Pension won't be enough - realistic alternatives?

dunstonh

jeepjunkie wrote: »

Yeah that sounds typical for household name pension companies. It's amazing just how many plans are not even accessible online. Probably to keep you like a mushroom One of the reasons for consolidating to a SIPP Never looked back...

its not amazing really. Many of these products were conceived in the 80s and 90s. Pre-mainstream internet. So, they were not built with the internet in mind. They often used hard coded systems. The cost of upgrade is significant. You are looking hundreds of millions of pounds to a billion. They then have to decide is it worth spending all that money to upgrade a system which is no longer used for new pensions and the number of people on that system may only be in the tens of thousands or lower.

It is not just the old insurers either that are suffering. The early fund supermarkets/platforms/SIPP providers are starting to worry now. Quite a few are under strategic review and one of the reasons is that their software, which was cutting edge 10-15 years ago, is now long in the tooth and has fallen behind. Half a billion pounds one of them quoted last week to upgrade.

David.s_2

Arthien wrote: »

Having recently done a pension calculator, I was horrified to see that it showed I would need to put nearly £500 a month into a pension for the next 42 years in order to have more or less the same standard of lifestyle as I do now and retire at 68.

I think you have received correct information from your calculator. If you retire at 68 you can expect to live for approx. 16-18 years depending on where you live in UK and family health record. (Can anyone confirm this I am interpolating from life expectancy at 65.) So you need to save 17 years salary over 42 years. That's 40% of your salary each year. You are saving 12% with employers assistance. However, your employer is probably paying 13.8% of your salary as NI and you will be paying some NI too (around 12%?) which is also adding to your pension pot. Near the 40% mark. If your pension pot is rising faster than inflation, wow does anyone achieve that??) then you will probably reach your goal. There are so many variables who can really say where the world will be in 42 years time?
I remember reading a Consumer Assoc "Which " report in the early 1960's which said that investing in a pension below the age of 45 is bad value as you will be losing money up to that age due to professional fees. Pension pots benefit most from the last few years investments, especially the final year. According to "Which" of that date. So you can top up late in your working life if you wish.

Arthien

dunstonh wrote: »

Friends Life? Their online system needs taking down for good and starting again.

I'm glad you said that and it's not just me. It wouldn't work full stop on my tablet, and then showed the maintenance message on my laptop. This is after waiting for days for some 'authorisation code' in the post. It's not even clear which section of the site I need to access! No wonder some people stick it under the mattress

[Deleted User]

dunstonh wrote: »

its not amazing really. Many of these products were conceived in the 80s and 90s. Pre-mainstream internet. So, they were not built with the internet in mind. They often used hard coded systems. The cost of upgrade is significant. You are looking hundreds of millions of pounds to a billion. They then have to decide is it worth spending all that money to upgrade a system which is no longer used for new pensions and the number of people on that system may only be in the tens of thousands or lower.

It is not just the old insurers either that are suffering. The early fund supermarkets/platforms/SIPP providers are starting to worry now. Quite a few are under strategic review and one of the reasons is that their software, which was cutting edge 10-15 years ago, is now long in the tooth and has fallen behind. Half a billion pounds one of them quoted last week to upgrade.

Bank accounts, gas and electricity, car insurance, tv license, travel agents, online shopping, govt services like RFL, passport etc... Old products/retailers, some even older than pensions, all online now. Why... It saves money and offers convenience amongst loads of other benefits.

Sorry but for the life of me I can't see why one of the most the most important 'products' in your life is 'hidden' from you by some providers.

I take you point about small legacy providers but that is not really what I was getting at. More the likes of Aegon, Aviva, SW, Std Life etc who are raking it in, Used to contract in IT for some of the big household name insurers/banks.

Just my opinion

Cheers

jamesd

David.s, please don't suggest that guidance that was correct in the early 60s is correct today.

It is normal to receive investment growth greater than inflation, with the main UK market exceeding that by over 5% before charges that don't have to be higher than 0.5% and can be lower. This also means that it's particularly valuable to make contributions early on to maximise the number of years of compounded investment growth. Pension pots benefit least from the last few years of investments, not most, and the lack of much time for compound growth makes it far more expensive to do it that way.

jamesd

Arthien wrote: »

The 5% mortgage wasn't an 'avoiding-risk' based decision, it was a 'only one available' decision.

