ITV Big Pension Prog

novice-saver

chesky369 wrote:

I also wondered about the information Jeff Randall gave to the young people towards the end of the programme who had just started their company pension. They thought they would be getting £ 15k - £18k p.a. on retirement but he told them it would be more like £2.5k - £3.5k p.a. Wondered what that was based on.

Probably based on the current practice of stopping new employees joining the DB scheme, if it is still running, and offering to put them in a company run DC scheme with punitive management charges and limited contributions from the company.

To get 3k looking at typical tables will need a pot near 60k in todays money.

I'm not smart enough to work out how much per month you'd need to contribute over the coming 40 years to accumulate a pot with that equivalent buying power at retirement, particularly as the investment returns and inflation are both variable - anyone care to guess, or calculate?


Regardless of which I was also disappointed in the programme.

cheerfulcat

duncan32 wrote:

Thinking about it, the more money I put into the pension the better tax relief I get, is that right? Apparently, the government pays in 22p for every £1.00 that I put into my pension (at the basic rate of tax). That sounds like something else that I don't want to miss out on by reducing my contributions, I suppose.

But the income you take from the pension fund will be taxed, so income tax is only deferred, not avoided entirely. The alternative is an ISA, where the money is taxed before it goes in but the income is tax-free.

EdInvestor

The GAD actuaries are part of the Profession: only actuaries are responsible for making mortality forecasts.

And of course all pension schemes will be different from each other in terms of overall life expectancy of members and it's the scheme actuary's job to advise the trustee and the company on that. And also on the funding of the liabilities and the investment allocation of the scheme's funds.

The actuaries/consultants have a lot to answer for ( not that you ever hear a word of apology, of course). They are also mainly responsible for the With-profits debacle at the lifecos as well - and the Equitable fiasco of course.

Steer clear of them if you can, it's clear they are right out of their depth when dealing with investment and financial markets.They should stick to their knitting.

dunstonh

I am thinking of reducing the amount that I put in to the minimum, so that I don't miss out on the company contribution. Then the difference, I'd add to overpaying my mortgage.

How much income in retirement is overpaying your mortgage going to give you?

Then, when the mortgage is clear in my mid forties I would be able to put some savings together, or get a second investment property or something.

Buying a mortgaged buy to let is higher risk than a money purchase pension scheme in unit linked funds.

Does that sound like a prudent decision?

No.

The problem with programmes like this is that they give the impression that "pension" is a single entity. Pensions exist in many forms and some are very good and some are not very good.

Yours sounds like a money purchase scheme that is invested. As long as the investment funds you have chosen are suitable to you and have good investment potential, then you have nothing to worry about other than making sure that enough provision is being made.

Debt_Free_Chick

EdInvestor wrote:

The GAD actuaries are part of the Profession: only actuaries are responsible for making mortality forecasts.

Forecasts based on current evidence, though.

[cynic-mode on]

And "current evidence" is the mortality tables compiled by GAD. Did GAD have insufficient funding preventing them from updating the tables for 20 years? :rolleyes:

[cynic-mode off]

EdInvestor

And "current evidence" is the mortality tables compiled by GAD. Did GAD have insufficient funding preventing them from updating the tables for 20 years?

If they were "wrong", would you not think the rest of the actuaries might speak up about them?As a Profession, wouldn't they take responsibility for something like that?

Or would they just go on blindly, running the whole pension system into the ground?

There was of course an official inquiry into the actuaries' role a coulple, of years ago.It was extremely critical especially about their professional negligence.

Their disciplinary arrangements have now been put under the accountants, as their own procedures are so lacking.

Debt_Free_Chick

EdInvestor wrote:

If they were "wrong", would you not think the rest of the actuaries might speak up about them?As a Profession, wouldn't they take responsibility for something like that?

But how would they know that the projections produced by GAD were wrong?There was not statistical evidence for that. In any event, the projections were not "wrong" - they were reasonable projections when they were made at the time.

Whilst it's true that actuaries make projections about the future, it's based on interpreting current evidence. If the evidence is out of date, they may (and often do) make an adjustment based on judgement - but their projections are only as good as the statistical analysis of the past/current position.

