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Is my pension contribution "worth it"
Comments
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gadgetmind wrote: »Yes, the continual M&S of pension companies does result in zombie funds
Oi! Marks Expensive would like a word with you!Free the dunston one next time too.0 -
Sorry, some idiot but the S key far too close to the A key on this keyboard!I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
gadgetmind wrote: »Sorry, some idiot but the S key far too close to the A key on this keyboard!
B is surely a long way from P though?
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Please stop trying to mislead people with old fashioned bogus pension scaremongering.So what please, really, is the point of misleading the OP or other young workers confused about pension messages with examples of your own fortune rooted in the good old days
All that happens in modern defined contribution pensions is that the employee gets to move the money to whatever other pension provider they want to use.
It's not that hard to get a decent income in retirement. All it takes is getting started early and paying in a decent amount of money. If nothing clever happens and all that a person does is get the past performance of the UK stock market each £80 a month paid in net of basic rate income tax gets to a pension pot that can provide an income of £603.70 a month in retirement.* Add £8,000 a year of flat rate state pension and the total income would be £15,244.72 a year, £1,270.39 a month or £293.16 a week. Almost all of that would be tax free - £10,000 personal allowance and a 25% tax free lump sum taken and paid into S&S ISA to generate tax free income that way.
£80 net too much? Then try £40, that's still enough to get to a decent single person living level.
*That's 43 years (starting at 25, state pension age 68) of £100 gross a month increasing with inflation which produces a pot of £181,118. At 4% drawdown income that would produce an income of £7,244 a year.0 -
.............
Salary sacrifice wasn't a concept we heard much about in the mid-nineties, and even when it was introduced to you in 2007, how much of the 28.5% was your own contribution?
10%There you go again. Of course it is unusual. How many companies employ 50,000 in the UK alone? A big bank or insurer? Or parasitic government preferred outsourcers like Capita and Serco, or oddballs like BAe that never quite get weaned off the taxpayer's titties? Look at this mess if you are a BAe employee looking for clues about your pension:
it's not unusual if 49,999 other people have the same situation, and that's only one company, there are many large good employers.
You are not even close; European, non-GB owned, and they are at heart an engineering company, they make stuff.And when your DB scheme closed, was it wound up? If it existed as late as 2007 I think not. It will in fact still be the mainstay of your pension and if you were with them man and boy then that will again be a highly unusual situation.
wrong again, not mainstay and not 'man & boy' just one of several decent household-name corporates I worked for. I have 3 bits of DB pension, and 3 DC pots now in a SIPP.So what please, really, is the point of misleading the OP or other young workers confused about pension messages with examples of your own fortune rooted in the good old days that he cannot even dream of matching because he can't fund it and no employer is ever likely to fund it unless he quickly becomes a grab-it-all, clamber over everyone else's heads FTSE100 executive and starts pulling his own pension strings at board level?
wrong again; my eldest son works for the UK arm of an American company, he's in their DB pension scheme which is still going strong. If/when they close it he will go the affordable and achieveable DC route, the maths has already been demonstrated by jamesd.The questions that get the best answers are the questions that give most detail....0 -
What? Call me a scaremonger if you wish, but I get no delight from correcting the misleading "come on in, it's safe, the water's lovely" nonsense propounded by people who refuse to see all the obvious downsides for ordinary people.Please stop trying to mislead people with old fashioned bogus pension scaremongering.
There's nothing bogus about my warnings. I'll restate my list again:- What usually happens to pension schemes when takeovers occur. Who gets the heads up?
- What happens when the lunatics at the provider choose to take over the asylum and bribe and "reattribute" ? Who do the trustees think about when deciding whether they will accept your bribe for you?
- What happens when the funds get merged unilaterally by providers or the risk ratings get quietly revised to 'adventurous' when they were sold as something else?
- What happens when DC Group Pension Schemes get wound up (yes they do - often after takeovers).
- What happens when the worker leaves and whilst he is working hard to bring in a monthly salary all of the above happens to his deferred arrangements, but he is naturally left out of the real loop and treated like the proverbial mushroom by past employers and trustees?
- What happens if the trustees and their advisers have fingers in the pies / fundamental conflicts of interest due to their roles as finance and HR directors and the like?
- What happens when the provider sells out to an organisation you only discover is the emerging leader in the zombie funds business ten years later?
- What happens when there is no effective pensions regulator?
Why-o-why would they ever need to? Or could it be for reasons such as those on my list (all of which I have experienced). So a new pension starter should expect to have to change provider a dozen times perhaps? How much will they have lost each time that will have caused them to make the change??All that happens in modern defined contribution pensions is that the employee gets to move the money to whatever other pension provider they want to use.
... Or perhaps put another way, all it takes to create a small fortune to dip into in retirement is to pay a large fortune every month to a bunch of untrustworthy pension providers?It's not that hard to get a decent income in retirement. All it takes is getting started early and paying in a decent amount of money.
