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Is my pension contribution "worth it"
Comments
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Not very likely either!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.
On paper, yes. But it might be interesting if you could deign to explain how the OP can get his hands on it at 25 or 26 or at all when he packs up the low paid job or if he needs it before he finds time to work out how the hell he might truly control it. Some governments can't even control their own gold reserves yet you are suggesting that an ordinary worker controls his own pension savings once he has tipped cash into it?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.
Immediately? Are you sure about that?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 -
What usually happens to pension schemes when takeovers occur. Who gets the heads up?
It may well be the case that the pension scheme gets wound-up and is underfunded. In that case, pensioner members (those who have commenced their pension) get priority over the funds.
Given the Directors of the company probably know what is about to happen, and they are likely to be over age 50, they can commence their pension just before the scheme is wound-up and thus get protection when the pension fund is wound-up. As they get protection, there is less to go round the unprotected members (those who have not drawn their pension) and so those without protection may well lose huge chunks of their pension - 60% or more, even if they are on the cusp of retirement...even if they intended to retire the following week they would lose a huge chunk of their pension whilst the Directors who may be 10 years younger or more get nearly the full value of their pension (they may lose some pension increases).
Well, that was the position 15 years ago anyway, but things have moved on a lot since then, as others have said above.
The relevance of the tale above is that bad things can happen, don't be trustful of the financial industry and the various regulatory rules, always ask questions and understand what is going on...but also don't live in the past, as it is no guide to the future.0 -
........ I apologise for maligning you .........
Accepted....... You're surely realise you sound just like another queuing to say you're alright, Jack, ........
you surely realise you sound like an entrenched embittered left-wing dinosaur? That's not to suggest you are, just the image you're projecting.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.
wrong again, on both counts; my son left school at 16 and qualified as a chef before switching to fuels and lubricants technology in his mid-twenties. Started at the bottom and is working his way up.
I had six different part-time jobs while still at school; they showed me what I didn't want to do but I had no idea what I did want to do. I left school with one A level and years later went to evening college to learn computing when I realised it was a growth industry............But no worries, my experience is evidently not typical, but yours is, and you're alright.......
It's never too late for you to get some therapy and counselling to discover the power of positive thinking and self-help.The questions that get the best answers are the questions that give most detail....0 -
5% plus inflation is the historic average growth rate of the UK stock market for the last 120 or so years. So I used 5% growth rate and said increase the £80 by inflation to keep everything in today's money terms. £80 a month in today's money for 43 years produces £603.70 a month of income in today's money.So you have slipped in a 5% compounding factor again (calling it inflation) and completely ignored the inflationary effects
I linked to the regular savings calculator I used in the original post.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?0 -
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.
Well, as you well know, I didn't say that.
I did however observe that what's an entirely run of the mill pension company, used by thousands of employers and hundreds of thousands (perhaps millions) of people across the country, doesn't suffer from a single one of the faults that you throw at modern pensions.
As for answering the OP, this was done in depth well before you lumbering along.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 -
Friends Life suffers by association with all those faults I listed. And I will list them again:gadgetmind wrote: »Well, as you well know, I didn't say that.
I did however observe that what's an entirely run of the mill pension company, used by thousands of employers and hundreds of thousands (perhaps millions) of people across the country, doesn't suffer from a single one of the faults that you throw at modern pensions.- 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?
As this is Christmas, I think I can pretty much get away with "Oh no it wasn't!"As for answering the OP, this was done in depth well before you lumbering along.
I came along just after those of you who had been answering your own questions had suddenly realised that the OP had barely two beans to rub together, primarily due to the fact that he is unlucky enough to live within what has become a third world labour market.
I must again apologise however to mgdavid as he is evidently the head of quite some kind of get up and go family which include two fine examples of those who have risen above it all i.e. there has been hope! But in this pensions climate and labour market hope does not spring eternal. It is dashed constantly for far too many. I mean, £1,500 pm GROSS pay from TWO earners. It is actually scandalous. And 6% of scandalous is just a distraction if it is suggested one must always bend over a bit further in order to pick up, ... or is there really suggestion in this thread that it really is worthwhile?? Do any of you (apart from mgdavid) have any idea how difficult it is to break of doldrums like that? You don't do it by pensions planning. That's picking up entirely the wrong end of the stick. You do it by life-planning
Jamesd, yes of course I can see exactly that you used that calculator to get your £181,118, but where did the £603.70 per month come from, please? From calculations of my own (yes I do my own before I take anyone else's as gospel), it looks like you have calculated it as the resultant of 43 years at a notional 5% inflation on the buying power of the £7,224 (or £7,244?) per month which is 4% of £181,118 if you draw it down every month?
But after 2 years of retirement, it has gone? Is that right?0 -
There were two typos in my original post. One was 7224 instead of 7244 and the other was writing "month" instead of "year" as the last word, though I correctly used year and 7244 in the body text. Thanks for mentioning those two errors, I fixed the year/month transposition yesterday and just fixed the 7224/7244 one.
£603.70 is 1/12 of the 4% annual drawing rate of £7,244. £7,244 is the result of investment returns of 5% plus inflation for the 43 years on £100 a month gross then taking 4% of the resulting lump sum as annual income. 5% plus inflation is the long term historic UK stock market return. Because all of the numbers used are after allowing for the effect of inflation - like saying increase the monthly payment with inflation or using the after-inflation growth - all numbers are in today's money.
It wouldn't really cost £80 a month for a young person for long, though. That's because from 2018 the auto-enrolment rules change are set to require a split of 3% employee, 1% tax relief and 4% employer contribution. So the employees will more than double their own contribution and getting £100 a month gross in the pension would only cost £37.50 net. So it'll be £37.50 monthly paying in to get £603.70 monthly out.
That £37.50 a month would be the auto-enrolment amount for a person on £15,000 a year, 3% of that.
You've suffered from all sorts of past flaws in the system but defined contribution pensions eliminate most of those.0 -
Friends Life suffers by association with all those faults I listed.
Well, you've already been corrected regards that, so there is no point in repeating things. You don't even seem to be able to grasp the difference between DC and unfunded DB, so let's move on.You don't do it by pensions planning. That's picking up entirely the wrong end of the stick. You do it by life-planning
Pensions planning is a key part of this, which is why it's important that people understand the realities rather than being swayed by misinformed rants.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 beg to differ, so perhaps I should repeat the list that Friends Life and Aviva are all mixed up in (not exhaustive but all of which I have experienced as part of DC and DB shenanigans. They are not nice people.gadgetmind wrote: »Well, you've already been corrected regards that, so there is no point in repeating things. You don't even seem to be able to grasp the difference between DC and unfunded DB, so let's move on.
It is not key when you have barely two beans.Pensions planning is a key part of this, which is why it's important that people understand the realities rather than being swayed by misinformed rants.
And I still would like to know from Jamesd how that £7,244 (43 years future money) is going to last beyond two years of retirement.0 -
I'm calling troll and won't be responding further.The questions that get the best answers are the questions that give most detail....0
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