What was the original LTV like? What might it be today if you were to concentrate on reducing it instead of increasing pension contributions?

I'm asking because getting it below one of the every 5% thresholds for LTV can save a lot of mortgage interest. Since the whole mortgage benefits from the lower rate it can provide very good returns on the extra money spent. Biggest deal going from 95% original LTV and by the time you get to 75% most of the available gain has already been made.

dunstonh

Bank accounts, gas and electricity, car insurance, tv license, travel agents, online shopping, govt services like RFL, passport etc... Old products/retailers, some even older than pensions, all online now. Why... It saves money and offers convenience amongst loads of other benefits.

Those providers may only have 5000 people on a product type and losing around 100 policies a year (which will accelerate). Also, a lot of those use shared systems and not individual systems and are in more profitable areas.

Sorry but for the life of me I can't see why one of the most the most important 'products' in your life is 'hidden' from you by some providers.

its not hidden at all. They were just not created in a time when the internet existed.

Apple is on the Iphone 6. Do you see people with Iphone 1 or 2 being able to do things that the Iphone 6 can do? No. They need to change their product. A black and white tv cant become widescreen HD.

Many modern providers are more modular in their coding and product provision and can continually adapt their product. However, older products cannot do that without significant investment. Investment that is likely not to be viable when the product is no longer available.

I take you point about small legacy providers but that is not really what I was getting at. More the likes of Aegon, Aviva, SW, Std Life etc who are raking it in, Used to contract in IT for some of the big household name insurers/banks.

All of those providers have legacy/heritage. Aviva spent over a billion on IT upgrades and still couldnt get all their old systems on to one system. There comes a point when you have to leave old business where it is and give the choice to the person to move it if they want to. Also, all those providers have rather naff online systems too. Even on their new business offerings, they are behind many on the online side. I am not excusing them. I just understand the commercial reality of not spending hundreds of millions of pounds bringing small pockets of policies onto a modern system when you will never recover the money spent.

Ironically, I just received an email from FL telling me that my problem is one of those that is being fixed with the changes going on this week. So, blame me for it being down!!!!

kidmugsy

jeepjunkie wrote: »

for the life of me I can't see why one of the most the most important 'products' in your life is 'hidden' from you by some providers.

Yeah, just like that ruddy Will Shakespeare hiding his plays on bits of ruddy paper instead of posting them online. Sumfink otta be dun abaht it.

Arthien

jamesd wrote: »

What was the original LTV like? What might it be today if you were to concentrate on reducing it instead of increasing pension contributions?

I'm asking because getting it below one of the every 5% thresholds for LTV can save a lot of mortgage interest. Since the whole mortgage benefits from the lower rate it can provide very good returns on the extra money spent. Biggest deal going from 95% original LTV and by the time you get to 75% most of the available gain has already been made.

We started with 95% and I believe we're at 85% now. We've got a fix until the end of the year, so I don't think we'd gain much by remortgaging a few months early at 85% as the early repayment fee would outweigh it. We'll then make a decision about whether to move or get another short fix and carry on building up equity.

I have previously considered giving up the pension contribution in the short term, but I can see it never getting started again, as there's always something else that needs paying for. At least this way I know both are being covered, and the focus is still on the mortgage.

coyrls

David.s wrote: »

I think you have received correct information from your calculator. If you retire at 68 you can expect to live for approx. 16-18 years depending on where you live in UK and family health record. (Can anyone confirm this I am interpolating from life expectancy at 65.) So you need to save 17 years salary over 42 years. That's 40% of your salary each year. You are saving 12% with employers assistance. However, your employer is probably paying 13.8% of your salary as NI and you will be paying some NI too (around 12%?) which is also adding to your pension pot. Near the 40% mark. If your pension pot is rising faster than inflation, wow does anyone achieve that??) then you will probably reach your goal. There are so many variables who can really say where the world will be in 42 years time?
I remember reading a Consumer Assoc "Which " report in the early 1960's which said that investing in a pension below the age of 45 is bad value as you will be losing money up to that age due to professional fees. Pension pots benefit most from the last few years investments, especially the final year. According to "Which" of that date. So you can top up late in your working life if you wish.

Please don't base your decisions on a "Which" report from over 50 years ago. Everything you've suggested is poor advice.