Dingdongler

Edd, it's late so I'll give a fuller response tomorrow, (your figures don't stack up by the way). However you'll see that most people on this thread so far agree that these sorts of pensions are a waste of time. They are there to make money for the pensions industry and not much more.

The reputation of these sorts of schemes is shot, I can't believe that intelligent people still sign up to them

Terminator X

iTrader: (7)

Your pension will be the square root of f*ck all if that's all you pay in though ... what's your point?

Pensions are a waste of time IMHO unless you live like a pauper & pay almost your entire income in there are other / better ways to fund retirement.

TX.

EddScott

Don't bother. I'm not prepared to waste any more time trying to get my point across.

I'm happy with what I'm doing, good luck with yours

Dingdongler

How pathetic.

You started the thread saying you were suprised nobody else has started the thread to discuss the Panorama programme on pensions.

Now we are discussing it you cry off saying you don't want to play anymore?

I think your attitude just about sums it all up. And I'll say once again, your figures don't stack up, I feel sorry for any mugs who take your advice

EddScott

You call this a discussion? How can anyone discuss a point with someone so blinkered and up there own backside they have no intention of accepting another opinion.

I feel sorry for those mugs who have to pay for your retirement by renting from you. And I'll say once again, my figures do stand up.


PS - I don't give advice and never said I did - probably for the best I hear you say? Well done.

Dingdongler

1)No. I said I was not convinced by the whole concept but was happy to be shown the light. YOU brought the subject up and thought the Panorama programme was unfair. I explained why I and many others agree with it.

2) I am not blinkered. I am also not the only one who thinks the same thing. I hope I'm not putting words in their mouths but John Banks, Gordo, Hodgy, TX (ie everybody who has posted on this thread but you) seems to feel the same way.

3) I also NEVER said that I'm using BTL as a retirement plan, I said lots of people were.

You've come on here saying that the whole Panorama prog was an unfair representation of the pensions industry, when other people have agreed with it and given reasons why you've taken your ball and said you don't want to play anymore rather than bother to explain why they are wrong.

EddScott

No matter what I say you are not prepared to listen. Hence there is no point in discussing it which IMO, is a blinkered attitude.

Dingdongler

I think you need to look back over the thread. I keep saying let's discuss it and I'm listening and you just keep insisting that I'm blinkered and not prepared to have a discussion. You have jumped to this conclusion and so really it's you who is being blinkered.

john banks

You're certainly not putting words in my mouth. Apart from tax deferral, pensions to me are a waste of time if you're a natural saver anyway (however few people are). The tax advantages come at a huge cost of restricted access, obstructive regulation, excessive charges and loss of capital.

Dingdongler

Thanks. I've gone over this every year for about the last ten years when some IFA/bank manager etc insists that I should consider one. Everytime I come to exactly the same conclusion as you which is that the only advantage seems to be the tax relief, this however seems to be outweighed by all the downsides which you have stated. Like you I am an natural saver. Or perhaps we are both blinkered?

I was keen to have the discussion with Edd though just in case I had got it wrong. I was also happy to use my personal circumstances to crunch the numbers to see how it would work, but he doesn't want to play....

john banks

You'd have to be stupid to get pulled in by the financial industry's yarns but they do seem to try "clever" ways to hoodwink people. One tried to tell me that I was getting "105%" allocation units after one year for some product. What it took me going through the small print to point out was that this 105% was of 95% in the first place, so I was still not quite getting all the money I was putting in invested. Every time the policy was changed, an advisor took a cut of the next year of premiums for the "advice" even if it was a mail merge letter and a standard pack.

105% of 95% wouldn't be so bad if the product then didn't have an illustration of 7% returns (not even accounting for inflation), and had further charges and conditions that all worked in the investment company's favour, and never mine.

The finance industry only works for itself in my limited exerpience, but it was enough to put me off them for life.

It may be that GPs are overpaid, but IFAs seem to do quite nicely for creaming recurring charges off people. Imagine if I took a cut for each "medication review" I did, this is nowhere near as complex or has the same implications.

Have I just seen the smelly underbelly of this industry?

hodgy0_2

didn't Gorgon Brown (slip of the finger but I will let it pass) demolish most of the tax advantages of pensions in the 90's

but if you work for a company that does a contributory scheme -- it would be wise to participate in it?

