My view on Pensions

bowlhead99

Rachel_Pierson wrote: »

don't think it's this Triumph; OP is an IT coder with her own limited company. Does auto-enrolment cover one-(wo)man-bands?

I'm not, actually. (Was previously some years ago, but not any more.) Perhaps you shouldn't believe everything you read online?

He was probably reading the blogspot which you use to host your rants over previous IT contracts or customer service experiences, and jumped to the wrong conclusion.

Oh no, it's the wrong conclusion and he's posting it online! While you are sitting there with the right facts. Isn't it frustrating to know or understand something and then read someone else who has a complete misunderstanding of the facts about it, post their flawed opinions online?!

I guess if he stuck rigidly to his initial conclusions and disregarded all explicit corrections, refutations and counterarguments, sticking instead to outdated information and an erroneous conclusion about the issue, it would be an analogy for the whole thread.

However, I expect he will happily accept the correction once it's been pointed out, acknowledging his guesstimate was due to outdated information where he wasn't up to speed with the situation. Being enlightened - and not having a misconception in your head - is a great thing!

Or maybe he could dig his heels in and start posting pictures to illustrate some of the points of a Paul Graham essay about argument. You know, to distract and deflect from the fact that he doesn't want to take the correction. But that would be stupid.

Lessons in here for all, I'm sure.

Temrael

This thread has probably gone as far as it's going to. There's obviously lots of strong feelings and entrenched positions (neither side is going to convince the other lets face it). But for what it's worth, here's my tuppenth...

If I put £100k in an Index Tracking fund in a DC pension
Or £100k in the same Index Tracking fund in an ISA...

Why is the money in the pension a Ponzi/pyramid/dodgy scheme, but the same money in the same fund in an ISA isn't?

Successive governments have wanted to incentivise people to save for retirement (perfectly reasonable and responsible), and so decided to give fairly generous tax breaks on pensions.

These tax breaks necessitate regulations and rules on when and how the money is accessed, to ensure pensions aren't abused.

Some people are instinctively sceptical/unhappy with these regulations, if the government took them away though, the tax breaks would need to be withdrawn too. What you would be left with would basically be an ISA.

If you don't want to feel "locked in" as you are with a Pension, go with the ISA or something.

You are missing out "on free money" that will accelerate your growth (as has been discussed) but if the freedom and flexibility is more important to you, that's fine. Ignore pensions and plan your retirement using ISAs or whatever feels right for you.

Horses for courses.

But if you come onto a board about pensions and say everyone here is gullible/wrong, it's never going to go well is it?

dunstonh

If I put £100k in an Index Tracking fund in a DC pension
Or £100k in the same Index Tracking fund in an ISA...

Taking that a stage further as the OP is opting out and giving up the employer contribution. Lets say its a matched contribution.

So, if you the same net amount into an ISA and used the same fund, the value of the ISA would be £80,000. The pension would be £200,000.

Yet the OP thinks that the £80,000 in the ISA is better than the £200k in the pension that cost exactly the same to build up.

steampowered

Name me one person that wasn't an MP that can live on their pension alone today? Most people rely on a combination of other investments to supplement what amounts to a pretty meagre sum from their pension.

This is really the key point, and I think goes to the heart of everything Rachel is saying.

The key point to understand is that standard defined contribution pension schemes are not a type of investment. They are simply a wrapper within which you hold investments. The performance of the investment is determined by the underlying investment, not the nature of the wrapper.

For example, if you want to buy shares, you can buy those directly. Or you can buy them through an ISA. Or you can buy them through a pension.

The significance of doing it through a pension is that (1) you receive significant tax benefits, and (2) your employer may match your contributions (allowing you to buy £2 worth of shares for every £1 you put in).

That is why the points made by Rachel about schemes like BHS are simply nonsense. That point is only valid when you are talking about final salary schemes. These days most people have defined contribution schemes in which the investment belongs to you, not your employer. It doesn't matter if the employer goes bust.

Most pension schemes are simply investments into managed investment funds, which select investments like shares on your behalf. If you would rather make your own investment choices, you can move your funds into a SIPP (self-invested personal pension) and make your own investment decisions.

steampowered

Temrael wrote: »

This thread has probably gone as far as it's going to. There's obviously lots of strong feelings and entrenched positions (neither side is going to convince the other lets face it).

The key point is that this thread is not a matter of opinion. It is a matter of fact.

The Op simply does not understand what a standard defined contribution scheme is or how it works. When one understands these basic facts, all of the points made by the Op are factually wrong.

RickyB2000

I think pensions do sell themselves, but you have to understand where they fit in with your overall planning which I would guess many people don't.

If pensions were such poor investment,s why would HMG be doing everything it can to reduce the benefit higher earners get from them? If it was a scam to make TPTB rich wouldn't they be encouraging as much in as they possible could? Admittedly as you come down the income scale the benefits reduce, but they are still there. They offer a carrot to drive certain behaviour.

BananaRepublic

I agree, the OP does not understand what they are talking about.

Enrol in an employer provided pension, and they will give you money for free. In my case if I put in 6%, my employer puts in 7%. So my contribution is more than doubled.

As far as tax is concerned, the 7% never attracted tax. The 6% gets an automatic basic rate tax rebate, and a higher rate tax rebate can be claimed via the tax return if appropriate. Now, this is not necessarily deferred tax. Assuming I retired today, I would have a state pension of £8,000. My tax free allowance is £11,000. So if I take a drawdown of £4,000 a year from my company pension, the first £1,000 is tax free, the next £3,000 is tax free because I do not go above the tax free allowance. So, I get £4,000 a year tax free from my company pension.

However, it gets better if I retire early. Lets say I retire at 55. I can then take almost £15,000 a year from my company pension tax free. £3,750 is a tax free lump sum, the rest is almost completely free of tax, because I have an £11,000 a year tax free allowance. Not surprisingly I am stuffing money into my SIPP, so that I can drawdown money in the years between retirement, and reaching state pension age.

As regards the OP's posts being described as rants, if she continues to post and ignore facts, then her posts can fairly be described as rants.

coyrls

An employer’s pension provision is part of a compensation package. It may well be rational to choose a compensation package that has lower pension benefits but a higher salary. What would be irrational would be to essentially throw away part of your chosen compensation package by opting out of an employer’s pension scheme and forgoing employer pension contributions. An employer will not compensate you by increasing your salary if you opt out of their pension scheme.

MyOnlyPost

Rachel_Pierson wrote: »

Wow. What other decisions would you like to make for us, oh wise one?

For you? Couldn't give a shiiite you can just live under your bridge for all I care

For my autistic son and daughter who cannot see beyond the end of this week, let alone their retirement I am glad that something is being done

atush

fairleads wrote: »

But arn't trolls in the eye of the beholder? you know, the ones who use terms like stupid and numpty, and as for post 93, how come it has been on view for so long - am i the only one to report it?

What is wrong with numpty?

Which is a kind (not mean or nasty) pejorative saying the op is clueless? And they are? On pensions at least.

And I only used that after they declined to read or reply to over 20 posts saying exactly how wrong their statements and assumptions were.

You are a troll enabler