I think we all expect too much for actuaries - or misunderstand their role. They're statistical boffins - not fortune tellers . In any event - projections will always be "wrong" - no-one can accurately predict the future; actuaries give you their best estimate of what might happen, based on the position today.

Whilst they (and many of us) "got the impression" that people were living longer and would continue to do so, without firm evidence in the form of updated tables from GAD, actuaries could only suggest "a prudent adjustment" to the existing table. When the new tables were produced, the future projections - based on increased actual mortality - were far more than anyone had predicted.

It's all very well to say that "the actuaries should have known" - but why would they? They don't measure mortality; they simply interpret the evidence

Or would they just go on blindly, running the whole pension system into the ground?

Financing a pension scheme is not simply down to the actuaries - trustees, employers, unions (less so) and members (to an even lesser extent) all have some influence. Whilst the final valuation report might produce some recommendations, there are interim reports and discussions that discuss a range of options, all of which will produce the same (or similar) result e.g. pay £x now for 7 years or £y now for 10 years.

There was of course an official inquiry into the actuaries' role a coulple, of years ago.It was extremely critical especially about their professional negligence.

I'm not sure it went as far as negligence, but yes it was certainly critical. An actuary can't be negligent for getting a forecast wrong, provided the original forecast was reasonable at the time it was made.

Their disciplinary arrangements have now been put under the accountants, as their own procedures are so lacking.

LOL! Yes, the same people who've been slated as having a part to play in some of the most dramatic corporate collapses in recent times

Let's try to put it in perspective. In financing a typical defined benefit scheme an actuary has to forecast ...

future membership
membership movements - leavers, joiners, deaths, retirements before and after NRA
future salary increases
future inflation
future investment returns
future mortality (any adjustment to current GAD tables)

And there are probably more. With all those forecasts they are never going to "get it right" and most of the trustees and employers I've worked with understand that.

Regards

duncan32

dunstonh wrote:

How much income in retirement is overpaying your mortgage going to give you?

Good point. I suppose if I saved the amount I would have been spending on my mortgage you could look at it that way.


Buying a mortgaged buy to let is higher risk than a money purchase pension scheme in unit linked funds.

Fair point, and another stress I wouldn't want at that age.


No.

The problem with programmes like this is that they give the impression that "pension" is a single entity. Pensions exist in many forms and some are very good and some are not very good.

Yours sounds like a money purchase scheme that is invested. As long as the investment funds you have chosen are suitable to you and have good investment potential, then you have nothing to worry about other than making sure that enough provision is being made.

So, if I can confirm that it is a money purchase scheme that is invested I should stop worrying and just ensure that I am happy that I am putting enough in? Any extra income I have I should then invest in a different way?

Thanks for you help!

Duncan

defender_of_the_weak

They knew (actuaries) that the figures were out of date but whoever and wherever failed to do anything about it. Provider/actuary/underwriting don't know. Dunbar and hambro as was made a big play out of pricing their product based on up to date mortality tables showing the rise in ages and used this as a selling point to demonstrate that the cost of thier cover would be cheaper. OK they forgot to say that all the saving was sucked out in charges and commission but at least it shows evidence that the information was available

Debt_Free_Chick

defender_of_the_weak wrote:

They knew (actuaries) that the figures were out of date

But they did not know that the out-of-date version was so far away from the (then) current position. How could they? The tables show how long people are living. Why do you think that actuaries should know this?

but whoever and wherever failed to do anything about it.

The Government Actuary was responsible for compiling the tables (and still is!!!).

Provider/actuary/underwriting don't know. Dunbar and hambro as was made a big play out of pricing their product based on up to date mortality tables showing the rise in ages and used this as a selling point to demonstrate that the cost of thier cover would be cheaper.

Are you saying that they had "up to date tables" but that the pension scheme actuaries didn't?

OK they forgot to say that all the saving was sucked out in charges and commission but at least it shows evidence that the information was available

What evidence?

You don't think that Dunbar might have been speculating in an attempt to get people to pay even more into their expensive pension products, do you?

Surely not :rolleyes: