STAKEHOLDER PENSIONS RIP_OFF

derekamr

Stakeholder pensions,immediate vesting or not,are a rip-off.You lose access to the capital invested and if you die all is lost,your spouse gets nothing back.Inflation and income tax render the repayments almost worthless and it takes 15 years or more before you begin to make any profit,better to put the money in a cash ISA or Building Society.,

Reaper

I disagree.

You lose access to the capital:
Yes you lose access to the capital. Most of it is paid out as an annuity when you retire. For this reason you need both pension and savings.

If you die your spouse gets nothing:
Not true. It may very between different schemes but normally your spouse does get something, around half the pension if I remember right.

It takes 15 years or more before you begin to make a profit:
Not true if you are a tax payer. Because tax on contributions are reclaimed you effectively make an instant 22% profit on every contribution if you are a basic rate tax payer, even more if you pay higher rate.

Better to put the money in a cash ISA:
Cash ISA are more flexible but you miss out on the big benefit of reclaiming tax on your contributions.

Now I'm not saying stakeholder pensions are suitable for everyone. You can get a first impression of whether they are for you by going here and answering the questions. Beyond that financial advice is needed for your particular circumstances.

derekamr

I was referring to stakehoder pensions for retired people where a single lump is invested. These are heavily marketed by certain stockbrokers and newspaper financial journalists as the best investment since sliced bread but rarely point out the small print where it spells out that ALL the capital is lost on death.

Reaper

Ah. I am a bit out of date on pensions but it sounds to me as if you are talking about annuities.

If this is what you mean then they are not directly related to stakeholder pensions. This is you exchanging a lump sum for an income for life (compulsory in the case of pension lump sums). Unfortunately these are currently very poor value for money due to low inflation and longer life expectancy.

This is the one time in your life you WANT to answer all those medical questions badly!

No offence intended on what is a morbid subject, but the way the insurance companies decide how much to income to give you in exchange for your lump sum is to guess how long you will live (insurance is a heartless industry).

This is the time to take up smoking and become a stunt man. Once they have calculated your income then give up anything dodgy and live as long as possible to fleece them out of as much as possible.

Apologies if I have misunderstood your post. I really shouldn't reply to anything after a night in the pub.

Reaper

Hmm. I knew I shouldn't post after the pub.

A quick search reveals web sites saying such things as "A Stakeholder Pension can also be taken out as a tax efficient investment for... people who have already retired"

I have to say that fills me with forboding. It sounds like a dreadful idea. You could well be right but as I am out of date on pensions (and drunk) I'll say "speak to an IFA" instead of "what a rip off".

Sorry. More coherent replies tomorrow. :P