EddScott

I look back over this thread and see that I have attempted to explain why pensions are not a "waste of time" and you have completely ignored what I have to say.

Lets start from the beginning shall we?

The Panorama program showed pensions in a very poor light by highlighting the costs involved and failing completely to give a balanced view by mentioning any of the benefits or mentioning that pensions do actually grow over time. The program more or less said that if you put in £120K you will lose £100K in charges - the program made no attempt to mention any growth over the term.

You then asked me to guarantee you the retirement income you desire. This I cannot do and I know of know one who isn't already financially independant that can guarantee their retirement.

You said you wanted £50K per annum in retirement and I said that you would need to put in around £1500 over the course of 35 years (25 - 60) I've checked these figures and confirm them to be roughly correct based on assumed 7% growth rate and even taking into account inflation at 2.5%.

Gordo mentions the use of ISAs as an alternative. This I accept however the very same funds you would invest in your ISA you would also invest in your pension - for either, you could use low cost tracker funds or even some ETFs. Costs and charges in ISAs and Unit Trusts can also be very expensive so it isn't only the realm of pensions that can be expensive.

You have to accept that you are going to be charged for financial products and investments. There are good IFAs out there and bad ones and some that take high charges and some that take very little and take great effort to keep costs as low as possible. Are you not prepared to accept that some advisers take charges very seriously? - by that I mean reducing them for the client as much as possible?

The tax advantage is not the only benefit. It's perfectly possible to purchase commercial property and possible to borrow against the pension fund for commerical properties. There is mention in the thread that if you die, it dies with you. This is not always the case and pensions are far more flexible with regards to what happens to you when you die.

My surprise that there wasn't a thread about it was actually because I expected a thread on how rubbish pensions are. This post pretty much repeats everything I have already said.

John Banks - was that an IFA or a bank adviser?

Again, I can only go on what I know but transparency of charges and how much of your money is genuinely invested is ingrained into many IFA practices. You have to accept you have to pay something - just as you would an accountant or a solicitor. You need to realise that you are not being stuffed with commission paying to the IFA but you are paying the IFA for their advice. What is needed is a change in mindset as to what you are paying for when you see an adviser.

john banks

Accountants are the agents of HMRC so a necessary evil if you run a business. Lawyers are useful for achieving an outcome. IFAs don't seem to be so far in my experience. The particular example was a tied adviser, but IFAs charge a fair bit just to fill out a lot of regulatory paper work that shows they have fulfilled their obligations, but I still don't think for someone that can think for themselves about their investments they are worthwhile. Why would I give money to someone to decide which managed fund to invest in that will on average perform worse than if I choose something myself? Half the money seems to go into useless pie charts that show how diversified my risk is, that are produced by B-list programmers and failed statisticians, with a bit of ability at marketing. Nothing innovative, nothing creative. Just parasitic. Just me experience, I avoid financiers like the plague.

Dingdongler

Glad to see you are happy to discuss the matter.

So back to me as the example please. When I started working at approx 23 my take home was £1100, this was in approx 1993. Like lots of professionals you start off on low wages. You can understand that £1500 at the time would have been impossible, even being a good boy lets say I put in £200 (ie 20% of my net). Don't forget I'm contributing to my occupational pension as well.

These lowish wages remained until I was about 28 at which point I could put in say £400 in a month. From age 33 everything changed and I became what you call a 'high earner', at this point higher pension contributions are possible

So far I've paid in

23-28 at £200 month =£16800

29-33 at £400 month = £24000

Total = £40800

We said I needed £630k over 35 years. So from 34 to 58 I need to put in £2100 per month. £2100 a month is quite a lot of money AND that's still assuming I'm going to get 7% growth (I've take that from your figures) year on year for 35 years. That in itself is actually a big assumption.

If I did get that 7% year on year growth, what annuity would that £1million buy me? Would it be £50k/year?

ps, I know I haven't taken tax relief into account. That's a bit too complicated for me

hodgy0_2

just for a little balance (on IFA's) the IFA who i use and has arranged me quite a few mortgages has been brilliant -- and earned his fees many many times over


I just would get a pension thru him

Dingdongler

Just would or wouldn't?

