Disillusioned, are pensions still worth it?

tony4147

I'm 50 next year, and at the moment I have a total pension pot of £105000, I make pension contributions of £500/month, the contributions are made via salary sacrifice.
I work contract and have good years and bad years, at the moment I earn around £50k a year. I also have £50k in cash ISA's. I have no spare money to pay into my ISA's, it all goes into my pension. I have a £190k mortgage with which I over pay £200/month.

For a good while now I have become very disillusioned with pensions, growth rates are up and down, the Government keep playing around with pensions no matter which bunch are in and annuity rates are poor.
I will get shot down for this but I don't have a great deal of time for IFA's, my experience is they sit on the fence and take your money and have very little comeback. I might be totally wrong but that is the impression I get, sorry if I upset any IFA's but that is my 20+ years of experience with 3 different IFA's.

I'm starting to think that I might be better off stopping contributions into my pension and paying into a cash ISA, at least the money will grow without any risk and ALL the money will be mine to do with how I please. I know I won't be maxing out my tax by paying into an ISA but from what I've seen (I might be wrong) cash ISA's are just a bit behind as far as rates go. A few years ago I tried a SS ISA and managed after 4 years to get out what I had paid in, i.e. ZERO growth. I know other people that have lost thousands with SS ISA's.

Should I just halve my pension contributions and put the remaining into a cash ISA? Should I pay everything into the mortgage instead?
What I do know is most of the people that I know who work Contract don't pay anything at all into pensions.

jamesd

You're right that growth rates are up and down, for both pensions and S&S ISAs. That's the price you pay to get substantially better long term growth. Pensions are a continual target for government tinkering, both the state pensions and the pensions rules. Sad but that's the reality of it.

The ability to pay into a pension via salary sacrifice is a great deal and it's worth doing that as long as it's available to you.

A key consideration is the investments you're choosing and which are available for you to choose from and we don't know that. Funds like Invesco Perpetual High Income have a good record and you might also consider a global tracker fund to go with it.

You can expect ups and downs, though. That's inevitable and at your moderately young age the biggest risk from them is that they might discourage you from investing and make you poorer log term if you give up on it and switch to savings accounts and mortgage overpaying.

What you might do is say more about the investments you're using and the ones that are available to you. That won't stop the ups and downs but it might help to check that you're making appropriate choices.

somethingcorporate

Cash is subject to inflation risk - so you are guaranteeing over the long term the spending power of your money will decrease if you cannot get interest rates that match inflation.

Personally, you are getting a massive uplift on your contribution via salary sacrifice that you lose if you put it in ISAs so I think it would be foolish to make that just the primary.

As in everything a balance approach is the best way forward and you still have quite a massive mortgage on a modest salary to pay down in just 10-15 years before retirement so make sure you keep this a priority.

dunstonh

For a good while now I have become very disillusioned with pensions, growth rates are up and down

Growth rates on projections are just examples and you can see with near certainty you will not get the figure used on the projections as it is so statistically unlikely. As for investment returns (if that is what you mean) they will be volatile. Always have been, always will be. It doesnt matter if you hold the investments in a pension, ISA, unwrapped or other tax wrapper.

the Government keep playing around with pensions no matter which bunch are in

That is a lazy excuse. Yes, they do keep playing around with pensions but most of what has been done since the introduction of personal pensions in 1988 has been to improve features rather than reduce them.

and annuity rates are poor.

They are but then so are interest rates.

I will get shot down for this but I don't have a great deal of time for IFA's, my experience is they sit on the fence and take your money and have very little comeback. I might be totally wrong but that is the impression I get, sorry if I upset any IFA's but that is my 20+ years of experience with 3 different IFA's.

Perhaps that is because you have used 3 different IFAs in 20 years and never employed them to provide ongoing services. IFAs rarely sit on the fence unless it is in areas that require a crystal ball but you want something concreter from them. FAs, on the other hand, do tend to sit on the fence as they have to put so much of the decision making process in your hands (different to the remit of an IFA). So, maybe you saw FAs rather than IFAs.

