Diminishing returns on a private pension

dunstonh

Looking at the actual numbers, over 10 years... factoring the fees and all the other expenses they like to take from you.... and from several different pension providers...  The amount of profit, which I will actually walk away with today, (not including my contributions)  is much lower than the projections the providers suggested. 

Providers do not suggest anything.  The provide a synthetic projection using rates that are largely defined by the regulator on periodic reviews.     10 years ago, projections over stated the position.  Today, the understate the position.  Plus, the reduce te figures to show them in today's spending power and not the real values.

I am saying that other investments that I have made, are outperforming my pension(s) - with no risk too!

What risk free investments are making 6-10% p.a.?  (6-10% p.a. being the typical ballpark that investment runs would run at in an appropriate portfolio)

Paul_Herring

I am saying that other investments that I have made, are outperforming my pension(s) - with no risk too!

You appear to be implying that

1) You don't have investments in your pension

2) You have "no risk" investments outside your pension.

[Deleted User]

german_keeper said:

Deleted_User said:

LucyTheWestie said:

Thrugelmir said:

LucyTheWestie said:

dunstonh said:

For example, the average family will have little money left for their future, once they have paid for the things they need today. 

But a good chunk of them will spend money on things they do not need to keep up with the Jones.   Some spend more money on a mobile phone each month than they do their pension.   They buy more x-box games or eat out constantly or change their BMW every 2-3 years.   Then claim they couldn't afford to save for retirement.

I am not sure if failure to plan or failure in expectation is fair.  In many cases, being unable to prepare for the future is probably more likely.

It very often is a failure to plan.    Or a failure to keep under review.    You often see cases like someone who started paying £30pm in 1988.    That was a good contribution back then.   However, 30 years later, they are still paying £30pm and never increased it.  That is a failure.

  The state can't afford or will not pay for your care at the end of your working life, where you have religiously been paying your taxes from day one, yet you are expected to fund your retirement, from a small pot of money,  which is constantly being stretched to its limits. 

Life expectancy has increased rapidly over the past few decades. Correspondingly care and pension provision cost is increasing. People themselves have to make a choice as to where their priorities lie. 

I suggest that most blue collar workers are unable to make a choice as to where their priorities lie.  Their incomes are being stretched to pay for the day to day essentials.  IMHO anyone who suggests they are wasting their money on non essentials, such as mobile phones, playstations, alcohol, cigarettes are insulting the vast proportion of the low paid and hard working British population.  Those who have managed to save a little are now seeing their investments being whittled away.

Sadly, I believe there is also a subclass of people who do waste their money, because their futures have been taken away from them.  They have no hope.  They have no money to invest in their futures.

I am not bitter or twisted when I see the investment banker who has a collection of supercars, paid for from a huge bonus, because he got lucky one day in the office.... I just know where that money came from!  My diminishing pension!!  (Do they have to give the bonus back when they have a bad day at work?) 

Neat and simple picture of the world. 

Have you considered becoming an investment banker? Their lives are easy and wealthy and the only tough decision they have to make is which Ferrari to drive on any particular day. 

One man's neat and simple is another man's realistic. And no I really wouldn't want to be an investment banker as I would accept that it is probably a very stressful life. But I would choose that over a single parent with 2 disabled kids under the age of 5 trying to work as a self employed hairdresser and navigating the current tax credits and benefits system and feeling the shame of having to use a foodbank.

I have no experience of the former but I do of the latter, my niece. If she didn't have family and friends supporting her financially and emotionally I dread to think where she would be.   

We all choose our paths. My brother in law was an investment banker. He started as a juniour clerk at Midland Bank when he was 17. Ended up at an executive level. “Retired” around 50. Its a weird life. He is married now but has no kids. Wouldn’t have been fair for him to have a family when he was young. Worked nights as well as days. He is well of and does have nice cars and “unusual” lifestyle. I certainly wouldn’t swap my life for his.

