Debate House Prices
In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non MoneySaving matters are no longer permitted. This includes wider debates about general house prices, the economy and politics. As a result, we have taken the decision to keep this board permanently closed, but it remains viewable for users who may find some useful information in it. Thank you for your understanding.
We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
Pension returns.
HAMISH_MCTAVISH
Posts: 28,592 Forumite
IN the other thread, there were some numbers given about pension returns that I thought looked incredibly optimistic.
The reality it seems is a tad different.
So the average real return for the last decade was just 1.7%.
The average real return for the last 50 years was just 4.7%.
That seems pretty crap for a product that is supposed to have all these great tax advantages.....
Can somebody less sceptical about pensions than me please explain why this is such a great deal?
The reality it seems is a tad different.
http://www.pensionfundsonline.co.uk/articles/growthnews.aspxfour years of negative returns over the past decade mean that the real returns during the period have averaged only 1.7% a year, well below the long-term average real return of 4.3% a year over the past half century.”
So the average real return for the last decade was just 1.7%.
The average real return for the last 50 years was just 4.7%.
That seems pretty crap for a product that is supposed to have all these great tax advantages.....
Can somebody less sceptical about pensions than me please explain why this is such a great deal?
“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”
0
Comments
-
Is it still light up there in Aberdeen?0
-
I don't think they are a great deal Hamish. I have been looking at pensions quite a lot recently and the conclusion I have come to is that rather than a 'great deal' for many it is a 'necessary' deal. Most people need them as an insurance against living a long time with a low income (if your savings depreciated).
As I recently started work as a university lecturer I have access to a decent pension scheme which offers the option to buy additional pension top ups. I could buy an additional £5,400 of pension top up for a net cost of £40,066 (£66,744 gross). I carried out a simlple spreadsheet appraisal based upon simply putting that cash into a savings account (paying 5% now and going up eventually to 6.5%, when rates return to normal). I chose a savings account as it's easy to assess, obviously there would be other options too, but it's more about testing the value of the pension option at the moment than identifying what the exact alternative is. The break even point when my pension catches up with the savings account is when I am 87 years old (I am 53 now and probably plan to retire about 65). I did allow for the fact that I could (and would) take a 25% tax free lump sum on retirement.
That to me just looked ok, but nothing special (after all I may not reach 87 and if I do It might be not much beyond that), but perhaps I am missing something? If I am someone please enlighten me. Because we are going to have plenty of money anyway in our retirement, insurance against pension poverty is not an issue to us. So I am struggling to see the value in buying this additional pension top up, it doesn't seem to stand out as an exceptional investment to me. But perhaps I am wrong, I am willing to listen if anyone has any vaild contribution.Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop0 -
shortchanged wrote: »Is it still light up there in Aberdeen?
It's a glorious sunrise at the moment. Very pretty.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
chucknorris wrote: »I don't think they are a great deal Hamish. I have been looking at pensions quite a lot recently and the conclusion I have come to is that rather than a 'great deal' for many it is a 'necessary' deal. Most people need them as an insurance against living a long time with a low income (if your savings depreciated).
Yeah, that's where I'm at with them at the moment. Insurance, but not to be counted on to provide a decent retirement.
If it wasn't for the company contribution, I wouldn't bother.
Still willing to be open minded, but I don't see that they're particularly safe, or particularly good performers.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »Yeah, that's where I'm at with them at the moment. Insurance, but not to be counted on to provide a decent retirement.
If it wasn't for the company contribution, I wouldn't bother.
Still willing to be open minded, but I don't see that they're particularly safe, or particularly good performers.
Yes I agree, the scheme I am in is very good with the employer contribution, it's fantastic value, but as the top up option doesn't have any employer contribution I am struggling to see the value.
I'm going to post this on the pensions forum to see if anyone can flag up something wrong with my take on this.Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop0 -
chucknorris wrote: »Yes I agree, the scheme I am in is very good with the employer contribution, it's fantastic value, but as the top up option doesn't have any employer contribution I am struggling to see the value.
I'm going to post this on the pensions forum to see if anyone can flag up something wrong with my take on this.
I'd be interested in reading their responses when you do. Keep thinking there must be something I'm missing.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »I'd be interested in reading their responses when you do. Keep thinking there must be something I'm missing.
You get to put the money in before tax. As a result you can buy £1 for 60p if you pay 40% tax.0 -
You get to put the money in before tax. As a result you can buy £1 for 60p if you pay 40% tax.
What are good reasons?
1) As Gen says, you can buy £1 for 60p as a HRTP.
2) Free money from employers.
3) Anyone able to get in on a defined benefit scheme, whether final salary or career average is onto a good deal because the employer takes the risk.
4) Saving for retirement, no matter what vehicle is used (pension, ISAs, dare I say it BTL investment) is a much better idea than not taking responsibility for saving and leaving things to chance.Please stay safe in the sun and learn the A-E of melanoma: A = asymmetry, B = irregular borders, C= different colours, D= diameter, larger than 6mm, E = evolving, is your mole changing? Most moles are not cancerous, any doubts, please check next time you visit your GP.
0 -
You get to put the money in before tax. As a result you can buy £1 for 60p if you pay 40% tax.
Yes, I know that, but given how poorly they perform, the risks of the goalposts being changed halfway through with tax, markets, etc, and the restrictions around buying an annuity, it still seems a crap deal to me.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
Like you say though, the employer contribution is well worth having. Do the sums counting that as a return based on your personal contribution. How do the figures look then?0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 347.9K Banking & Borrowing
- 252K Reduce Debt & Boost Income
- 452.2K Spending & Discounts
- 240.4K Work, Benefits & Business
- 616.5K Mortgages, Homes & Bills
- 175.4K Life & Family
- 253.6K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 15.1K Coronavirus Support Boards