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Thread: Pensions

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    G4Z
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    Pensions

    So at work they are changing all of our pension schemes to yet another acronym that is pretty much the same deal but slightly worse (I assume, I fall asleep the second I start reading this crap) so I have been thinking about what I want to do.

    The more I thought about it, the more I realised that my pension is quite likely to be a waste of money for me. In the last 10 years loads of people have seen their pensions destroyed and seemingly all the money the younger generation is putting in about to be hovered up by the baby boomers. Therefore I am not convinced that there will be anybody to pay me back what I put in if I retire (and it is an 'if' really isn't it?) This whole thing is just another giant ponzi scheme and I just can't for the life of me see how it’s ever going to work out. The other thing is that my projected pension is really pitiful and wouldn't even be enough to live on now, not counting the fact that inflation is going to take a massive chunk out of it (especially when the BoE is printing money).

    In light of all that, I decided id try and get my money back, only to find out that there is legislation that says I can't!

    It’s my money, in a private scheme and the bloody government says I can't have it!

    I understand that if everybody decided to take their money the whole thing would crumble but it’s still my money, and they don't seem to have given banks any such similar restrictive legislation about who they lend money to even in light of the financial collapse we have seen. Is the difference between us individuals and banks that we can't give Alistair Darling a directorship do you think..?

    So anyway, now I am in a situation where I have a relatively paltry amount of cash (in pension terms) that I could really do with right now but it's just going to sit there for 30 years and do nothing. Seems to me that the whole thing is heavily reliant on growth in the economy which is obviously unsustainable long term due to the whole 'finite resources' issue. Really I dunno what im ranting about here, think I am just annoyed that they can just decree I can't touch that money and I know that assuming I live to claim a pension I will be no better off for having it because it won't be enough to live on in any case and either I will get state benefit or I won't and il be poor either way and so bottom line is unless I do something myself its a barren retirement ahead.

    I know im hitting a whole load of different issues there, just wanted to get it off my chest and see what you all think.
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    0iD
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    Re: Pensions

    I cut my pension payments & started investing in ISA's instead.
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    Pork & Beans Powerup Phage's Avatar
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    Re: Pensions

    It's not a ponzi scheme. Some employer funded, final salary schemes probaly are though.
    It's compulsory saving, so technically not your money.....yet.

    If you don't like the scheme, don't make any voluntary contributions, and put any spare cash into the invest vehicle of your choice.
    Society's to blame,
    Or possibly Atari.

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    Seething Cauldron of Hatred TheAnimus's Avatar
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    Re: Pensions

    Sounds like you need a decent pension advisor.

    What you pay in to a private pension is yours, and only yours. You keep all of the pot right up until your pension repayment starts.

    If your worried about the markets, you can put it all in government bonds (exactly like a cash ISA but without the limits) if not you can put it in equities.

    What is intresting, is that dear old new tax n spend labour, decided that (and quite truthfully) because its voters are all thick, they can tax what they want so long as they don't understand it.

    So now dividend payments on your equities are taxed.

    As such the market has adapted and there are people which effectively use derivitatives to create a synthetic which provides abstraction from the div tax. A so called div yeild swap, these are traded a lot OTC by hedge funds, for pension funds, the hedge funds make their money by been less gready than the government, with virtually no risk (except of course the inherient counterparty risk of OTC).

    The legilsation that avoids capital gains (except for new labours interference) on your pension is why you shouldn't be allowed to just yank it out, you wouldn't have paid any CGT. When you start reciving your pension you then are taxed.

    As such its a very efficent way of saving........ Until some idiotic middle class people elect gorden brown allowing him to try and tax it. Whilst the decent plans have sidstepped his attempt to interfere with your saving, its likely the next lot will do the same too in 10 years.

    Thats the disadvantage of having a pension, what future governments might do.

    But looking at the lib dems, having the ordasity to own a house in london might also be subject to idotic interference.
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    Re: Pensions

    effectively use derivitatives to create a synthetic which provides abstraction from the div tax. A so called div yeild swap

    please tell me you made that up

    Permanently confused

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    Re: Pensions

    Live fast, die young, keep your money in a shoebox.
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    Lover & Fighter Blitzen's Avatar
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    Re: Pensions

    I am very fortunate and am in a prtected Final Salary Pension scheme.
    With the AVC's i pay in, it should be a preety good payout.

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    Re: Pensions

    Quote Originally Posted by zulander View Post
    effectively use derivitatives to create a synthetic which provides abstraction from the div tax. A so called div yeild swap

    please tell me you made that up
    Fraid not:

    http://www.wilmott.com/messageview.c...threadid=26937

    So they are used legitimately, but once something is a deriviative, it is a contract based on a notional.

    In the same way that 2x isn't x^2, its the derivivative, they are seperate things, so legislatively seperate.

    You have to be about as stupid as gorden brown to think that people would pay the tax on dividends, why would anyone put their pension money into something which yields less return FOR THE SAME RISK.

