vicious circle isn't it? When the majority of a whole generation do not understand that their excuses don't make sense, then it is this very ignorance causes them not to save.

    The [financial] facts of life have not changed for hundreds of years.

    1. It is 'possible' to live on £10K a year [or the equivalent over time].
    2. It is equally possible to live on £150K a year.
    3. Thus it is possible to live on any figure in between.
    4. For most people, let us assume they have little choice as to where within this income spectrum they lie, but it is absolutely 100% their own choice as to what sort of lifestyle they live. Whether it is greed, ignorance, lack of education, belief that they will win the lottery... I don't know, but the majority of this generation is choosing to live up to their income. Most of previous generations chose not to. Yes. It really is that simple.

    I believe that people who spend 100% (or more) of their income - consistently - are at best a little bit naive and unthinking. The sooner they understand the message the better.

    However, those people who understand and realise they are doing this, but nevertheless come up with [what to them seems] a 'valid' excuse are, in my view, on the verge of requiring some form of psychiatric treatment. Inheritance or lottery wins apart, the only 'valid' excuse is "I am happy to live in retirement on the state pension alone."
  • ThrugelmirThrugelmir Forumite
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    dunstonh wrote: »
    You would think that but the Virgin stakeholder pension which has been available for 10 years now is pretty much one of the worst stakeholder pensions going.

    Virgin as a brand lost its sheen a while back. As with most entrepreneurs the early ideas are normally the best and create the money to invest with. Thereafter its maximising on image.
    Real insurance claim quote : -

    "Going to work at 7am this morning I drove out of my drive straight into a bus. The bus was 5 minutes early.".
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