32 Year old - Pension or No Pension

webnibbler

FrankRizzo wrote: »

My mother made a comment about a friend of my dads. She said his pension plummeted just as he was about to retire. Excuse my ignorance but how does this happen?

You do hear this happen and it's unfortunately given pensions a bad rap. But the moral of the story is to understand where your money is going and not to simply entrust it to someone else or to an organisation like an insurance company. After all, it's YOUR money - take time to understand where and how it is being invested.

If you are starting a pension, don't just blindly pay money in for the next 30 years and hope for something at the end. Take time to read and understand about investment and fees and platforms. This way you will be on top of your money and avoid a shock similar to the one you mentioned.

atush

It happens when people don't look at their pensions, and what they are invested in and are not diversified. It also happens when, those who are relying on pension income, don't have other savings outside a pension such as ISAs, investments etc that can tide them over should a market correction happen just before retirement. And it happens to those who don't realize you Don't have to buy an annuity when you retire but can leave your money invested and take income.

If it remains invested, in income producing assets, the actual value won't matter so much as it goes up and down so long as the income is stable.

FrankRizzo

Would this type of pension scenario occur for a standard work pension or is this for another type?

somethingcorporate

Depends if the works pension is final salary / career average or money purchase.

Money purchase the risk of fluctuating values sits with the employee but over the last remaining years the expectation is for the funds to move from higher risk to lower risk (cash/fixed interest) based funds to stop any huge fluctuations as you are coming up to retirement.

For FS/ CA the risk of shortfall sits with the employer so this really cannot happen for these kinds of pension.

xylophone

standard work pension

Standard?
Start here http://www.pensionsadvisoryservice.org.uk/

dunstonh

My mother made a comment about a friend of my dads. She said his pension plummeted just as he was about to retire. Excuse my ignorance but how does this happen?

Plummet is a word the media use to indicate anything from typical daily movement, minor blips or major event. In this case, we can only guess but it would suggest that your dad's friend stayed in high risk investments right up to retirement and suffered a loss in a negative period. Usually happens when someone is investing above their risk profile and capacity for less and ignoring the short timescale left.

FrankRizzo

xylophone wrote: »

Standard?
Start here

Thanks for the link. I will study this site. I really am clueless it's actually embarrassing.

FrankRizzo

somethingcorporate wrote: »

Depends if the works pension is final salary / career average or money purchase.

Money purchase the risk of fluctuating values sits with the employee but over the last remaining years the expectation is for the funds to move from higher risk to lower risk (cash/fixed interest) based funds to stop any huge fluctuations as you are coming up to retirement.

For FS/ CA the risk of shortfall sits with the employer so this really cannot happen for these kinds of pension.

Ill check tomorrow what kind it is. It's a private sector company and i know for sure it's not final salary.

hyubh

FrankRizzo wrote: »

One thing that worries me is hearing from older colleagues about all their redundancy/TUPE horror stories and how there pensions T&Cs changed for the worse etc.

Just on that specific point, the TUPE regulations are what *protect* terms and conditions - they are the reason a not insignificant fraction of active LGPS members have a private sector employer.

hyubh

kidmugsy wrote: »

Almost the whole public sector also seems unable to acknowledge that their terms are typically changing from unbelievably generous to merely extraordinarily generous. My own preference is that we strip even accrued benefits from those parts of the public sector that collaborated in Brown's ruining of the public finances.

Blah blah blah - do you have to turn every thread into a particularly repetitive episode of Question Time?