MSE News: Pensions shake-up 'to help half a million by Christmas'

Eellogofusciouhipoppokunu

Simble wrote: »

Yes, for them it makes a lot of sense as part of a balanced savings portfolio for old age. But this thread is about auto-enrolment, which is aimed at people who are not higher-rate taxpayers, and specifically at the lower-paid, who stand to gain least from the tax benefits.

Good, we can draw a line under that group of people. Next...

For employees who receive employer contributions, a pension plan is a 'no brainer'. The NEST minimum contribution levels basically mean the employee contributes 4% of his wage to receive a matching 4% contribution from the tax man and his employer. That's an instant 100% return for the investment, risk free.

rpc

Eellogofusciouhipoppokunu wrote: »

The NEST minimum contribution levels basically mean the employee contributes 4% of his wage to receive a matching 4% contribution from the tax man and his employer. That's an instant 100% return for the investment, risk free.

It is not risk free. You can never ever ever transfer out of NEST. That is a risk - there are no market pressures to force NEST to remain competitive.

Eellogofusciouhipoppokunu

rpc wrote: »

It is not risk free. You can never ever ever transfer out of NEST. That is a risk - there are no market pressures to force NEST to remain competitive.

The 100% gain is instantaneous and not reliant on market pressures. There is no risk that your money won't double as soon as you put it into the NEST, because it will. 100% guaranteed!

rpc

Eellogofusciouhipoppokunu wrote: »

The 100% gain is instantaneous and not reliant on market pressures. There is no risk that your money won't double as soon as you put it into the NEST, because it will. 100% guaranteed!

Give me £100, I will double it to £200 but you relinquish all control over it and I can do more or less whatever I like within FSA rules and you have no choice but to leave it invested with me.

Risk Free!


Workplace pensions are a good thing. The NEST scheme is not.

Eellogofusciouhipoppokunu

rpc wrote: »

Give me £100, I will double it to £200 but you relinquish all control over it and I can do more or less whatever I like within FSA rules and you have no choice but to leave it invested with me.

Risk Free!


Workplace pensions are a good thing. The NEST scheme is not.

I've met a lot of people who are more afraid of losing a few quid in fees than gaining several thousands in returns. Most, if not all of these people will be living in poverty in their retirement years.

You makes your choice and you takes your chances.

Simble

You makes your choice and you takes your chances.

Well put. Pensions are a gamble.

Also, for the low paid, there is more at risk than the investment return. The Government has made it clear that one of the main drivers behind the AE programme is to reduce the cost to the Treasury of care of the elderly in a ageing population. The only way that AE would appear to address that is if those that have pensions pay more of their care costs than those that don't. That makes sense from a Govt perspective, but not for an individual making investment choices. Saving for old-age makes sense for most people, but for many it is more important to retain control over the money saved even if it means foregoing the "employer contribution". If they can persuade their company to pay their contribution into an ISA instead of a pension, it makes even more sense.

People will have different aspirations and resources, so the optimum solution will vary. Which is why the 'everyone must have a pension' approach is misguided. Since the Government is actively promoting this, it will be interesting to see how long it will be before they are embroiled in another pensions mis-selling scandal.

rpc

Eellogofusciouhipoppokunu wrote: »

You makes your choice and you takes your chances.

NEST gives you no choice. Once your money is in NEST, it is stuck in NEST.

There are no transfers in or out with NEST, so members will be deprived of their ability to make choices with their pension.

edinburgher

The reason the GAD limits are there is to stop people spending their whole pension and falling back on state support. An account like you suggest would encourage people to spend it all and then the state would have to pick up the tab.

I understand that, but feel that a more equitable middle ground between saver/state control might encourage more reasoned retirement saving, as well as a culture of personal responsibility.

Then again, this is the UK

Eellogofusciouhipoppokunu

rpc wrote: »

NEST gives you no choice. Once your money is in NEST, it is stuck in NEST.

There are no transfers in or out with NEST, so members will be deprived of their ability to make choices with their pension.

I think the whole point is that most people who don't already have a pension are either confused by the miriad of offerings or are too low paid to be able to put away enough money to make a difference.

NEST seeks to rectifiy both of these by providing simple investment offerings from pensions companies such as Canada Life, Legal and General, Scottish Life and Reliance Mutual that cover Higher risk, Sharia, Ethical, low risk, pre-retirement, etc. Simple and straightforward approach for people who have no interest in learning about Asset Classes, Bollinger graphs, CMT's, EPS, ECDs, etc. They also have an element of employer contribution that pretty much doubles the amount of money that a lower paid person can invest in a pension.

Eellogofusciouhipoppokunu

Simble wrote: »

Well put. Pensions are a gamble.

So are any investments where you don't just keep your money in cash. If you want to just put your retirement money into a cash ISA, then you're fully entitled to. Just don't expect it to keep up with inflation and expect to have to dip into it if you lose your job and need to go onto benefits (savings are used for means-testing, pensions aren't). Also expect to have much less to retire on, not just because of the lack of investment growth, but also because you are losing 50% of what could have been invested from the employer and tax man contributions.

I dare say that your employer would be thrilled if you opt out - it will save them a fortune. Turn down free money? Not me.