Was this 1988 pension projection hopelessly unrealistic and can I blame anyone?

LookingForAnAnswer

At age 28 my employer set up a pension scheme (DC group money purchase I think?). I'm now 65. I still have the 1988 introductory paperwork from the broker.  The illustration states that I "earn £9,188 pa, my salary will increase by 5% pa, and the retirement fund will grow by 13% pa. This will create a pension fund of £394,513 at age 65 and will buy a lifetime pension of £37,753 pa and a widows pension of £18,877 all increasing by 3% compound".  Well I wish I really did have this today at age 65! Was 1988 a far better time to invest? Can I contact the broker, if it exists, and say "you misled me"?

JoeCrystal

No. Did you not get an annual statement with up to date projection? It is set by the regulator these days.

Tucosalamanca

Projections will vary from year-to-year.

For perspective, in 1988, base rate was just under 13%, so expectations for future growth would have been higher.

You could invest in TESSAs that would double in value every five years, comfortably outpacing inflation.

Yes, it was better to invest 37 years ago.

Marcon

LookingForAnAnswer said:

At age 28 my employer set up a pension scheme (DC group money purchase I think?). I'm now 65. I still have the 1988 introductory paperwork from the broker.  The illustration states that I "earn £9,188 pa, my salary will increase by 5% pa, and the retirement fund will grow by 13% pa. This will create a pension fund of £394,513 at age 65 and will buy a lifetime pension of £37,753 pa and a widows pension of £18,877 all increasing by 3% compound".  Well I wish I really did have this today at age 65! Was 1988 a far better time to invest? Can I contact the broker, if it exists, and say "you misled me"?

1988 was a completely different landscape. Interest rates were roaring away and life expectancy was much lower, meaning annuities were much cheaper.

You can contact anyone and say anything, but forget compensation. You're time barred by at least a quarter of a century, even if the broker actually gave you financial advice. That seems unlikely, given they merely gave you a projection in relation to your employer's scheme - and of course if you hadn't joined the scheme, you wouldn't have had any employer contributions.

 If you look again at the paperwork, there will be disclaimers about 'assumptions' and 'projections' - crystal balls were no more common then than they are now.

Have you been checking your annual statements, and noticing that your funds haven't been growing at 13%, and adjusting your contributions appropriately, taking into account how closely your salary has matched the 5% a year increase assumption?

dunstonh

LookingForAnAnswer said:

At age 28 my employer set up a pension scheme (DC group money purchase I think?). I'm now 65. I still have the 1988 introductory paperwork from the broker.  The illustration states that I "earn £9,188 pa, my salary will increase by 5% pa, and the retirement fund will grow by 13% pa. This will create a pension fund of £394,513 at age 65 and will buy a lifetime pension of £37,753 pa and a widows pension of £18,877 all increasing by 3% compound".  Well I wish I really did have this today at age 65! Was 1988 a far better time to invest? Can I contact the broker, if it exists, and say "you misled me"?

You have not been misled.  The figures are accurate.

Projections are based on assumptions.    e.g. 4x5=20.    Projections are not predictions.  If you care to read the rest of the projection it will make it clear you could get back more or less than that.   It was also the regulator of the day that set the projections.

The decades prior to 1988 had higher gross returns (although lower net returns) and higher annuity rates.  So, the assumptions reflected the expectations of the day.  The whole of the 1980s saw inflation in double digits for example.

Each year you were sent a statement with a projection that would have used revised assumptions. 

In my experience, you often come across people who made a good contribution in 1988 but failed to increase it each year due to inflation.

Qyburn

I found my projection from when I started my private pension in 1992, age 34.  For monthly payment of £147 gross (no idea where that figure came from), the projection at age 60 was a pot of £305,000 giving an annuity of £35,600.

Silvertabby

Similar to the mortgage endowment policies of the 1980s.  "You'll have enough to cover your mortgage plus £KKs over to do what you want with". 

And we all know how that panned out......

Hoenir

Silvertabby said:

Similar to the mortgage endowment policies of the 1980s.  "You'll have enough to cover your mortgage plus £KKs over to do what you want with". 

And we all know how that panned out......

In many ways feels similar now. Under the skin you wonder how exceptional the USA actually is. Back then was Japan. 

LookingForAnAnswer

JoeCrystal said:

No. Did you not get an annual statement with up to date projection? It is set by the regulator these days.

Yes, I had ongoing paperwork from Legal and General of course. I have never really managed my pension and realise now I was financially illiterate and didn't check anything and simply paid in as much as I could afford. Money was always tight, it is for everyone isn't it, and I always maxed out on mortgages instead in the hope it would be my best financial investment in life.

Albermarle

LookingForAnAnswer said:

JoeCrystal said:

No. Did you not get an annual statement with up to date projection? It is set by the regulator these days.

Yes, I had ongoing paperwork from Legal and General of course. I have never really managed my pension and realise now I was financially illiterate and didn't check anything and simply paid in as much as I could afford. Money was always tight, it is for everyone isn't it, and I always maxed out on mortgages instead in the hope it would be my best financial investment in life.

Well checking it would not have increased its current value, but you would have been aware that the initial projections would have been adjusted. If you paid in as much as you could then not a great lot else you could have done.
Also as said the initial projections were based on high inflation. If that had persisted then maybe you would have got the £395K total but the price of everything would be much much higher than they are today.

katejo

Silvertabby said:

Similar to the mortgage endowment policies of the 1980s.  "You'll have enough to cover your mortgage plus £KKs over to do what you want with". 

And we all know how that panned out......

I was very sceptical about those mortgage endowment promises then.  I was a ftb in 1993 and remember walking out on 1 mortgage advisor because she would not discuss a repayment mortgage with me. I got my way eventually and only ever had repayment mortgages.