Is my pension contribution "worth it"

PeacefulWaters

agarnett wrote: »

Did I imply any such thing??It is a big world and aeroplanes take you anywhere you want to experience, and contrary to the UK experience, you don't have to restrict your career plans to service industry jobs. Believe it or not, some countries in the world do get on with the job of making things rather than living off industries that simply corner other people's money, or through standing guard over intellectual property and collecting tolls, which restricts freedom of ideas and enterprise.

You self-congratulatory commentators are a mixture of "I'm alright, Jack - been there, used my above-average indeed truly excellent noddle to validate it and try it, and it turned out pretty ok" types, and perhaps one or two snake oil merchants giving the wheel a turn.

Would one of you, instead of playing with imaginary performance based on some rose-tinted idea of the past or future, please care to tell the OP the average period that a real pension policy/plan like the one you think he should pay more into, remains as purchased in the UK over the past, say 20 years?

The sort of interruptions to the best made plans in the real world which I mean cut short the original intended contract are this (in order of the likelihood/frequency of it happening):

1. If the terms are unilaterally changed by the provider, then that ends the original plan for the purposes of my question, or
2. If the provider gets taken over, or
3. If the provider sells out your pension fund as part of a 'zombie fund' (you didn't realise your fund could be so labeled on a whim?), or
4. If the employer gets taken over, or the employer decides to be less generous with their contribution, or the trustees of the scheme if there are any, decide to crumble in effectiveness and fade away, or
5. If the individual purchaser changes jobs, that also more often than not ends the original plan, or
6. If the individual purchaser hits even leaner times and cannot even contemplate continuing in any form of contribution based scheme unless forced to, that ends it, or
7. If the government make sweeping changes such as changing the pension age (again) or introducing unfathomable rules about drawdown or taking tax-free cash or reducing basic pension entitlement based on something like SERPs which all normal people never understood in the first place (fathomable only by people like gadgetmind who DOES NOT represent the average pension buyer.) - that also represents the end of the period.

I would guess that the average period of a pension policy/plan on that basis would be about 24 months. Less for a younger manual worker.

And yet you commentators still dare to pontificate over your utopian investment scenarios based on some 30 or 40 year unchanged environment save for your ups and downs of a TR Index?

Get Real!

No-one should invest in any financial services industry pension product until

• they have secured their own individual platform of success, whether it be the longevity and rewards of their job, whether employed or self-employed, or some other measure where that person is sufficiently at ease in their world to be able to control their own destiny on their own say so, not someone else's
• they have the knowledge to challenge the seller of the product they feel might fit their life

both criteria that gadgetmind clearly has fulfilled for quite some time! How many buyers will ever be that clued in? I say you cannot afford not to be if you buy any pension product either via your employer or the open market. Putting serious contributions into a pension is worse than buying a second hand car with no understanding of what might be wrong with it. I was reading a thread over in the Motoring section yesterday thinking how so few people have a clue how not to buy a pig in a poke. It's the same with pensions.

The advice over there ranged from buying a high mileage one which has been used daily to the opposite extreme of buying a low mileage one at a premium price.

I think the best advice was that you take your expendable budget and halve it. You buy a car costing half what you can afford to lose, and then if you lose it because it turns out to be junk, you still have half left to buy another.

Maybe employer-sponsored pension schemes can be viewed a bit like that - if you can afford a 6% contribution and if your employer is prepared to match it, then just view the employer's contribution as the bit you might be able to afford to lose before you transfer out to a better scheme?

It is all nonsense of course. A terrible muddle for all except the well off to think about. For most people who like the OP do not have a generous salary and perks package, that means you should let the government worry about your retirement until you have the success, knowledge and luxury of time on your hands to monitor investments as closely as thread commentators regularly suggest.

Incidentally, £2.5K per month for STEM graduates is not success, unless it is scheduled to rapidly increase within 18 months to say £4K per month. £2.5K is a mickey take when they will be leaving university with typically £60,000 to £100,000 of student loan debt increasing at 6+% pa under current English arrangements.

£3K pm rising to £4K pm in 18 months is what some 'lucky' graduate might land if they get an in to say the Financial Conduct Authority, regulating(sic) the whole sorry show discussed in this thread. STEM graduates could expect to start on £4K pm in Europe.

And the terribly sad thing is that jobs like gadgetmind offers and FCA might offer are very much the exception in UK for 'ordinary' graduates. So rather than on £2.5K pm starting salaries, you get swarms of impressionable smart-a$$es employed in financial services, learning bad habits, many even starting as lowly bank cashiers just to get an in. And when do you think a bank cashier might ever see £2.5K pm?? About as often as the OP dares dream of it I should think.

I only asked where you thought they should go to be appreciated.

Jesus.

Bootsox

agarnett wrote: »

I am amazed at how this thread seems to be self-sustaining despite that little revelation from the OP

My advice to the OP might be to forget UK and emigrate to a place where labour is respected and the financial services industry are not such overt crooks and snake oil merchants :mad:

I agree, places like Canada and Australasia pay 2-3 times the UK going rate.

