MSE News: Young people 'confused by pensions'

JimmyTheWig

dunstonh wrote: »

If the employer pays into it then you get free money. Is free money a good idea or a bad idea?

Are you saying that it is always a good idea to be part of a pension scheme if the employer pays into it?

dunstonh

JimmyTheWig wrote: »

Are you saying that it is always a good idea to be part of a pension scheme if the employer pays into it?

There would be a very small number of cases where it wouldnt be the case. Mainly those people who intend to be near poverty in retirement and live on benefits. The rest of the people should bite the employer's hand off and take the free money.

jamesd

JimmyTheWig wrote: »

Are you saying that it is always a good idea to be part of a pension scheme if the employer pays into it?

Not always. If the only thing offered is NEST a younger person might well be better off by opting out and putting the money into a S&S ISA until something better is available. For some situations near retirement with minimal pension provision a pension might be enough to eliminate benefits. Some might exceed contribution limits or the lifetime allowance. Others might have protection under older rules that they would lose if they added more money to a pension.

Usually it is a good idea to use an employer pension up to the amount an employer will match. Even if it's bad you can eventually transfer out of defined contribution ones, except NEST, where your money is trapped.

JimmyTheWig

dunstonh wrote: »

There would be a very small number of cases where it wouldnt be the case. Mainly those people who intend to be near poverty in retirement

Other than those people...

My thinking would be are there cases where fees, etc, would make it not worth it. For example in Domino9's case above they are likely to have various small pension pots from various different employers. Might it be the case that the value of these are likely to go down if fixed fees exceed reasonable growth of a small pot?
In which case the money Domino9 has put in to enable the employer contributions may get wiped out?

I'm only asking. Have never had the oportunity of a company pension and so have never looked in to it.

dunstonh

My thinking would be are there cases where fees, etc, would make it not worth it. For example in Domino9's case above they are likely to have various small pension pots from various different employers. Might it be the case that the value of these are likely to go down if fixed fees exceed reasonable growth of a small pot?

Employer schemes are mono charged. It doesnt matter if you have £100,000 in 1 pension or £1,000 in 100 pensions If the charge is say 1% p.a. then it is the value that matters. Not the number of schemes.

You can always consolidate them.

Credit-Crunched

Yawn yawn yawn, yet more incompetent, badly presented, ignorant 'journalism'

The people who construct these articles may be better served understanding the principles of journalism and article construction.The poor standard of writing on this website never ceases to amaze me.

Forget if the youth of today do not understand a topic that a) does not interest them and b) does not interest them.

I am sure if you asked the same people about the pro's and con's of taking Fish Oil supplements you would have the same blank expression.

adamc260

I'm 23 and my understanding of a pension is.. I pay into it for when I get older and there is money there to 'live on'

I dont understand all this risk, fees etc etc... It's just so overcomplicated!

dunstonh

I dont understand all this risk, fees etc etc... It's just so overcomplicated!

It is not over-complicated. It is unknown until you research it. If you dont want to research then you use someone to do it for you. Just like everything else in life.

For most people, they dont need to understand how it all works. Just the basics. You dont have to be able to strip an engine and rebuild it to have a car.

Annisele

Surveys tend to show whatever the person who designed the survey wanted them to show.

If somebody asked me if I knew the exact meaning of the term annuity, I'd probably say 'no'. I do know what an annuity is - as Lokolo says, they're not a difficult concept - but I'd be put off by the "exact" part and be expecting a follow up question about the tax treatment of purchased life annuities or some such thing.

And if asked generally if I understood pensions, I'd say no. However, I think I do have enough understanding to get by. I've played around with a few pension calcuators and Excel spreadsheets and I'm reasonably confident I'm saving enough; I've checked the funds I'm investing in and I think they look OK; and I review both of those things around my birthday each year. I don't need to understand pension legislation to have one, just as I don't need to understand engines to drive a car.

[Cross posted with dunstonh - the car analogy is popular tonight!]

BobQ

Daniel_Elkington wrote: »

...........
People deal in facts, insurance companies deal in policies. That's why a good deal of people employ middlemen like me (IFA) in order to cut through all the jargon and explain it in laymans terms. In addition the point of a good IFA is they make you consider things that you wouldn't normally consider.

.

I agree with your post, but the above surely misses the point that while some people do employ IFAs many more do not trust IFAs or the financial industry that they service. I agree they should, or at least learn enough to make a decent fist of it themselves, but the fact is many lack trust. They may express this lack of trust as a belief that its a waste of time or is confusing, but in reality they do not trust the industry.