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Is a Pension Worth Having?
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JoeCrystal wrote: »Not sure what your point about BHS staff is. They are still in very good and enviable position of getting index-linked retirement income which cost them a pittance and ultimately backed by the PPF. As they are in a DB pension scheme which are in a different league entirely from people with DC pension scheme, I am not sure it is really comparable.
Anyway, as you pointed out about the hidden charges, could you please tell me where your assumption of 2% to 2.5% per year came from? My AMC and pension fund charge are 0.5% ATM and and what about the funds outside the pension, their charges are still hidden right?
Of course, it is a good thing that there will be more information about the charges so once it come out in January 2018 so we can make better choices. Having said that, you are posting in the pension forum with many outstanding posters who spare their expertise and time to help out others. You are not going to be able to convince the vast majority of the posters on this forum that pension is worthless when so many people in this country found that they are worthwhile. Ultimately, I do wish you well in your retirement saving even though you do treat the DC pension schemes with disdain when eventually everyone will have a workplace pension scheme due to auto-enrolment and for a good reason.
The suggestion was that pensions are always protected and cant be lost unlike investments. BHS staff were facing a near total loss of pension until the delightful Mr Green was shamed/forced to pay £363million back in!
The 2-2.5% is best industry estimate of the total charges on managed funds (inside or outside a pension) Your AMC might have a headline rate of 0.5% but they will never tell you what the hidden ones are, hence the new legislation.
Most people are mentally totally invested in the benefits of a pension, everyone knows they are a key part of life, right. Most are not going to want to hear they may be wrong. They will close their ears and try to shout you down, not exactly open minded.
The ONLY reason for auto-enrolment is so the government can degrade/end state pensions.0 -
Unless you have a Sipp or SSAS (which most dont) you have NO IDEA what charges are applied to the scheme.
I am looking for genuine reasons not assumptions or misconceptions, an 'opinion' need a bit more back up.
Jeez I’ll rise to the bait. Why does it matter if “most”do even if that’s true.
All that matter is what YOU do. So get a SIPP.
Right, I’m REALLY out now I shall avoid the masochistic tendency to come back to this thread , enjoy your impoverished retirement and I thank you sincerely for giving more money to HMRC than you need so the rest of us don’t have to.0 -
Ok I thought I would try some number.
Simplistically, if someone puts £100k into a pension over 40 years and another take the £100k taxed and gets £80k to invest themselves.
Based on monthly contributions into a typical managed pension fund compared to a non managed investments of a similar return.
£100k @4.5% compound for 40 years = £288k minus 25% tax free (£72k) = £216k minus 20% tax = £173k + £72 = £245k at the end.
£80k @7% compound for 40 years = £444k minus £80k you started with, minus 20% tax = £291k at the end.
Obviously the tax at the end is variable but even if you didnt pay any tax there is still no clear monetary benefit from the pension. But you made plenty of money for the institutions along the way.
Whilst many here would mitigate a lot of this disadvantages of a pension most dont or cant. They are conned by the consensus that pensions are automatically and overwhelmingly a good thing. The government & institutions want your money trapped in a pension as loooong as possible.0 -
" pensions with very high charges are not worth having " is completely different to " pensions are not worth having".The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
Often people seem to use this word mistakenly where "quandary" would fit better.0 -
Ok I thought I would try some number.
Simplistically, if someone puts £100k into a pension over 40 years and another take the £100k taxed and gets £80k to invest themselves.
Based on monthly contributions into a typical managed pension fund compared to a non managed investments of a similar return.
£100k @4.5% compound for 40 years = £288k minus 25% tax free (£72k) = £216k minus 20% tax = £173k + £72 = £245k at the end.
£80k @7% compound for 40 years = £444k minus £80k you started with, minus 20% tax = £291k at the end.
Obviously the tax at the end is variable but even if you didnt pay any tax there is still no clear monetary benefit from the pension. But you made plenty of money for the institutions along the way.
Whilst many here would mitigate a lot of this disadvantages of a pension most dont or cant. They are conned by the consensus that pensions are automatically and overwhelmingly a good thing. The government & institutions want your money trapped in a pension as loooong as possible.
What "non managed investments of a similar return" can't be held within a pension wrapper?0 -
Ok I thought I would try some number.
Simplistically, if someone puts £100k into a pension over 40 years and another take the £100k taxed and gets £80k to invest themselves.