I'm starting to think that I might be better off stopping contributions into my pension and paying into a cash ISA, at least the money will grow without any ris

I'm afraid you are wrong. Cash ISA will be subject to shortfall risk and inflation risk. It wont have investment risk. You could use a cash ISA for your retirement provision. You would need to up your contribution compared to your pension by about 3 to 4 times. Plus, you would need to compensate for tax relief and NI.

And in retirement when you take the interest, you will be eroding the capital value of the cash ISA and that will likely end up with little or nothing left after 20 years. Unless your death happens to match the point your money runs out or you die early, that would not be something you would really want.

A few years ago I tried a SS ISA and managed after 4 years to get out what I had paid in, i.e. ZERO growth.

4 years???? This is your problem. You are looking at long term investment products in the short term. An economic cycle is around 10 years. Unless you are invested for the whole of the economic cycle you are only going to get a bit of it. That bit could be the best bit, the nothing period or the worst bit. You are looking far too short term.

I know other people that have lost thousands with SS ISA's.

The only people that would have lost money are those that take it out earlier than they should or invested above their risk profile and didnt understand it.

At the moment, you say you are disillusioned with pensions. I would put that down to a lack of knowledge and understanding. Someone who doesnt know what they are doing shouldnt be making such important decisions like those you are looking at. Spend some time to learn about investing.

lvader

It seems to me you should be making more use of your high rate tax relief on your pension while you can. £500 at your age and annual ernings isn't nearly enough.

tony4147

lvader wrote: »

It seems to me you should be making more use of your high rate tax relief on your pension while you can. £500 at your age and annual ernings isn't nearly enough.

Easier said than done

lvader

You seem happy to waste your money on high taxes while keeping 50k in cash earning little or no interest.

tony4147

lvader wrote: »

You seem happy to waste your money on high taxes while keeping 50k in cash earning little or no interest.

How am I wasting my money in high taxes? I'm paying into a pension now via salary sacrifice, if I could pay more I would but I'm not convinced that a pension is the right place to put my money, HENCE my original post, unfortunately a pension is the only place I put my money and gain with the 40% tax, but when I come to draw my pension I'm at the mercy of insurance companies paying relatively poor annuities.

My cash ISA's are making 3% with no risk, yes it's not a great rate but I have COMPLETE control, the money is mine to do with how I please, and no IFA suggesting do this or do that and then walking away with a fee, and turning round and saying "well I did tell you investments can go up or down" if they don't go up.

One of my pensions has a guaranteed growth rate of 4%/year until I retire at whatever age that will be, I've asked the question on these forums if that is a good rate or bad and no one can answer, my IFA tells me "well it is a guarantee". I personally don't think its a good rate but there again when other peoples pensions had negative growth I had 4% positive.

I know plenty of people that pay ZERO into a pension because they have lost complete faith in them, so YES I know I'm not put enough money away but at least I'm putting something away which is a lot more than most are doing.

gadgetmind

tony4147 wrote: »

when I come to draw my pension I'm at the mercy of insurance companies paying relatively poor annuities.

Annuities are likely to be far better by then and/or there is always drawdown.

My cash ISA's are making 3% with no risk

Is that a real (post inflation) 3%? I doubt it.

I have COMPLETE control, the money is mine to do with how I please, and no IFA suggesting do this or do that and then walking away with a fee, and turning round and saying "well I did tell you investments can go up or down" if they don't go up.

I have S&S ISAs, a SIPP and a group personal pension, and I make the investment decisions for all of them without there being the slightest whiff of an IFA.

tony4147

gadgetmind wrote: »

Annuities are likely to be far better by then and/or there is always drawdown.


Is that a real (post inflation) 3%? I doubt it.


I have S&S ISAs, a SIPP and a group personal pension, and I make the investment decisions for all of them without there being the slightest whiff of an IFA.

Why will they be better?
No it's pre inflation
And what growth are you making?

lvader

It doesn't sound like you are in control of your finances at all and your lack of knowledge is costing you lots of money. You have a large enough pension pot and enough income to turn things around, it's not too late. Use an IFA or learn very quickly!