I've used an IFA before for critical illness cover etc and have been very happy with it.

john banks

The IFA I used found the same mortgage I'd already found myself and wanted to take a fee, until I pointed out that in my initial contact I mentioned the deal I'd found and was interested in their services if they could do better.

EddScott

Going on the illustration I ran you'd get more than £50K pa but assuming inflation grew at 2.5% a year then you'd get around £54K. Its still an illustration and I'm sure they'll be comments along the lines of them being complete ***** and I would admit they are to an extent but some of the better providers are completely clear about your exact charges - the growth rate can't be guaranteed obviously - but then theres no guarantee we won't have a long period of deflation.

Before I go on I'll admit that some of the costs of financial products are very high but as the alternative is under the bed, in some ways we have no choice.

Personally I would try to avoid ending up with pension income that automatically puts you into higher rate tax (using todays regime). At this sort of pension fund it would be better to consider one of the more flexible unsecured pensions - they carry more risk than a straight forward annuity but they do have benefits that shouldn't be dismissed. I can't give specific advice but I would use the tax free cash from the pension (assuming it wasn't needed at the time) and use that to fund something else that could also provide income but with certain tax advantages on the income.

After the recent annoucement that HRT payers will lose child benefit, its possible to make a pension contribution and become entitled to child benefit - not loads but ironic that it will be possible to use child benefit to fund a pension contribution (as apposed to new ***** like in the other thread)

One final point on pension Vs ISA for retirement. If you have combined assets over the IHT threshold and you die, the pension is free from IHT, the Unit Trusts in the ISA lose the ISA status and become liable to IHT.

I would argue that an IFA is suitable for achieving an outcome. If you felt comfortable with UK law then you could defend yourself in court, if not you need a solicitor. If you feel confident about making all your financial decision for investments and tax mitigation then you don't need an IFA. I would also say that you don't always need an accountant and if your accountant gets it wrong you still have to pay up to HMRC - AFAIK you also technically don't need qualifications to call yourself an accountant - at least its not illegal. Without authorisation from the FSA, giving advice is illegal. AFAIK anyway.

The cost of the fancy pie chart machines takes the pi55. However, not everyone is able to or has time to research investment funds, the prices, where they invest, the implications of asset allocation, risk, correlation analysis.

The giving of advice is not parasitic. If you don't need advice you don't need the professional. If you do you pay for the advice of the professional. A good IFA these days charges for needed advice and is not the middleman on the commission hunt (commission will hopefully be gone by 2012 anyway) I've heard of IFA practices going bankrupt and the receivers ask where the money has gone - its in the car park was the reply (Astons etc) I see an IFA in a posh car and a sharp suit and a flashy cocky attitude and it makes me cringe. Not all are the same and it just annoys me that to some people being in the financial industry is seen as being lower than a catholic priest with busy hands.

We don't normally deal with mortgages but if asked we would charge £75 non refundable fee for doing the research. If we couldn't find a better deal we would still want the £75 but we would agree that it was the best mortgage for you - if you wanted us to handle the administration and we received a fee from the lender we would take off the £75 already paid. It would be like fitting a new engine to a car then asking a garage to check if you'd done it right - you wouldn't expect it for free would you?

njkmrs

The fact that the company I work for puts more in my pension than I do is why I am in it .
Not 100% sure on its worth but its another gamble and its not easy to decide what to do for the best .

hodgy0_2

yes apologies -- would not

hodgy0_2

it's got to be worth it -- if they are putting as well, not to rely on, but just a bit of extra money

anyway -- with five kids I am going to be working until i'm 80

EddScott

If your company offers a scheme, its probably the right thing to do to opt in. I don't have much experience with salary sacrifice so wouldn't like to comment. Modern schemes allow you to move the pension from employer to employer so you can build on it over the years.

On the horizon is "auto-enrolment" which means you won't have a choice. The private schemes I don't think are completely ironed out but the government scheme is called National Employment Savings Trust or NEST. The details sound horrific.