Based on monthly contributions into a typical managed pension fund compared to a non managed investments of a similar return.
£100k @4.5% compound for 40 years = £288k minus 25% tax free (£72k) = £216k minus 20% tax = £173k + £72 = £245k at the end.
£80k @7% compound for 40 years = £444k minus £80k you started with, minus 20% tax = £291k at the end.
Obviously the tax at the end is variable but even if you didnt pay any tax there is still no clear monetary benefit from the pension. But you made plenty of money for the institutions along the way.
Whilst many here would mitigate a lot of this disadvantages of a pension most dont or cant. They are conned by the consensus that pensions are automatically and overwhelmingly a good thing. The government & institutions want your money trapped in a pension as loooong as possible.
You must have had some crap pensions.
The return within an outside a pension is the same, whether you hold funds in a general investment account, an isa etc
You hold exactly the same funds within a pension as outside, the which article you quote is poor, which are fine if you want to buy electrical goods but have little to add with investments or financial matters like many journalists.
There are no hidden charges because you see the net amount, you can track the returns from virtually all modern pensions, whether they be a personal pension or a sipp, by monitoring in trustnet, Morningstar or similar websites. Returns are always quoted net, the charges come out first.0 -
Pensions are not perfect. In return for tying up your money until you retire (at 55+) you get some advantages such as employer contribution, 25% tax free lump sum, tax relief on the way in, etc. There are some !!!! pension providers, there are some !!!! investment providers outside of pensions. If you do not wish to contribute to a pension, no one is forcing you. Look at what is available and choose what is best for you. Me? I'm really glad I spent the last 30 years thinking about how I was going to fund my later years and that I chose to benefit from what a pension could offer. It may change, it's not compulsary, whatever you decide just make sure you save for the future."For every complicated problem, there is always a simple, wrong answer"0
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My point was that 75% is taxed in the same way as any earning, regardless of it coming from a pension, so no advantage.
But if you employer offers to match your contribution or you get ZERO then there is an advantage.
I accept things might be different for you but in my industry pension matching is very common. The alternative to taking the matched contributions is zero outside a pension.
You need to accept your circumstances are not the same as others. I accept this.0 -
Ok I thought I would try some number.
Simplistically, if someone puts £100k into a pension over 40 years and another take the £100k taxed and gets £80k to invest themselves.
Based on monthly contributions into a typical managed pension fund compared to a non managed investments of a similar return.
£100k @4.5% compound for 40 years = £288k minus 25% tax free (£72k) = £216k minus 20% tax = £173k + £72 = £245k at the end.
£80k @7% compound for 40 years = £444k minus £80k you started with, minus 20% tax = £291k at the end.
Obviously the tax at the end is variable but even if you didnt pay any tax there is still no clear monetary benefit from the pension. But you made plenty of money for the institutions along the way.
Whilst many here would mitigate a lot of this disadvantages of a pension most dont or cant. They are conned by the consensus that pensions are automatically and overwhelmingly a good thing. The government & institutions want your money trapped in a pension as loooong as possible.
I certainly do not pay 2.5% extra in my SIPP compared to my ISA.
Sounds like you’re getting a raw deal with no salary sacrifice.0 -
" pensions with very high charges are not worth having " is completely different to " pensions are not worth having".
Most people have managed pensions, most if not all are charging 2-2.5% including hidden charges. I also never said pensions are not worth having.What "non managed investments of a similar return" can't be held within a pension wrapper?
Most can, property is typically a problem, in fact any tangible assets are usually a problem.You must have had some crap pensions.
The return within an outside a pension is the same, whether you hold funds in a general investment account, an isa etc
You hold exactly the same funds within a pension as outside, the which article you quote is poor, which are fine if you want to buy electrical goods but have little to add with investments or financial matters like many journalists.
Yes if you held the same managed funds outside a pension wrapper you would have the same costs...There are no hidden charges because you see the net amount, you can track the returns from virtually all modern pensions, whether they be a personal pension or a sipp, by monitoring in trustnet, Morningstar or similar websites. Returns are always quoted net, the charges come out first.
Its difficult to give an accurate answer without seeing the actual figures quoted. I suspect that only the 'quoted' charges come out first.
Why do you think the gov are forcing them to show all charges and why do you think there has been such resistance to do so?!
They have been hiding these cost a looong time, they are very good at it, the whole point is you cant tell!0
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