This country treats skilled engineers with utter contempt.

gadgetmind

Bootsox wrote: »

I agree, places like Canada and Australasia pay 2-3 times the UK going rate.

I employ skilled engineers in many countries across four continents.

The UK certainly isn't my most expensive place to employ people (that's the SF Bay Area for me) but we pay enough for people to have a similar lifestyle here in the UK. Remember, a lot of counties don't have the NHS, have high housing costs, and lots of other unexpected expenses.

I've had people move from the UK to the US (while still working for us) and have a paper 2x salary multiply, and then start wanting to move back as they realise the grass isn't really greener.

Of course, if anyone here wants to start employing engineers in the UK for 2x or 3x what my company is paying them, then please go ahead. You may find putting your money where your mouth is harder than you think, but feel entirely free to prove me wrong.

Thrugelmir

gadgetmind wrote: »

And, to be fair, let's also not forget inflation along the way ...

As the article said.

Factoring in inflation over the same period the FTSE-100 has just – and only just – kept up with the cost of living.

Not as exciting an investment as is often portrayed. Yet people now chase yield with an aversion to risk. Going to be some very burnt fingers one day. In many ways it's like watching investors chasing LastMinute.com. Greed overtakes rationality.

kangoora

gadgetmind wrote: »

I employ skilled engineers in many countries across four continents.

The UK certainly isn't my most expensive place to employ people (that's the SF Bay Area for me) but we pay enough for people to have a similar lifestyle here in the UK. Remember, a lot of counties don't have the NHS, have high housing costs, and lots of other unexpected expenses.

I've had people move from the UK to the US (while still working for us) and have a paper 2x salary multiply, and then start wanting to move back as they realise the grass isn't really greener.

Of course, if anyone here wants to start employing engineers in the UK for 2x or 3x what my company is paying them, then please go ahead. You may find putting your money where your mouth is harder than you think, but feel entirely free to prove me wrong.

That depends a lot on the area you move to in USA. I moved to Fort Lauderdale many years ago with a 60% pay rise and was living the life of Reilly over there compared to UK. Gated community, swimming pool, cost of eating out, new car, almost trebled my house size etc. Others who went to North Carolina/ Research Triangle Park were even better off.

Company medical and dental benefits are key to that though as private cover was insanely costly - although you do get what you pay for. Needed an exploratory op, requested Thursday by GP, was in the hospital and being seen to on Friday.

jamesd

Thrugelmir wrote: »

Not as exciting an investment as is often portrayed.

That's for a single lump sum invested at the worst point in the last few decades and people still did OK over a time horizon shorter than normal retirement planning.

Pick a month and make an equity-based investment. Here are your historic chances of having beaten cash, first percentage, or gilts, closer to mortgage rates, the second:

2 years: 67%, 68%
5 years: 74%, 73%
10 years: 90%, 79%
18 years: 99%, 88%

Source for these is the 2013 Equity Gilt Study, page 77 and they cover a period of more than a hundred years. You do better than that with regular investing as normal in pensions because most of the money won't be invested at the market high points.

gadgetmind

kangoora wrote: »

Others who went to North Carolina/ Research Triangle Park were even better off.

They might find things different now. Housing costs in many areas have gone insane, nearly as crazy as central London. A hot topic in the Bay Area currently is large employers such as Google using large buses to transport workers from San Francisco as even their fancy technology salaries won't get them much in the San Jose area. This is pushing up prices elsewhere resulting in protests and attempts at blockades.

http://www.cnbc.com/id/101415989

Company medical and dental benefits are key to that though as private cover was insanely costly

Agreed, which is why when things go wrong in the USA, they go very wrong, and why people struggle in retirement.

Needed an exploratory op, requested Thursday by GP, was in the hospital and being seen to on Friday.

I get that with my company BUPA cover, which costs less than £400 a year.

kidmugsy

agarnett wrote: »

you should let the government worry about your retirement

Quite right: freeloading on the taxpayers is a strategy that rarely fails. The reforms of the welfare state by the 1945 government might almost have been designed with that aim in mind.

kidmugsy

gadgetmind wrote: »

Agreed, which is why when things go wrong in the USA, they go very wrong, and why people struggle in retirement.

In retirement they'd get Medicare. The horror show is if you lose employer cover during your career years, so that potentially you, your spouse, and your children could all lack health insurance cover. A second horror show appears to be Obamacare, which seems to have been part con trick, part monument of incompetence. Vested interests will presumably obstruct the US from doing something sensible such as copying Singapore or Switzerland (though to be fair, they'll also probably protect them from something as mutton-headed as the NHS).

jamesd

The Affordable Care Act (Obamacare) appears to deal quite comprehensively with the major loss of job issues, making insurance premiums affordable for those in that situation who have the savings to pay the bills. Lower prices and an obligation to cover everyone helps hugely in that situation. But of course that's only for people who have the money to pay the premiums, there's not that much of a safety net otherwise.