My view on Pensions

AlanP_2

Rachel_Pierson wrote: »

Right. It's getting late. Thank you all for your opinions, even those I didn't agree with or that contained the words "rant" or "@rse". Although I remain convinced pensions are a bad investment, it's interesting to get an alternative perspective. So thank you for that.

Pensions aren't an investment they are a tax wrapper for investments.

Linton

1) The original "deal" on DB pensions was that you couldnt transfer them out at all except possibly to other DB pensions. You certainly couldnt get lump sums out as cash beyond the limits of the scheme rules. When you retired you simply got your guaranteed pension which is what continues to happen with no need for any IFA involvement. In my view: What then happened was that things got confused for a while when the rules for DC pensions were relaxed. It was belatedly realised that DB pensions were very different. So the current situation where you can transfer an equivalent value out but under the safeguard of having taken advice is somewhat of a lash-up process that provides the possibility of flexibility whilst retaining some protection. The IFA requirement isnt something restrictive in contravention of the initial "deal", it's providing some extra flexibility beyond that initial deal.

2) DC pensions have always been transferable. Well certainly since the 1970s.

3) There is no reason to control DC pensions. If there were, the same arguments could apply to controlling ISAs, or even bank accounts. There is no point in managing your finances on the basis of what the government could do at some time in the future. The possibilities are far too large.

Rachel_Pierson

AlanP wrote: »

But one of your main points is that you need IFA advice to do what you want with your pension - that in the main applies to a DB -> DC transfer.

Using that as the main point against DB schemes then today's DC schemes are better surely form your perspective?

As for overall earnings whilst that is true for you it wouldn't necessarily be for everyone opting to leave a Public Sector DB scheme for a "No Pension but Higher Salary" Private Sector scheme.

As it happens I went the other way from a non-pension private sector job to the public sector taking a 40% pay cut along the way but recognising that my income when I retired would be substantially better.

I made my choice and you made yours that does not make either of us correct or put us is a position where we can "preach" that our route is the Best Route.

Sorry, just one final thing Alan, my comment that "noone in their right mind would have bought a DB pension" arose from the John Small case I linked to earlier. He was a businessman all his life, running his own small company. So I assumed he must have "bought" some DB scheme (by paying for it as both an employer and employee throughout his career) for either just himself, or for all of his staff. Then found he had to argue the toss to convert it to cash.

Also, as noted, I can see the "requirement to obtain advice" stipulation suffering from scope creep by the time the current DC pensions come to pay out 20-40 years from now. I bet by that time the rules have changed again, and you'll need advice if you want to take a DC pot as cash.

zagfles

Rachel_Pierson wrote: »

I didn't opt out of mine. But the salary that accompanied it was so crap I did leave the job, and moved to the private sector.

So? That's a problem with the salary, not the pension.These days average salaries in the public sector are higher than the private, and the pensions are much better.

In the case I linked to earlier, I don't have any opinion as to whether it was the right move or not. But I do have the opinion that the pensioner in question was a competent businessman that was approaching the end of his life, who shouldn't have had to argue with a self-serving pension scheme organiser just to do what he thought was right with his own money.

I'd agree, but you seem to think that's the norm. It isn't. Most people can do exactly what they want with their DC scheme without having to pay a penny to any financial adviser (unless they want to).

Triumph13

Reading this thread I'm having real problems deciding whether the correct response should be 'Don't feed the troll' or 'Never argue with an idiot, they will only bring you down to their level and beat you with experience'.

michaels

If consenting adults enjoy trolling/being trolled then does it really matter?

robin61

Rachel_Pierson wrote: »

I can guarantee that every time I discuss pensions with a group, someone will ask that question. My answer is always the same - "the same as you, but I won't be propping up a Ponzi scheme for 40 years first". The fact, as I see it, is this: we're all going to have a crap retirement, unless we invest wisely ourselves outside of pension provision. 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.

So, my question to you is, what are you going to do when your pension isn't enough to support your retuirement? Same as me probably, except your investments may be worth less because you've had less funds available to invest whilst you were working.

