Pension shock - can this be right?

Anonymous101

Doglegger wrote: »

I get astounded at the arrogance of some on here with regards how much real people should know about pensions. In my line of work you could hardly call anybody thick but until 3 years ago I knew zip about what was going on with my pension. It was only speaking to an IFA (on my scheme providers advice) and then later coming here that I've managed to elevate myself to just about understanding half of it.
Within my peers I now seem to be the resident expert on pensions so that's how much attention highly educated, high earners care about it. Rightly or wrongly people have other more pressing things to care about. Probably have proper lives away from things like pension forums!!

I'd like to think in my case its passion not arrogance. I'm not critising the person for not knowing. I just think its incredably important and if they could raise their level of awareness then it would be hugley benefitial.


I work in a professional industry where most people are fairly well educated, but as you describe they know next to nothing about pensions. Its not about being elitist or looking down on anyone its just that I think the basics about pensions are something that everyone should be aware of. Especially now there's a minumin level of contribution that everyone should be making.


Its even more important that people earning less understand where their money is going and how much they'll have in retirement. People with large sums can afford to make mistakes where as people on lower incomes cannot.

Malthusian

AnotherJoe wrote: »

I think they could just tell you how much money you'd have as a lump sum without mentioning annuities that are such poor value no one but the terminally ill will buy.

People don't know how to interpret the information that they have a large sum of money (5/6 figures) or will have in the future. This is the "lottery winner" effect that resulted in a significant minority of people destroying their pension fund after pension freedoms came in. Just showing them the lump sum without making any attempt to tell them how much it will provide runs a high risk of making a lot of people think that it feels enough when it isn't.

It would be interesting to run one of those "silly question, silly answer" surveys where you asked people on the street to name a figure for how much they thought they needed as a pension fund in retirement and how much income they wanted to live on. The average guess would probably be about half what was actually needed.

These illustrations only have one purpose and that is to make people start thinking about their pension provision instead of having feels. Wrong thoughts are better than no thoughts at all.

And not use projections of future growth that make premium bonds look tempting.

Problem is that the alternative was to use projections of future growth that gave the impression people had saved / were paying enough into their pensions when they weren't. This is what we did until the early 2010s when the projection rules changed.

Someone above said that they reacted by putting more in their pension and then later retired early, which is exactly what was supposed to happen. Someone who reacts to the illustration by cashing in the pension, paying loads of tax and putting the rest into Premium Bonds was probably going to bone themselves no matter what the illustration said.

crv1963

I disagree that some are deliberately arrogant, but do agree that sometimes replies could be taken to be so.

I think that the level of knowledge generally is low, I'm not sure what the solution to that is. Like Anonymous101 I took the time and trouble to find out more for myself and I am sometimes asked for advice from colleagues, am seen as a bit obsessive about ensuring retirement income.

Like many here I find the whole process interesting, Mrs CRV on the other hand finds it all boring and difficult to grasp. Both reasonably bright, professional and work with skilled people most of whom roll their eyes at discussion of pensions.

It is I think because it is out of most peoples everyday thoughts and skill set. Some for whom it will directly effect will try to discover more, some will bury their heads and hope for the best.

I'm sure a heating engineer or plumber could explain in detail why my sink tap doesn't run hot in my bathroom but the bath tap works perfectly, I don't really want to know I just want it fixed. Possibly most people are like that about their pensions, they just want the bottom line?

Clive_Woody

I got my annual mailing from Scottish Widows where I have a very small pot from a job from a few years ago. In the last 12 months the pot has increased in value by around £500 to give a total of about £11.5k.

The projection says when I reach 65 (in 21 years time) the pot could be worth £12.5k with the warning it could actually be higher or lower than this. Thankfully I am well aware that the projection and the estimate monthly income from it if I bought an annuity is nonsense.

It did remind me that I probably need to shift this from SW to combine with one of my bigger pots that seem to be growing faster and have lower fees.

seacaitch

crv1963 wrote: »

It is I think because it is out of most peoples everyday thoughts and skill set. Some for whom it will directly effect will try to discover more, some will bury their heads and hope for the best.

I'm sure a heating engineer or plumber could explain in detail why my sink tap doesn't run hot in my bathroom but the bath tap works perfectly, I don't really want to know I just want it fixed. Possibly most people are like that about their pensions, they just want the bottom line?

A couple of key (arguably necessary) skills in life are:
(i) how to look after your health (such as following a sensible diet, doing some exercise, etc); and
(ii) how to look after your personal finances (such as basic budgeting, learning to save, borrow sensibly, make provision for later in life, etc).

Some people are dealt are a very tough hand in life and are unable to do much about (i) or (ii). But for most of us, whether we do or don't make a good stab of (i) and (ii) often comes down to whether we choose to take personal responsibility for our own lives. Many do, some don't, or not as much as they could.

Better education in and about those areas, and the consequences if people don't take responsibility, should help. But it's tricky, since both areas require people to play a long game, which seems to be easier for some people (personality types?) to do than it is for others.

Ever more education and better clarity on the subjects is probably the only thing that can be done, so that people are acutely aware they need to take responsibility for these things - and the sooner the better - because nobody else is going to do it for them.

Sea_Shell

So much of current society seems to be geared towards, "eat the cake" or "buy the car", just enjoy life, no worries!!! No long game in sight!!!

Ignoring the fact that too much of a good thing is bad for you and you'll end up overweight and skint before you know it.;);)

Terron

My IQ is in the top 1% and I have 2 degrees and I find pensions statements hard reading. That is why I came here and why I hired an IFA.


I think it might help if four estimates were provided:
a) the current annuity figure with a note that it is guaranteed for life and there will be nothing to pass on.
b) a drawdown estimate based on a SWR with a note that there is a %age chance than the money will run out after 30 years and that anything less could be passed on (tax free). The exact numbers would have to be specified so that everyone uses the same ones to enable a fair comparison.
Both would be repeated with a 25% TFLS.

seacaitch

Terron wrote: »

My IQ is in the top 1% and I have 2 degrees and I find pensions statements hard reading. That is why I came here and why I hired an IFA.

A lot of bright people have specific domain expertise that doesn't necessarily automatically transfer to or prepare them for other subject domains.

Absolutely nothing wrong with appointing someone else with that specialist domain expertise to do stuff for you. I do that all the time in my own life in all sorts of areas either because they can do a better job than I could or because it wouldn't be an effective use of my time to gain the skills and do the job myself.

Outsourcing stuff under your direction so that someone else with expertise is doing the heavy lifting is still very much you taking responsibility.

MarkCarnage

Sea_Shell wrote: »

So much of current society seems to be geared towards, "eat the cake" or "buy the car", just enjoy life, no worries!!! No long game in sight!!!

Ignoring the fact that too much of a good thing is bad for you and you'll end up overweight and skint before you know it.;);)

And worse, expecting others to bail you out for the consequences of your own actions.....

JillyC8

Number75 wrote: »

Why would a spouse only get 50% of a DC pot?
That doesn’t make sense.
Do you mean, if the DC pot was used to purchase a joint lives annuity then eventually a spouse might only get 50%? (if that was the terms of the product)
In which case - don’t but that product.

This how most DB pensions work ... the spouse receiving 50% after death of their husband/wife ...