MSE News: Young people 'confused by pensions'

dunstonh

While it must be very nice for all of these clever financial wizards to tell us profligate young people off for spending beyond our means and not saving anything for our retirement (I suppose I could cut down by not using electricity or paying my council tax or eating), why not point us in the direction of where to find out what the best way of saving for retirement is?

Why do you think you are different to any other generation that has gone before?

I don't think the financial advice available on pensions recognises that the financial situation of someone in their 20's and early 30's today is hugely different to someone the same age 20 or even 10 years ago.

Its not hugely different. The spending habits are different. Those in their 20s spend more on consumer goods today than those of previous generations.

House purchases need less deposits than in the past except during the credit boom years where 100% was possible. Prior to that you needed 10-25% deposits. The ratio of borrowing requirements to income are largely the same. That tends to wavy line between a band but it is no higher today than it was 20 or 30 years ago relative to earnings.

There are obvious exceptions. London property prices for example.

JimmyTheWig

hello_sunshine wrote: »

why not point us in the direction of where to find out what the best way of saving for retirement is?
...
I've done a lot of research and it seems to boil down to "you should get a pension". Ok, but how/where/what kind? Do I go to my bank? My insurer? Someone else? What if I change jobs a lot? Can I have more than one? What if I want to work abroad, or take time off work?

I think the problem is that, other than the advice that you should have a pension, and the more you pay into it the more you'll end up with, the advice is different depending on different circumstances.
It's not like a savings account, where 3.2% interest is better than 3.1% interest. So it's not something that a website can tell you which one to go for.
Equally, it's not something that people on the forum can tell you, because that would mean getting all your details and giving advice - which is something that people on here (a) don't have the time to do and (b) aren't allowed to do as the forum (quite rightly) isn't authorised to give financial advice.

So you either have to take a pick yourself, or pay an advisor to go through your personal circumstances and give proper advice. Which of those routes you go down will probably depend on how much money you are putting in to your pension.

[Like you, I've got one but don't know if it's the right one.]

Pincher

hello_sunshine wrote: »

I have an economics degree and I work in an extremely technical industry, so I'm not thick, but all the advice out there seems like a big tangled ball of string that you can't find the end of.

"Economist clear and accurate in his/her predictions."

seeks

"Honest low cost fund manager who produces above average returns."

Sounds like a match on e-Harmony.

waspsandjam

I got my first pension with my first job after uni. It wasnt a graduate position and was lowish paid but there was some options for overtime to boost it and it was a good way to see the UK and it was fun. I paid about £800 (including tax relief) into the pension over the 16months i was there. This was matched by my employer. It is now worth about £2500, 9 years on. So, for the sake of not getting £10 a week (about 4 pints lager at the time) take home pay for 16 months, i now have a pot of £2500 which will grow over the next 30 years before i can get to it. I have other pensions too now and have learnt much more about financial stuff since but this was the first one and whilst £2500 dosent seem much when looking at my statement and "what my income could be on retirement", it always makes me smile when i think of the £640 take home pay i gave up for it.
I have always taken an employers pension when offered as its free money, you cant dip into it in an emergency and compounding is awesome over time!

p.s. i have also given my nephew a pension for his christening present and am saving £1 a week in spare change (and paying in when enough for min payment) so he can learn this lesson earlier in life than most (and see it happen to his own money).

waspsandjam

It would be nice to hear from more young people on this thread, but unfortunately I think most of us probably want to avoid the b******ing you tend to get when you say you haven't got a pension!

I think that the resounding message people get (although not always very politely put) when they say they havent got a pension, should tell you its probably a good idea to have one.....
IMHO even if its not put into the best fund to get "maximum" returns, the prospect of compounded tax relief (and possibly employers contribution), on top of your own contributions, over 40 years should be very appealing. That said, when i was 18, i thought there was a reasonable chance i wouldnt see 30, so i'm happy to be proved wrong and have put into a pension!