How misleading do you really want to get?? So you have slipped in a 5% compounding factor again (calling it inflation) and completely ignored the inflationary effects on the spending power of all those forgone monthly £80's AND the reduced spending power of the £603.70 monthly pension you say that £181,118 will buy in 43 years time. You don't say where you got the £603.70 pm from but I reckon if inflation averages 5% then in 43 years your £603.70 will be worth not much more than about £70 per month in today's money i.e. less than the £80 per month you set out as your example to be saved monthly for 43 years??If nothing clever happens and all that a person does is get the past performance of the UK stock market each £80 a month paid in net of basic rate income tax gets to a pension pot that can provide an income of £603.70 a month in retirement.* Add £8,000 a year of flat rate state pension and the total income would be £15,244.72 a year, £1,270.39 a month or £293.16 a week. Almost all of that would be tax free - £10,000 personal allowance and a 25% tax free lump sum taken and paid into S&S ISA to generate tax free income that way.
£80 net too much? Then try £40, that's still enough to get to a decent single person living level.
*That's 43 years (starting at 25, state pension age 68) of £100 gross a month increasing with inflation which produces a pot of £181,118. At 4% drawdown income that would produce an income of £7,224 a month.
Or did you get the £603.70 from inflation adjustment of the £7,224? Drawing down £7,224 monthly from £181,118 exhausts it in barely 2 years of retirement?
BTW, I have reckoned that at £100 pm gross savings, and at 5% pa compound, it would take 43 years 6 months to get to £181,118, but I guess it depends exactly how the calculator calculates the interest versus the way I calculate it.
Have you tried it yourself from scratch?
And mgdavid? I apologise for maligning you the evidently proud engineer, alongside employees of service industry giants of dubious pedigree, but what shall I say ?
So you will have us believe that 50,000 employee companies who make good stuff are commonplace in the UK? Good enough stuff to share the profits with well-husbanded employees? You're surely realise you sound just like another queuing to say you're alright, Jack, as opposed to getting down to the shop floor level and taking a hard look under there. All is not well in such places in terms of "didn't have to think about it - it was part of the good old days reward package" retirement planning. And your son in a DB pension scheme with an American employer? You have to admit that is quite novel. But I am not doubting your word. No doubt your son was a sought after graduate as well you may have been in your day.
However, the first thing my first American employer did in the early 90s was to ditch the UK DB scheme completely, wind it up, and announce a special windfall profit taken from the "surplus" to its NYSE shareholders! The second US employer I experienced at the beginning of the noughties was no better and ditched another of my DBs (so that was two out of three DB schemes wound up for me within 20 years of joining a pension scheme).
Fascinatingly I have one DB scheme left which has been turned into an average salary scheme and has also been restructured rather optimistically I think into heavy exposure in global bond markets. It also has a substantial shortfall that relies not only on the fund management gamble coming off but also on the promise of the employer successor organisation which is a severely weakened FTSE company. Whether the shortfall will actually get reinjected depends if it manages to survive another 7 or 8 years.
But no worries, my experience is evidently not typical, but yours is, and you're alright :money:
Oh - jamesd's figures? I think the Jury remains out till he explains at least why I am wrong to suggest that £80 a month invested now by a 25 year old for 43 years at a compound rate keeping pace with 5% inflation is apparently good only for £70 pm retirement income before tax for as long as you can stay alive after age 68 to keep receiving it ... I am struggling to work out the value in that ... 0 -
What? Call me a scaremonger if you wish, but I get no delight from correcting the misleading "come on in, it's safe, the water's lovely" nonsense propounded by people who refuse to see all the obvious downsides for ordinary people.
There's nothing bogus about my warnings. I'll restate my list again:- What usually happens to pension schemes when takeovers occur. Who gets the heads up?
- What happens when the lunatics at the provider choose to take over the asylum and bribe and "reattribute" ? Who do the trustees think about when deciding whether they will accept your bribe for you?
- What happens when the funds get merged unilaterally by providers or the risk ratings get quietly revised to 'adventurous' when they were sold as something else?
- What happens when DC Group Pension Schemes get wound up (yes they do - often after takeovers).
- What happens when the worker leaves and whilst he is working hard to bring in a monthly salary all of the above happens to his deferred arrangements, but he is naturally left out of the real loop and treated like the proverbial mushroom by past employers and trustees?
- What happens if the trustees and their advisers have fingers in the pies / fundamental conflicts of interest due to their roles as finance and HR directors and the like?
- What happens when the provider sells out to an organisation you only discover is the emerging leader in the zombie funds business ten years later?
- What happens when there is no effective pensions regulator?
... Or perhaps put another way, all it takes to create a small fortune to dip into in retirement is to pay a large fortune every month to a bunch of untrustworthy pension providers?
How misleading do you really want to get?? So you have slipped in a 5% compounding factor again (calling it inflation) and completely ignored the inflationary effects on the spending power of all those forgone monthly £80's AND the reduced spending power of the £603.70 monthly pension you say that £181,118 will buy in 43 years time. You don't say where you got the £603.70 pm from but I reckon if inflation averages 5% then in 43 years your £603.70 will be worth not much more than about £70 per month in today's money i.e. less than the £80 per month you set out as your example to be saved monthly for 43 years??
