Pension

viz

TTony said:

viz said:

I've been paying into a Zurich pension since 2000. I looked at the valuation yesterday and compared it with the amount that was paid in, and calculate that, after charges (totalling 39k!!!) it has grown at 0.002485%. If anyone wants to pay me 39k to keep their money under a mattress, please PM me.

You've paid c£3k/yr in fees ???

That's either a very large pension pot that they're (not) looking after for you, or you're getting (or paying for) some incredible level of service!

However, depending on when you invested (pre/post the early 2000's crash) you've suffered either 1 or 2 general stockmarket crashes in that period.  If you were invested in a basic FTSE-100 tracker, that level of growth is about right, scarily.

Of course, the job of the investment professional is to out-perform the standard UK index ... but that'll depend on the level of direction that you gave them, your stated risk appetite, etc.

I rather think the latter. Cheers for the graph, nice one. But to my eyes, even at tracker rates,the average looks like 5000, invested an average of 6 years ago, and the current looks like 6500, which is 4% a year.

Phil_aka_Pip

You're better off than the bloke I knew who paid £39k into a pension fund and was told it was worth £32k when he retired.

viz

Eurgh horrible

ToneControl

best value pensions I could find were

Cavendish online SIPP (I went for this)

and

Hargreaves Lansdowne

money saving expert have pages full of stuff about this. In one sentence: my one has low charges, 1000 of the best funds, usually no fund change fee, and the "trail commission" of 0.25% that is normally paid back EVERY YEAR to the advisor goes back into my pension fund.

 

viz

Nice one thanks Mr @tonecontrol - i'll mention them to our ifa - cheers

Myranda

I should probably start thinking about a pension... 

viz

Well something needs to be put away for the autumn and winter years, but not necessarily a pension. But you need 800k in a pot somewhere to get you 40k a year when you're 65.

Myranda

I don't get 40K a year now, so I'd not be missing out on all that much I guess

viz

But you might be on 40k when you're 64! But I reckon 40k will be enough when we're 65 - for me and my wife, with a bit left over to help the kiddywinkies out when they need a bit.

Myranda

Well I don't want to have kiddywinkies so can save a little money... and how much does it cost to mooch around playing guitar and watching films?

viz

Fair point

Evilmags

Gordon brown took a massive amount of capital out of pensions. Add that to very low interest rates due to the fact he also totally fucked the economy and there is your answer in a nutshell. The 65 billion of equity owned by the government in two banks is not very large next to the one and a half trillion national debt, which combined with a similar number for household debt goes along way towards explaining why your pension fund is worth about 2,500 a year at current annuity rates. Annuities are just a dumb purchase at the moment. A house will give you a better income and won't belong to the insurance company when you die. And that is putting a 25% pricefall into my numbers. If you want the 10% annual returns enjoyed by previous generations then risk and expertise are a requirement. Brown is by far the biggest culprit here but his mistakes were repeated the world over.

Evilmags

viz;50234" said:

Well something needs to be put away for the autumn and winter years, but not necessarily a pension. But you need 800k in a pot somewhere to get you 40k a year when you're 65.

Only if your dumb enough to buy an annuity. And if you want inflation protection and widow transfer the number is closer to 20k...

ToneControl

you should need less per month - no mortgage, no insurance, no commuting etc.

The total Fund should = 20 times what you need per year

so for £1k per month after tax, if you weren't taxed you'd need £1k x 12 x 20 = £240k

Probably best to take as income drawdown at present, since annuities are stupidly low

People under 40k salary might be  better off buying a couple of cheap houses to rent out instead

Pensions work better if you are taxed at the higher rate, especially for the self-employed, since you save lots of NI too

It's all very complicated, and most IFAs are useless when it comes to advice to be honest, since they are really just sales guys.

e.g. What happens if you take an annuity, then don't last long? your money is lost. With drawdown, what's left gets taxed and goes to your family. I could add a lot more, but basically most pensions are a scam and most IFAs are leeches

Most people should put 20% or more away from their pay, but most put 5% or a max of 11% away. People should just do the maths - you have to save 20x what you need as a pension, so if you want a pension that's half your salary before tax, you need to save 10 x your salary. At the 10% that most put in every year, that takes 100 years if the funds don't grow, and after charges they don't grow much - with small growth (2% real terms) it might come to say 40-50 years. If you save 20% a year, it takes 50 years with 2% growth, I reckon, 25 years of saving might do it

 

 

viz

That's why I said you need 800k for 40k pa, is that right then? By the way I'm assuming the salary is tax free though isn't it? So you only really need 30k for it to be like 40k. Points about needing less when you're older taken.

ToneControl

800k for 40k a year is right, the maths are variable in a way, annuities often give 4% or less, so that's worse, but with income drawdown you can invest then take up to 7% a year, and assume you won't live too long - to be fair - if you do live to be 100, if you're the last one standing you should be looked after I guess.

However, if you do stack up more than 200k or so you can do commercial-property based SIPPS, in which case, you own offices or shops etc, and your pension is paid from the rent, leaving the actual investment undiminished every year - this is the ideal to aim for. I think it's 55% tax on the fund if you croak after starting retirement, before you kids or whoever gets what's left. No tax for a spouse of course. 25% tax free first though as usual

Other issue is - the amount you get is treated a bit like salary, so you pay tax on it, but at present the tax codes are nicer if you're retired

There is another trick, I will post in a minute

 

 

stickyfiddle

I have an excellent pension plan. It's called "Moving to a country where there is no tax". It's going well so far. 

Brown fucked pensions so hard up the arse I can't see that they'll exist by the time I'm eligible for one. There's already a massive hole in pension funds, which is being propped up by the current employer-contribution-matching stuff, but are they filling the pot so much that these lovely new pensions will be affordable when they're due? I doubt it.

ToneControl

the Brown stuff should not affect you so much that pensions are a mistake, they take a cut of profits, that's all

The % taken if you croaked went up to 80% or %85%, which was outrageous, that came down.

If you go and live in Cyprus, the pension was 6% for UK pensioners, so for those upset about tax, you can avoid it after retirement if you like

It's true that many of my mates will be skint as pensioners, but that's not Brown's doing, that's down to IFAs saying a 10% pension contrib is enough (and some people just not bothering saving), the stock market does not look like growing quick enough to make 10% enough. In reality, if people expect to save for a 20 year pensions over a 40 year career, saving 10% or so a year is obviously not enough unless the investments are growing massively, a lot of folk need to be made aware of this ASAP, I have nagged my mates a few times, but cannot really repeat it any more, most just don't want to know.

Nitefly

Evilmags said:

Only if your dumb enough to buy an annuity. And if you want inflation protection and widow transfer the number is closer to 20k...

The problem for folks like me is that we have no choice BUT to buy an annuity.  Ah well, it seemed like a good idea at the time...

ToneControl

OK the trick -

until recently, many high-rollers on 150k a year or whatever used to remortgage their house 2-3 years before retirement, and then basically live on the money released, and contribute their entire salary as a pension contribution for the last years of employment.

Result = zero tax on the last years' income, then as soon as they retire, they take 25% tax-free - they can then pay off the mortgage partly, and carry on paying it form their pension

 

Net result = at least £80k tax saving typically

 

the current government has cracked down on this, and now they can only contribute £40 or 50k a year, I forget which

But - for Mr normal, you can still use this idea - make sure your house is remortgaged to some extent a few years before retirement, and pay as little as possible in tax for  those years, and live off the pension money.

Have I explained this well enough?