Inflation is over 10%..what will your pension buy ?

TRUSt_NO_1_2

True inflation (UK) is over 10%.
For most pensioners 10% is probably conservative, as food and energy bills are the bulk of most pensioners spend. I don’t think they buy a plasma TV every week !

The RPI is a joke. The concept of a one size inflation figure fits all is ill conceived, excluding the fact that it is changed regularly to keep it conveniently at 2.something percent.

With a loaf of bread costing over £3 within 10 years (probably £2 within 18 months), as a guide line, how far do you think an RPI that is stuck at 2.5% will protect the buying power of your pension ? That’s assuming your pension is index linked.

So when considering your different pension options build both these numbers (government inflation,RPI =2.5%, true inflation =10%) into your calculations.
This is the reason why I am looking to move a "deferred" final salary scheme pension into a SIPP.
Think I'm mad ?..'professional' financial advisers will I'm sure.
Unfortunately the pension profession has repeatedly through recent years got their sums badly wrong.
My reasoning is that, on the proviso of a reasonable transfer value, I should have an extremely good chance of seriously outperforming the RPI for the next 10 years or so and increasing the pension (drawdown) that I will collect, that will not be eroded away by 'stealth' inflation.
Nor will I have to worry about the Pension Protection Fund, which will run into serious under-funding within 5 years...I expect a lot sooner when the derivatives market unwinds and most decent company pension schemes collapse.

royeee

My previous company pension which I took out at 50 had a 4.4% increase this year based on last December RPI. In some ways need a bit of luck for the year's peak RPI to happen in the month the company pension picks up the RPI and such increase is generally limited to a maximum of 5%.

purch

The RPI is a joke. The concept of a one size inflation figure fits all is ill conceived, excluding the fact that it is changed regularly to keep it conveniently at 2.something percent.

Can't disagree there..........there are some in this 'fine' nation who will have a personal inflation rate of less than 1%....but many will have a rate much higher than the puplished rates....and in the current economic climate it will always be the lowest paid or those on the lowest income who will be worst hit.

If you think you can build a bigger Pension Fund by D.I.Y then good luck to you.

However.........

when the derivatives market unwinds

..as it no doubt will........(Derivatives are hugely over leveraged and barely understood, and are hedged with similarly over leveraged and barely understood instruments, when it happens it will be the biggest pack of cards collapsing ever)...no Investment will be safe, so the DIY route has no certainty of insulating you or anyone else from a market meltdown.

Andy_L

Based on your claim of RPI being 2.5% you appear to misunderstand RPI. Still, crack on & let us know how it goes.

missile

TRUSt_NO_1 wrote: »

True inflation (UK) is over 10%.
For most pensioners 10% is probably conservative, as food and energy bills are the bulk of most pensioners spend. I don’t think they buy a plasma TV every week !

The RPI is a joke. The concept of a one size inflation figure fits all is ill conceived, excluding the fact that it is changed regularly to keep it conveniently at 2.something percent.

With a loaf of bread costing over £3 within 10 years (probably £2 within 18 months), as a guide line, how far do you think an RPI that is stuck at 2.5% will protect the buying power of your pension ? That’s assuming your pension is index linked.

So when considering your different pension options build both these numbers (government inflation,RPI =2.5%, true inflation =10%) into your calculations.
This is the reason why I am looking to move a "deferred" final salary scheme pension into a SIPP.
Think I'm mad ?..'professional' financial advisers will I'm sure.
Unfortunately the pension profession has repeatedly through recent years got their sums badly wrong.
My reasoning is that, on the proviso of a reasonable transfer value, I should have an extremely good chance of seriously outperforming the RPI for the next 10 years or so and increasing the pension (drawdown) that I will collect, that will not be eroded away by 'stealth' inflation.
Nor will I have to worry about the Pension Protection Fund, which will run into serious under-funding within 5 years...I expect a lot sooner when the derivatives market unwinds and most decent company pension schemes collapse.

Where do you get 10% inflation? Whilst I would agree RPI is not a good measure, it is a bit more accurate that your price of bread example. Bread is £0.32 at my supermarket and the cost of many foods has actually fallen.

You expect to get substantialy more than 10% return from a SIPP. Do you have any experience or special knowledge which would justify this opinion?

purch

Bread is £0.32 at my supermarket

:eek:

.......guess that must be the cheapest value stuff possible !!!

If you eat that kinda stuff you won't need to worry about a Pension :rotfl:

missile

It has been a while since I bought bread in a supermarket, but that is the price for Tesco white sliced.

What I usually buy is a large bagette which costs €0.40 circa 25p in "real" money. :iloveyou:

[Deleted User]

Lets say food and energy goes up 5% a year, house prices 8% and the stock market 12%.

Then id say true inflation is around 7-8%

chesky369

most pensioners won't have to reckon with house price increases - by that stage they've either got one paid for or their b

---

d anyway.

cheerfulcat

Everyone has a personal inflation rate - it is IMHO a better rate than CPI or RPI to use when planning long-term investment. There is a handy calculator on the ONS site, here.

[Deleted User]

Just used that government tool and guess what, integrating the line and taking the average, my personal inflation is between 7-8% thank you cr***y government for f***in nicking all of my money with inflation without me knowing.

Stealth tax or what!!!!


.... Goes to remove money out of his accounts and buys more gold, f**k the british rob the middle class feed the upper class on social security system.