It sounds pretty horrible, its expected AMC is something like 2.4 and is going to be administered by TATA - yes TATA who makes Jaguars cars!!. The previous government tendered it and only TATA showed interest. Its costs a fortune so far and the government can't get out of it because theres massive exit penalties if the government decide they don't want TATA to operate the pension system.

The Panorama program that caused me to start this thread seemed to imply what a jolly good idea it is going to be. Again not really investigating the facts

john banks

The only way to get the company's contribution is to join the scheme though, at least in the situations my wife has been in, and the advice is naff, money for old rope, and you're paying for this naff advice with your hard graft and have no choice in the matter. If it was possible for the contribution to be paid as salary instead, that would be an interesting option.

The accountant is a necessary evil as I'm in a partnership and the others would obviously want someone independent. If it was entirely my own business I would not have an accountant and do it myself. Given what they charge and what they do it would be well worth my while.

Sef representing in court (an adversarial scenario) is rather different to choosing a financial product when you realise the apparent opacity of the products is to try to confuse non-professionals.

The mortgage advice was because my accountant suggested these people were a whizz with mortgages, so I agreed to contact them.

I am possibly unfairly tarring all IFAs with the same brush, I don't see what would ever encourage me to use one now.

john banks

Speaking of critical illness cover, it seems a terrible product to me. So many exclusions, so few conditions covered, so much sleaze in the marketing of them. I'm surprised you bought it Dingdongler, what convinced you?

EddScott

I wonder is nkjmrs is contracted out of S2P. If so most employers pass the saving they make in NI contribution to the employee. If there was no contribution there would be no saving to pass on. However, like I said, I'm not too savy with salary sacrifice.

John Banks - you must realise that not everyone is like you and they need advice. You've obviously had poor experience feeling that all financial products are a big con but like I've said so many times, this isn't true. You may never require the advice of a good IFA - one that charges you a fee for giving you an answer to a question you pose rather than a product pusher. If an individual has a bad experience or takes on negative media to form their opinion its very hard to change their minds - this goes for just about all industries and careers.

EddScott

I can only go on past experience but we've had 4 or 5 claims and none were declined. We even claimed interest from one insurer because they took too long to pay out. Its not exact but I think about 85+% of claims are honoured with the majority of the difference being non-disclosure rather than unspecified condition - although it could all be big fat lies to sell more policies.

Personally if you can afford it have it but it needs to be affordable for the individual.

njkmrs

I was contracted out in my original works pension(which is now frozen with min 3% interest added each year I think ) but we were sold as a company and the new owners introduced us to a Pension scheme whereby we have our individual pot of money so to speak (and we are now contracted back in )were we can make our own decisions as to the level of risk we take etc .This pension can also move with us if we leave the company .
Apologies as Im not big on all the tech terms for these Pensions.Hope you understand what I am on about .

EddScott

Thats explained fine. Its mostly likely what is known as a Group Personal Pension. Its your individual pension under a group scheme for the payments. It may well be a "stakeholder" pension which means it has to stick to certain rules like a maximum annual charge or 1.5%. The issue with stakeholder is that for an IFA practice its not very cost effective to setup and administer because there is little or no commission involved. Another is that to keep charges low the fund choice is quite limited. We have the process of setting up a stakeholder GPP down to a fine art and have some very large schemes. We get a little drip feed payment which, if being honest, probably doesn't cover the administration costs but we do it anyway.

We are all aware that there is a huge issue with adequate pension provision. All anyone can do is their best in this area and its really a personal choice as to whether its a good thing to do or not. Even if I wasn't in the financial industry I would say being a member of a company scheme is a good idea. Auto enrolment will take that choice away.

Dingdongler

John, I took mine out when I was a house plant at age 23 (1993). At that point there were hardly any exclusions and critical illness included things like single vessel angioplasty which is now a daycase procedure.

The critical illness cover I have cannot be bought now, it's one of the few financial products which was actually worth it. In total so far I've only paid about £10k into it ie £50/month over 17 years but would pay me out close to £300k for illnesses which are now very treatable and should probably mean a near normal life span but at the time weren't.

The income protection I bought is another matter though. It pays me 2/3rds of my income as a house plant (index linked) should I not be able to undertake my job. As you can imagine 2/3rds of that income even when index linked is not much compared to todays earnings especially when a busy private practice is taken into account