Pension returns.

Old_Slaphead

HAMISH_MCTAVISH wrote: »

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%.

A real return (ie above inflation) of 1.7% seems fairly decent given that some of it is on money borrowed from taxpayer.

Thrugelmir

dtsazza wrote: »

And there's the rub. Too often people choose "a pension" and expect it to magically show good growth without thinking about the investment side.

Or in fact approach the committment as a long term savings plan. Increasing contributions as income allows. The effects of compounding reinvestment don't kick in until the later years.

Procrastinator333

chucknorris wrote: »

On that point I think I have spotted some value, by buying a top up to my pension. Because if I buy enough additional pension to get up to a guaranteed 20k pension income. I could then opt for a flexible draw down pension over and above that 20k pension. Which I believe means that I could be investing into it and getting 40% tax relief, then take it all out at some point (in retirement) rather than buying an annuity.

It seems too good to be true though, maybe I am overlooking something?

Please take my comments with a pinch of salt, but as I understand it, yes flexible drawdown is a fantastic option - for those who can use it.

To qualify, you must hve £20k of secured income. That can only be state pension, final or average salary based pension, or lifetime annuity. Nothing else counts towards the £20k. E.g rental income from btl doesn't count.

If you qualify, everything you have after that in pensions can be drawn down from 0 to 100% in any year. As with all pensions, the first 25% is tax free. After that it is at your marginal tax rate.

The people who this is of most benefit to are hr taxpayers who are going to retire with say 25k pension and maybe another pot of £100k. Now they can actually draw out from the flex pot 17k to take them to the 40% band. Basically max out the 20% band. So if approching retirement, serious consideration should be given to putting all salary over the br band in to a pension with the intent of extracting it at br.

Flexible drawdon may be incredibly useful for those that can use it.

dunstonh

The fact there is no IHT on pension funds as also another positive. The pension tax wrapper has started to become useful for estate planning

Graham_Devon

Dunno if I'm missing something here, but no ones mentioned, what to me, is one of the more obvious advantages.

You can stop paying into your pension, without the potential of losing what you have achieved so far.

Life changes. You don't know whats around the corner. Anything could happen whereby you find yourself needing as much of your wages as possible for the immediate future. You can simply stop your contributions and then restart where you left off before. Can't do with with a BTL (which the OP is referencing with his reference to the other thread). Stop paying the "contributions" in terms of mortgage payments and you could lose the lot, and in worse cases, lose your own home too.

That's a financial benefit in my mind. Maybe others don't see it the same way.

Indeed, could go the other way and find yourself much better off, so have the option of adding more to your pension if you so desire.

Procrastinator333

HAMISH_MCTAVISH wrote: »

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.

Never let the facts get in the way of a good moan ey.

michaels

Really - put 100k in btl and you can sell the property and get the cash, put it in a pension and whatever the circumstances (treatment for your sick child only available in the US to take an extreme example) the money can not be accessed until whatever age the govt decides to let you access it.

Kennyboy66 wrote: »

5) the investment inside the pension wrapper is more liquid than property.

Kennyboy66

michaels wrote: »

Really - put 100k in btl and you can sell the property and get the cash, put it in a pension and whatever the circumstances (treatment for your sick child only available in the US to take an extreme example) the money can not be accessed until whatever age the govt decides to let you access it.

The clue was in the statement

[FONT=&quot][/FONT]"the investment inside the pension wrapper is more liquid than property".

They are 2 separate things;

1) The pension wrapper
2) The investments inside it.

Pensions are for providing an income when you retire, not for buying a new car or booking a holiday next year.

Then again, perhaps the £250 billion that was MEW'ed against peoples houses in the decade upto 2008 was all spent on sick children rather than nice shiny things.

dunstonh

The clue is also in the name "pension". It doenst say savings account.

It wouldn't be called pension if it was a savings account.