If a pension scheme makes on average 1-2% after charges it is diabolical and avoid putting your own personal money in. The only time a pension scheme should be making 1-2% is moving the money into a very low risk fund which is advisable in the last years to protect yourself from volatile markets before you retire.
- Thread starter Mid Wales welder
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If a pension scheme makes on average 1-2% after charges it is diabolical and avoid putting your own personal money in. The only time a pension scheme should be making 1-2% is moving the money into a very low risk fund which is advisable in the last years to protect yourself from volatile markets before you retire.
HughF
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All the nest funds are available to view on the website and fund switching is easy. You can view the performance and asset allocation of all funds for the past years (previous performance should not be used as an indicator of blah blah blah etc etc)
HughF
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Exactly, closer to drawdown date you want to minimise the risk exposure
Mid Wales welder
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I've not herd anything particularly bad, just raised some questions. The stuff I had read was from 2010-2014 so I think it was more when it was being set up and these things have all been ironed out now. It was things like the fund choices are poor, you can't transfer in or out (which I know not to be the case now), there was a cap on contributions etc. Having a read over the weekend I found that NEST seems to be an acceptable scheme and the comments made on hear have been good to hear!
Thanks again everyone, very helpful
HughF
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It's an easy, tax efficient way to invest in a variety of market options. I personally wouldn't want the faff of managing the investment myself, doing it through a pension provider is easy, and hmrc automatically pay the tax back on my monthly contribution (I'm not self employed, don't know how this works if you are)...
Burdekin
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Reduces your taxable income if nothing else so there is a saving straight up.
I have had a pension since I started work and it really is something all folk should have. I have a good work pension, has a standard percentage that they contribute and they match up to another 4% so well worth doing. I have started increasing my pension contribution by 1% each year, was 2% this year.
8ob
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What i was sort of getting at was the few folk I know that draw pensions get just enough money to survive, if they never had other income streams they would be sat indoors licking the windows. Do any of these very complicated " pension plans" offer more in real terms? Genuine question.
Bob
Bob
Burdekin
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Unless you’re one of the lucky ones with a final salary pension that you’ve contributed to for 30 years then the value of your pension really comes down to you. I couldn’t tell you what percentage I’m getting on my company pension, I treat my pension as a low risk saving pot with tax benefits. The value and if my pension is any good will be down to me and how much I contribute, that's my thinking anyhow.
A mate reckons for him to retire he needs to have saved 400 times his monthly outgoings. Him and his girlfriend are semi-retiring next year, he’ll be 49 and she’ll be 44 and they’re off travelling, will do the odd bit of work here and there, then sell up and move to where they would like to retire. No debts so a low monthly outgoing, savings, not wasting money and investments is how he’s planned his early retirement.
rtbcomp
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"No debts so a low monthly outgoing, savings, not wasting money and investments is how he’s planned his early retirement."
That's the way to do it. Too many people are racking up big debts and it will bite in the future. AFAIK there's no financial education in schools. Really the only debt you should have is a mortgage, that gives you somewhere to live without paying rent and more likely than not a lump sum when you retire and downsize.
That's the way to do it. Too many people are racking up big debts and it will bite in the future. AFAIK there's no financial education in schools. Really the only debt you should have is a mortgage, that gives you somewhere to live without paying rent and more likely than not a lump sum when you retire and downsize.
HughF
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They're incredibly simple:
You pay in a certain amount each month, the government top it up by the % of tax you pay on your earnings
The pension provider invests this pot (as it grows) for you in a fund that you choose based on your aversion to risk
Come draw down date (retirement age) you take the pot and buy an annuity with it (other options are available now)
The annuity pays you a monthly income until you die. If you die 2 years after buying the annuity, the insurance company wins, if you live till 100 then you win.
You can see here that there are 2 key variables, the size of your pot at retirement age and the annuity deal you are able to buy.
If you don't pay in a decent amount and make attempts to maximise the growth of the pot, the pot will be small therefore you won't be able to buy a decent annuity.
If you're in poor health, the annuity you buy at retirement age might be quite generous (the insurance company expect you to die early so they can offer to pay you more each month). If annuity rates are poor across the industry then you won't be able to buy a decent offering.
Basically it is down to you and the stock market/global economy.
If the people you know who draw pensions are getting very little income each month, it's either through a company scheme going bust in which case I feel for them, or through their own lack of planning...
Burdekin
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If you managed to put in £5000/year for 35years (say from when you are 20 to 55) with 2% interest you would have contributed £175k but with interest you would have £255k. If you managed to get 5% you’d have £475k. That’s the advantage of starting early, contributing as much as you can afford and even a low interest rate over a long duration will pay dividends.
GW8IZR
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I always paid a fair bit into my pension and I created some diversity with property, I considered it more important than family holidays or new cars. I'm fortunate that the investment has been successful so far but the markets are a little more depressed these days. My niece and her family are not bothering with a pension at all but plan to invest in property - myself I think thats a mistake, yes the return is better but there is no diversity. Its hard to determine what is going to change in the next thirty years and for sure if everyone moves away from pensions the economy will automagically punish other investment strategies.
IMO there isn't anything legal that is much better than a company (or even a private) pension, purely from a tax advantage perspective.
Now just one thing... six months into retirement while I was being pushed in and out of the CT scanner, all those years of saving and being careful were put into context.
GW8IZR
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Of that 5000 quid you would also see the tax returned to you - if your a basic rate payer that's just over 6K a year invested, even better if your a higher rate payer.
OK you pay tax when you draw it but personal allowance rises steadily ( pretty much ) and if you draw down the fund sensibly and use the tax free allowance you can minimise the tax due.
HughF
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An example of a typical NEST fund info sheet attached:
https://nestpensions.org.uk/schemew.../NEST-higher-risk-fund-factsheet-dec-2014.pdf
https://www.nestpensions.org.uk/sch...stment-Report-January_2017-March_2017,PDF.pdf
https://nestpensions.org.uk/schemew.../NEST-higher-risk-fund-factsheet-dec-2014.pdf
https://www.nestpensions.org.uk/sch...stment-Report-January_2017-March_2017,PDF.pdf
Unless I'm misunderstanding the numbers you're quoting, the problem is when you allow for inflation, what your £175k bought you 35 years ago will cost you £616k now so actually your pension has gone down in value over time rather than up.
I realise you didn't have £175k 35 years ago but it's still illustrates that while the numbers may be bigger now what they actually can buy you is massively diminished.
HughF
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That's why you work backwards from your required income at retirement age to get an idea of your monthly payments needed now.
It's usually very scary and quite un-affordable for people with mortgage and kids to pay for etc.
It's usually very scary and quite un-affordable for people with mortgage and kids to pay for etc.
That's where the old 10% of earnings loose theory comes in and that's from like 20 years old. Very few people attain that. If start in your 30's it's probably already in the region of 20% of earnings.
Burdekin
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Are you saying inflation is going to be 6 to 7% for the next 35years?
If you get interest at the same rate if inflation which is normally 2 to 3% then you are still much better off than without.