UK is heavily dependent on the financial industry and its a competitive market. Somehow I doubt screwing investment bankers would help single mothers one bit but  always worth a try. Blaming them is so much more fun than taking responsibility for your own affairs. 

Prism

LucyTheWestie said:

Prism said:

LucyTheWestie said:

Looking at the actual numbers, over 10 years... factoring the fees and all the other expenses they like to take from you.... and from several different pension providers...  The amount of profit, which I will actually walk away with today, (not including my contributions)  is much lower than the projections the providers suggested.  OK, they say investments go down as well as up.  You would not buy a car if its performance was slower than they promised!   My other investments, which are very low risk, have performed better over the same period of time.  I don't have to pay fees to get at my money.  The trendline for my pension performance, over a long period of time, is a downward curve.  Projecting forward, things look grim..... and you can't get through to the buggers when you call them!

Do you know which fund(s) you are invested in within your pension?  What is the charge for the pension provider - the platform? These are details you should be able to find out and then decide how to move forward. Why don't you get online access so you don't need to call them?
Something is wrong if you have been losing money for 10 years since pretty much everyone else has been increasing their pot because in general all investments have been doing very well.

The guidance that was given at the start is just that - guidance. However I would have expected you to exceed those figures based upon recent history.

I am saying that other investments that I have made, are outperforming my pension(s) - with no risk too!

In your second post you said that your pension had been doing well until recently. Then later you said it hasn't done well for 10 years. Which is it? You haven't mentioned what you are invested in? Do you know?

Thrugelmir

LucyTheWestie said:

Thrugelmir said:

LucyTheWestie said:

dunstonh said:

For example, the average family will have little money left for their future, once they have paid for the things they need today. 

But a good chunk of them will spend money on things they do not need to keep up with the Jones.   Some spend more money on a mobile phone each month than they do their pension.   They buy more x-box games or eat out constantly or change their BMW every 2-3 years.   Then claim they couldn't afford to save for retirement.

I am not sure if failure to plan or failure in expectation is fair.  In many cases, being unable to prepare for the future is probably more likely.

It very often is a failure to plan.    Or a failure to keep under review.    You often see cases like someone who started paying £30pm in 1988.    That was a good contribution back then.   However, 30 years later, they are still paying £30pm and never increased it.  That is a failure.

  The state can't afford or will not pay for your care at the end of your working life, where you have religiously been paying your taxes from day one, yet you are expected to fund your retirement, from a small pot of money,  which is constantly being stretched to its limits. 

Life expectancy has increased rapidly over the past few decades. Correspondingly care and pension provision cost is increasing. People themselves have to make a choice as to where their priorities lie. 

I suggest that most blue collar workers are unable to make a choice as to where their priorities lie.  Their incomes are being stretched to pay for the day to day essentials.  IMHO anyone who suggests they are wasting their money on non essentials, such as mobile phones, playstations, alcohol, cigarettes are insulting the vast proportion of the low paid and hard working British population.  

Previous generations never took overseas holidays either. My father never learnt to drive so didn't incur the cost of car ownership. You can only eat you cake once so to speak.  Nothing in this world comes as a giveaway. Once you can travel a little and visit the real world. Then you'll appreciate just how comfortable we are in the UK. Likewise how many people aspire to have what you enjoy and believe to be a right. 

cfw1994

Prism said:

LucyTheWestie said:

Prism said:

LucyTheWestie said:

Looking at the actual numbers, over 10 years... factoring the fees and all the other expenses they like to take from you.... and from several different pension providers...  The amount of profit, which I will actually walk away with today, (not including my contributions)  is much lower than the projections the providers suggested.  OK, they say investments go down as well as up.  You would not buy a car if its performance was slower than they promised!   My other investments, which are very low risk, have performed better over the same period of time.  I don't have to pay fees to get at my money.  The trendline for my pension performance, over a long period of time, is a downward curve.  Projecting forward, things look grim..... and you can't get through to the buggers when you call them!