Or did you get the £603.70 from inflation adjustment of the £7,224? Drawing down £7,224 monthly from £181,118 exhausts it in barely 2 years of retirement?
BTW, I have reckoned that at £100 pm gross savings, and at 5% pa compound, it would take 43 years 6 months to get to £181,118, but I guess it depends exactly how the calculator calculates the interest versus the way I calculate it. Have you tried it yourself from scratch?
And mgdavid? I apologise for maligning you the evidently proud engineer, alongside employees of service industry giants of dubious pedigree, but what shall I say ?
So you will have us believe that 50,000 employee companies who make good stuff are commonplace in the UK? Good enough stuff to share the profits with well-husbanded employees? You're surely realise you sound just like another queuing to say you're alright, Jack, as opposed to getting down to the shop floor level and taking a hard look under there. All is not well in such places in terms of "didn't have to think about it - it was part of the good old days reward package" retirement planning. And your son in a DB pension scheme with an American employer? You have to admit that is quite novel. But I am not doubting your word. No doubt your son was a sought after graduate as well you may have been in your day.
However, the first thing my first American employer did in the early 90s was to ditch the UK DB scheme completely, wind it up, and announce a special windfall profit taken from the "surplus" to its NYSE shareholders! The second US employer I experienced at the beginning of the noughties was no better and ditched another of my DBs (so that was two out of three DB schemes wound up for me within 20 years of joining a pension scheme).
Fascinatingly I have one DB scheme left which has been turned into an average salary scheme and has also been restructured rather optimistically I think into heavy exposure in global bond markets. It also has a substantial shortfall that relies not only on the fund management gamble coming off but also on the promise of the employer successor organisation which is a severely weakened FTSE company. Whether the shortfall will actually get reinjected depends if it manages to survive another 7 or 8 years.
But no worries, my experience is evidently not typical, but yours is, and you're alright :money:
Oh - jamesd's figures? I think the Jury remains out till he explains at least why I am wrong to suggest that £80 a month invested now by a 25 year old for 43 years at a compound rate keeping pace with 5% inflation is apparently good only for £70 pm retirement income before tax for as long as you can stay alive after age 68 to keep receiving it ... I am struggling to work out the value in that ...
This is the biggest load pf Cr*p I have ever read here. Have you read a newspaper in the last 20 years? you know a real one w/o breasts?
I'll just debunk option 1 as I can't be arrs*d to do the rest.What usually happens to pension schemes when takeovers occur. Who gets the heads up?
What usually happens will depend on what type of pension. And a heads up by anyone wont really help.
Final salary DB means it could carry on, it could be closed to new members, it could be closed and a DC pension started for all current and new workers. All scenarios would mean that the previous pension would be banked and still pay out on retirement. If the company failed, the pension would be taken over by the PPF and still pay out according to the rules. Read up as you obv haven't heard of it? Basically it depends on who takes over the company or if the compoany fails.
http://www.pensionprotectionfund.org.uk/Pages/homepage.aspx
As for a DC pension, very little changes. You could transfer your pension, or keep it where it is depending on scheme rules and length of time (mostly you can't leave pensions where they are if you have worked less than a year so have to transfer them if you dont want to lose Employers contributions and tax relief.)
And even if you are stupid enough to do so, you dont lose anything as you can get your contribs back. Of course if you do that you'll lose both tax and NIcs where those were credited.
Please, go read up on the facts before posting again . You are just embarrassing yourself.0 -
What usually happens to pension schemes when takeovers occur. Who gets the heads up?
I answer this and most of your other questions earlier. If you want a point by point break down, then I suggest you start a new thread.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
I suggest you likely lads start a new thread as none of you have begun to answer the OP properly.
You seem to be just enjoying your own smart-a$$ed rose-tinted self-preservation society view of the world without a care for the real crµp you would lead youngsters into and walk away from as soon as it goes t|ts up.
You need some real life experience atush before you start pontificating on the basis of theoretical scenarios you read in newspapers. I have a loft full of pension variation paperwork which maps actual scenarios. They ain't pretty and they ain't anything like the water off ducks backs you describe.
And gadgetmind, you answered nothing with your rather blase suggestion that Fiends Life are the answer to your wet dreams and if they weren't you'd easily up-sticks. What you would take with you versus what you might have thought you would take with you might depend on decisions taken by trustees of your Group Personal Pension Plan if you had one like mine.
You have lived charmed lives obviously, but that ain't typical.
But before you overdose on the mince pie sauce, do either of you understand where jamesd got his £603.70 per month from ? And why does he suggest drawing down an entire 43 years into the future pension fund in 4% monthly dollops which would exhaust it in just over two years?0 -
I answered the OP and am not a lad.
I never take investment returns for granted and hold cash, property (too much) and some bonds.
But I am not stupid enough to say that a pension is poor value with both tax relief (meaning you have an immediate min of a 25% gain) not to mention an employers contribution on top.
where and how would you assume you could turn 80 quid a month into 200 immediately yourself w/o either of those? At the bookie's?0
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