Is this how people choose their investment strategy?

FatherAbraham

There's an article about ISA-v-Pension over on the Money section of a national newspaper (http://www.guardian.co.uk/money/2013/mar/17/isa-save-retirement), which contains this story:

Some savers, such as Mark Fisher, 53, from Wolverhampton, have turned their back on pensions in favour of Isas to benefit from greater control over their savings pot.

Mark, who works as baggage handler in Birmingham Airport, decided around six years ago to cancel his company pension contributions and put his money into a Nationwide cash Isa.

"My father died before he was 65, and he had a good pension," says Mark. "But thanks to the small print, my mother lost out on up to £68,000 because it said that if he died before this age, there were no death benefits."

Mark had a couple of old company pensions from his time working in a distribution warehouse. "But I won't contribute any more to a pension, as I want instant access to my money and to ensure it isn't lost in the same way as my father's," he says.

Well, I guess we don't know the full details, but this seems an odd way to decide against pension schemes, despite, presumably, an employer contribution (frequently referred to as free money).

The guy doesn't want to invest in pension schemes because his father was in one, a generation ago, which didn't provide death bennies.

Indeed, by not participating in his employer's scheme, he may well be foregoing a scheme death-in-service benefit.

He may know what he's doing, but one the face of it, it looks rather irrational, and a terrible way to plan for retirement.

What's alarming is that there's not really any discussion of whether he's doing a sensible thing, for good reasons, in the article. As such, what's a apparently a bad example of how to plan and prepare isn't getting the right criticism, and thus it becomes acceptable.

Warmest regards,
FA

Camdoon

Given the number of people who have not thought about retirement at all, this is quite tame, but still disturbing.

dunstonh

Some savers, such as Mark Fisher, 53, from Wolverhampton, have turned their back on pensions in favour of Isas to benefit from greater control over their savings pot.

Statements like that are daft and obsolete. The pension allows virtually the same investment control as ISA. They share virtually the same investment options (indeed, pension has more).

Mark, who works as baggage handler in Birmingham Airport, decided around six years ago to cancel his company pension contributions and put his money into a Nationwide cash Isa.

What a total plank.

"My father died before he was 65, and he had a good pension," says Mark. "But thanks to the small print, my mother lost out on up to £68,000 because it said that if he died before this age, there were no death benefits."

Virtually all pensions have death benefits. Defined benefit schemes usually have a death in service amount attached to them of 2-4x salary plus spouse/dependents pension. Money purchase schemes pay out the value of the fund tax free.

What's alarming is that there's not really any discussion of whether he's doing a sensible thing, for good reasons, in the article. As such, what's a apparently a bad example of how to plan and prepare isn't getting the right criticism, and thus it becomes acceptable.

You are right. It does make a good example of what not to do. The media love to hammer pensions. Its a good scaremonger subject as the average reader doesnt understand pensions and wont look into the subject. You only have to read some of the comments to realise how stupid some of the people are. The media is pandering to them. Not you or I or others that know what they are doing.

srcandas

Makes me think that newspapers should have health warnings like cigarettes:

"the contents of this publication can seriously damage your life - even kill. The reader should be aware that the contents may be badly researched, incomplete, biased and sensationalised with the sole aim of attracting the gullible to our advertisers".

atush

Ever hear of the Stupid, Stupid, Stupid letter in a John Grisham Novel?

Well Mark needs one now. Because he is actually being Stupid/

Some savers, such as Mark Fisher, 53, from Wolverhampton, have turned their back on pensions in favour of Isas to benefit from greater control over their savings pot.

He will have great control- to spend it all, lose it all, or pay it all over to his creditors should he fall into debt. He will alos be able to spend it on living costs if he is made redundant as it will probably rule him out of means tested benefits

Mark, who works as baggage handler in Birmingham Airport, decided around six years ago to cancel his company pension contributions and put his money into a Nationwide cash Isa.

6 years of employers contribs lost - what if it was a defined benefit scheme?

"My father died before he was 65, and he had a good pension," says Mark. "But thanks to the small print, my mother lost out on up to £68,000 because it said that if he died before this age, there were no death benefits."

Well, since you dont' have to buy an annuity, you could use DD and have a spouse inherit 100% of the fund. Not to meantion he has probably given up Death in Service benefits on top. Utter madness, and shows the Guardian reporter who did not comment on any of these flaws to be a very poor journalist indeed.

And dont even get me started about saving for your retirement in 100% cash. Super stupid.

Perelandra

Overall, I don't think the population is very aware of retirement planning, and the benefits of the different vehicles.

I'm reasonably clued up generally, but it wasn't until I started reading this forum (particularly the "ISAs vs Pensions") thread that I really "got" the benefit of ISAs at all. I think it's fair to say that this forum has given me a valuable education.

JoeCrystal

I agreed with Perelandra. As the matter of fact, the retirement savings does not even exist to me as concept! Until I stumbled into this forum and started reading the pension topics. Afterward, a mixture of enlightenment and horror then dawned on me. Few years later... I finally managed to set up a pension scheme and with 25% of my basic income, the pension scheme is building up nicely (If I am very lucky, I might get £30,000 by the age of 30, even though reading the pension projection is still depressing.

Cheers,
Joe

bigadaj

I think as well as lazy journalists the problem has lain with the financial industry. People's trust has been destroyed by the impression, sometimes true, sometimes not, that they can't trust anyone in financial services, from endowments through equitable life to the bank bailout. The sensible thing to do in this scenario is to obviously educate yourself to know what is good and what isn't, but the average person has the idea these things are too complicated when a little basic reading and research could make such a difference to their future life.

atush

Perelandra wrote: »

Overall, I don't think the population is very aware of retirement planning, and the benefits of the different vehicles.

I'm reasonably clued up generally, but it wasn't until I started reading this forum (particularly the "ISAs vs Pensions") thread that I really "got" the benefit of ISAs at all. I think it's fair to say that this forum has given me a valuable education.

Seems to me, most on that thread dont understand Pensions like Mark Above.

atush

Big:

I think as well as lazy journalists

Not just lazy but young journalists who may not know of many who even retiring this year have Great pensions. And yes, trust has been misplaced in recent years with govts, regulators and banks.

but lazy is as Lazy gets. Read up, educate yourself.

redbuzzard

That is far from the most ill informed attitude I have heard to pensions.

I encouraged several of my younger colleagues to join the company DC pension scheme, which had a choice of 3%, 4% or 5% employee contribution attracting respectively 6%, 8%, or 10% employer contribution. Life cover of 4 x salary included for death in service.

How about

"I don't believe in pensions. I could get run over tomorrow" (this from a higher rate tax payer, after I had explained that his tax free lump sum alone would exceed the net cost of his contributions even with no growth or NI benefit, and that life cover was free on top of that)

"I give enough to this company without giving them even more out of my pay"

"I might not stay with the company"

Of nearly 20,000 people eligible to join, fewer than 4,000 were in the scheme.

You can't judge everybody by the degree of awareness you find on a money forum.

With auto enrolment, the most junior staff have now lost the opportunity to join this scheme and are being given NEST, starting with 1% each from them and the employer. No doubt many will opt out.