Do you know which fund(s) you are invested in within your pension?  What is the charge for the pension provider - the platform? These are details you should be able to find out and then decide how to move forward. Why don't you get online access so you don't need to call them?
Something is wrong if you have been losing money for 10 years since pretty much everyone else has been increasing their pot because in general all investments have been doing very well.

The guidance that was given at the start is just that - guidance. However I would have expected you to exceed those figures based upon recent history.

I am saying that other investments that I have made, are outperforming my pension(s) - with no risk too!

In your second post you said that your pension had been doing well until recently. Then later you said it hasn't done well for 10 years. Which is it? You haven't mentioned what you are invested in? Do you know?

Some of the posts from Lucy are very “troll-like”.  Ranting investment bankers, blathering about things doing well then not well, etc.....all fascinating stuff, but taken together: nonsensical!
If you want to get useful snippets here: post the funds you are invested in that have done poorly, and post those risk-free ones outside the pension that are doing better.

83705628

LucyTheWestie said:

Prism said:

LucyTheWestie said:

Looking at the actual numbers, over 10 years... factoring the fees and all the other expenses they like to take from you.... and from several different pension providers...  The amount of profit, which I will actually walk away with today, (not including my contributions)  is much lower than the projections the providers suggested.  OK, they say investments go down as well as up.  You would not buy a car if its performance was slower than they promised!   My other investments, which are very low risk, have performed better over the same period of time.  I don't have to pay fees to get at my money.  The trendline for my pension performance, over a long period of time, is a downward curve.  Projecting forward, things look grim..... and you can't get through to the buggers when you call them!

Do you know which fund(s) you are invested in within your pension?  What is the charge for the pension provider - the platform? These are details you should be able to find out and then decide how to move forward. Why don't you get online access so you don't need to call them?
Something is wrong if you have been losing money for 10 years since pretty much everyone else has been increasing their pot because in general all investments have been doing very well.

The guidance that was given at the start is just that - guidance. However I would have expected you to exceed those figures based upon recent history.

I am saying that other investments that I have made, are outperforming my pension(s) - with no risk too!

/
There's no such thing as a risk free investment.

dunstonh

9 pages of posts and virtually no details.  Just a lot of off-the-cuff remarks.  Whenever information is requested, it doesn't get posted.

BritishInvestor

Prism said:

Deleted_User said:

dunstonh said:

I have seen the stress and worry of a retired relative, as they watched their investments fail. 

Investments in the mainstream do not fail.     That is a generalistic statement with caveats but it is extremely rare for mainstream stuff to go wrong.   And where it has done, it is in areas where you would only typically have a limited amount allocated.

If he lost money due to failure then its likely he went into extremely high risk unregulated investments away from the mainstream.   e.g. a cold caller scammer.          Greed is a common factor with those. Along with naivety.

We have to define “failure”. I define it as retiring and dying poor. And categorical statements like the one above are very wrong; demonstrate fundamental lack of understanding of investment risks. 

Here is a simple test for a mainstream Canadian investor who retired with  $1M in the year 2000. The portfolio value has been tracked  for over a decade. The products used were standard 20 years ago. There are 4 portfolios with various asset allocations. Right now all of them have a chance of lasting for the total of 30 years, but the all equity portfolio came close to failure early on and would have been nerve breaking to have. Might still fail, as of Jan 1st our retiree is left with only 500k. Thats not that different from the value of this portfolio in 2008. Never fully recovered once depleted early on in the retirement. The “Growth” portfolio with some bonds isn’t doing much better. 

https://www.financialwisdomforum.org/forum/viewtopic.php?f=30&t=108990&hilit=2000+retiree

I would see it as encouraging that someone who retired at one of the worst times in recent history and used a now out dated withdrawal rate has still managed to likely not run out until year 20+. A small adjustment to the withdrawal rate calculation is probably all that would have been needed. In those early years it there is more chance of being able to top up any income shortfall with a bit of part time income.

From a US perspective
https://www.kitces.com/blog/how-has-the-4-rule-held-up-since-the-tech-bubble-and-the-2008-financial-crisis/