In default, if you are young (assuming you dont want an IFA to advise you on the specifics), pick a low fee global equity tracker fund, set up regular automatic payments for whatever you can afford and sit on it until you know more about pensions / investing or want an IFA. 10 years before retirement age, look at the equity market, if its doing well take or start taking your money out in case it goes belly up over the final 10 years.

Btw, one thing that isnt mentioned often with pensions is that if you dont make it to retirement for some reason, your "pot" gets to go to a nominated beneficiary.

Pincher

waspsandjam wrote: »

I paid about £800 (including tax relief) into the pension over the 16months i was there. This was matched by my employer. It is now worth about £2500, 9 years on.

So it's £800 + £800 (from the employer) = £1,600, which became £2,500. 56% over 9 years.

I have a similar thing. Left the company 1990, the pension had £1,000 in it, it's worth £1,500 now, so 50% over 22 years. It was made "paid up", so at least no fees worth speaking of. Couldn't close it down, because I would only get £300 or so back, so just left it.

This is the free money case where they match your contribution and take care of the fees, plus you get tax relief, so you are an idiot not to take it.

The only problem with having these little parcels of paid-up pension is the insurance company has a habit of not investing the money properly, and just park the money somewhere safe, making a low but steady interest. Once upon a time, you could trust With Profits schemes, but the lack of transparency and abuse of trust put paid to that.

What I take exception to is paying into a personal pension with your own money. The only reason you get more than you put in is because they never steal more than the tax relief. So, if you put in £800 + £200 tax relief, they only take a £100 bite out of it,
so £900 is actually invested. With the most evil insidious managers, nothing is invested in the firs year, your first year contribution goes straight into the commission pot.

[Deleted User]

dunstonh wrote: »

Do ISAs confuse you? Do savings accounts confuse you?

Not the ones I have, but I'd definitely avoid the S&S for the same reason.

Have you ever asked anyone to explain it to you? Yes, and I get different answers! - Not helpful Have you made any attempt yourself to understand? I've read all the info given, but I'm not prepared to do a degree and a masters just to understand the info provided

It is actually very easy to get the principle. Perhaps yes, if like you you have a background in finance. The more you pay in the more you get back. I think you might be over-simplifying it now If you dont pay enough in then you will not have enough to provide a suitable retirement income.What is enough to pay in? What will be enough to provide a suitable retirement income? If the employer pays into it then you get free money.Is this still the case if you work for different employers over a period of time paying in to *various* different pension pots? Is free money a good idea or a bad idea?Not convinced it's really free money!

You've done little to explain anything!

margaretclare

dunstonh wrote: »

Why do you think you are different to any other generation that has gone before?

Its not hugely different. The spending habits are different. Those in their 20s spend more on consumer goods today than those of previous generations.

House purchases need less deposits than in the past except during the credit boom years where 100% was possible. Prior to that you needed 10-25% deposits. The ratio of borrowing requirements to income are largely the same. That tends to wavy line between a band but it is no higher today than it was 20 or 30 years ago relative to earnings.

There are obvious exceptions. London property prices for example.

I agree with all this. I am from a different generation and I didn't get an awful lot of advice or information about financial matters, the kind of information that is available now in popular newspapers. There were a lot of assumptions made which were never questioned. House price deposits - well, I was in the first generation of my family ever to think about buying rather than renting.

There are books written now about all financial matters which are specifically for young people. I never saw such a book in the years in which I could have made decisions which would have affected my financial future for the better. I'm thinking specifically of 'A Girl's Best Friend is her Money' by Mack and Birtles. Oh, how I wish such a book had been available in my youth!

dunstonh

You've done little to explain anything!

You have done little to learn anything.

You are either not asking the right people or you are not listening to the answers or deciding that you prefer to remain ignorant as you think it is cool.

Lokolo

dunstonh wrote: »

You have done little to learn anything.

You are either not asking the right people or you are not listening to the answers or deciding that you prefer to remain ignorant as you think it is cool.

Have to agree.

ISAs and Pensions are not rocket science and easily understood by those willing to learn.