I'm not going to have a crap retirement. I have been paying into my company DB scheme since I was 18 and have been investing in the AVC scheme linked to it so that I get the maximum PCLS without compromising my pension.

I could have a pretty good retirement on that alone. A long way from being crap actually. However I have also got a separate DC pension , my state pension when I reach the right age and then my wife has a couple of pensions and a state pension when the time comes.

I am not an MP and I have not worked in the public sector.

I have no problem with pensions in fact I doubt I could have done better.

You are clearly misguided. I just hope people have the sense not to take you seriously.

hyubh

Rachel_Pierson wrote: »

He was a businessman all his life, running his own small company. So I assumed he must have "bought" some DB scheme (by paying for it as both an employer and employee throughout his career)

Erm, the word 'annuity' is in the headline...

I can see the "requirement to obtain advice" stipulation suffering from scope creep by the time the current DC pensions come to pay out 20-40 years from now. I bet by that time the rules have changed again, and you'll need advice if you want to take a DC pot as cash.

If there come to be significant numbers of people frittering away their private/occupational pensions before their actual old age and falling back on the welfare state instead, that would be sensible, yes, however the trend as things currently stand will be going the other way as old DC arrangements with the sort of guarantees that mean they get grouped along with DB pensions in current 'freedom and choice' legislation fade away.

michaels wrote: »

If consenting adults enjoy trolling/being trolled then does it really matter?

Ha ha ;-)

taktikback

Thing is - the OP is trolling in a very intelligent way - I've really enjoyed this thread because it reminds me of chatting with Jehovah's Witnesses...no matter what facts or analysis are presented, the counter arguments are always "well god was behind that..it's amazing isn't it". You can't argue with that, because it's analysis with a pre-conception

I hate pensions because everyone wants to rip me off. I clearly don't understand the principles involved. I'm articulate enough to divert attention away from that at every turn. I like arguing, and I'm good at it...(apart from the bits that involve almost universally accepted information that is unfortunately at odds with my arguments - but never mind -attack is the best form of defence..) but most of all, I'm enjoying the responses I'm getting from the experts I've targetted.

Some people want to be victims, and actively work towards ensuring that is the case - I suspect the OP is not one of them - they probably have a nice big DBP payable at 60 RPI and a Christmas hamper...but where's the fun in starting a "smug thread"..

Brilliant...

dunstonh

If everyone took out their pension as a lump sum, plenty of schemes would go bust.) So, I feel it's the illusion of choice at best.

No they wouldnt. That is not how it works.

Although I remain convinced pensions are a bad investment,

Pensions are not an investment. They are a container for your investments. A tax wrapper.

Sorry, just one final thing Alan, my comment that "noone in their right mind would have bought a DB pension" arose from the John Small case I linked to earlier. He was a businessman all his life, running his own small company. So I assumed he must have "bought" some DB scheme (by paying for it as both an employer and employee throughout his career) for either just himself, or for all of his staff. Then found he had to argue the toss to convert it to cash.

He would not have had access to a DB scheme. It would have been DC. Plus, he would have saved significant amounts of tax and NI by using the pension wrapper to get the money out of the company.

In that example, he is hitting the age he has to do something but is refusing all the options available and the insurer has to go with the default. He is being pig headed and silly.

However, he is only in this situation because he has a plan with potentially valuable benefits that he wants to give up. Modern pensions do not have those guarantees. The last guaranteed annuity rate was available in 1995.

I have had people who say they dont want an annuity and are really adamant about it and when you go through the options and point out they have guarantees and what they are and how they will break even and when, frequently, they change their mind. That is why there is a requirement for people with these old plans with safeguarded benefits to get advice.

Also, as noted, I can see the "requirement to obtain advice" stipulation suffering from scope creep by the time the current DC pensions come to pay out 20-40 years from now. I bet by that time the rules have changed again, and you'll need advice if you want to take a DC pot as cash.

20 years ago, most pensions were bought under advice. Today, only a minority are. The creep is away from advice. Since 1998, pensions have had multiple reviews from Government that have made them more flexible and offer more options.