    There is actually an awnser to that, the poor people who can't afford decent pension advisors, who instead rely on those who are incentivised incorrectly.

    And once again, new labour ****s the poorest people, with most of them too stupid to realise.

    (i used to work on a desk were we traded some div swaps, they where basically free money, not much money because everyone wants some of that free money, but for $100M you'd be able to scape $2M back with only counterparty risk, in the space of 3 months at one point)
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    Senior Member JPreston's Avatar
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    Re: Pensions

    The important thing to remember with pensions is that contributions are made out of your gross earnings. Other schemes such as ISA's are funded from your net income.

    So your choice is between paying $100 (stupid US keyboard ) into a pension scheme, watching it grow and not seeing any benefit until you retire, or paying up to $41 in income taxes leaving only $59 to pay into an ISA or similar equity plan. The ISA is accessible at at any time but you've rubbishrubbishrubbishrubbishrubbished up to 41% on tax at the outset, that money is gone forever and you get no benefit (except for the NHS, 2012 Olympics and Arts Council grants etc). Horses for courses. Most people would do best by investing in a combination of both, I suppose.

    PS it is correct and fair that pension schemes be taxed just like any other non-charitable commercial operation, whatever tory boy bankers say
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    Re: Pensions

    Stopped my last jobs pension years ago as it looked good on paper but was turning out to be utter rubbish!

    Don't have any pension now. Hard to save anything these days!!

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    Re: Pensions

    Quote Originally Posted by JPreston View Post
    The important thing to remember with pensions is that contributions are made out of your gross earnings. Other schemes such as ISA's are funded from your net income.

    So your choice is between paying $100 (stupid US keyboard ) into a pension scheme, watching it grow and not seeing any benefit until you retire, or paying up to $41 in income taxes leaving only $59 to pay into an ISA or similar equity plan. The ISA is accessible at at any time but you've rubbishrubbishrubbishrubbishrubbished up to 41% on tax at the outset, that money is gone forever and you get no benefit (except for the NHS, 2012 Olympics and Arts Council grants etc). Horses for courses. Most people would do best by investing in a combination of both, I suppose.

    PS it is correct and fair that pension schemes be taxed just like any other non-charitable commercial operation, whatever tory boy bankers say
    No tax on contributions or growth, but you do pay tax when you get payouts from the pension... assuming your income is over the tax-free threshold at the time.

    A bit scary talk here of not saving at all .. pensions might not suit everybody, but it's going to be a pretty dismal retirement if you rely on state payouts.

    The general rule is to be saving half your age as a % of income - whatever you choose to invest it in ... if you think you can't afford to save now, image living on the state pension for a reduction in lifestyle.

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    Re: Pensions

    Quote Originally Posted by JPreston View Post
    The important thing to remember with pensions is that contributions are made out of your gross earnings. Other schemes such as ISA's are funded from your net income.

    So your choice is between paying $100 (stupid US keyboard ) into a pension scheme, watching it grow and not seeing any benefit until you retire, or paying up to $41 in income taxes leaving only $59 to pay into an ISA or similar equity plan. The ISA is accessible at at any time but you've rubbishrubbishrubbishrubbishrubbished up to 41% on tax at the outset, that money is gone forever and you get no benefit (except for the NHS, 2012 Olympics and Arts Council grants etc). Horses for courses. Most people would do best by investing in a combination of both, I suppose.

    PS it is correct and fair that pension schemes be taxed just like any other non-charitable commercial operation, whatever tory boy bankers say
    Also, employer pensions are usually matched (or better) on a certain level of contributions.

    Therefore, as above, if I take £100 of my gross salary to place in an ISA, I will end up with £59 in the ISA.

    If I defer that £100 of my gross salary into my pension, I will end up with £210 in my pension (the £10 is a peculiarity of my scheme).

    So, £59 to fritter away now, or £210 spend when I have no income and will really need it?

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    Re: Pensions

    Not sure if quiting paying into a company pension in favour of putting it into a ISA on a longterm saving for a pension basis would be best imo. A SIPP would be more beneficial over the long term due to its tax relief, if the aim was for longer term retirement funding.

    Remember, money placed into your pension (such as a SIPP) gives instant tax relief at both lower and higher rate, where as an ISA simply shields your money from tax to a limit each year.

    Putting money into a ISA makes sense if you want to get access to that money at sometime before you retire (emergency money, saving up for something etc) I make sure i use my allocation each year (£7200 at present, full limit - goes up to £10200 next), but remember if you take the money out from your ISA you lose that years tax relief for ever. Personally I still run a SIPP alongside my ISA and even though I do have a company pension. This is because im not totally happy with the limited investment choices of our non-contrib company chosen schemes (very top heavy European equities imo) so by doing a SIPP I can allocate money to investing in varying asset classes i personally favour.

    The important thing for us all to remember is that thanks to living in profligate financial ways recently we as a country owe crazy amounts of money that will need to be paid back, and the form of this pay back will be higher tax's in the years to come. Anything you can do to shield your money from it no matter if ISA/SIPP/Personal Pension is very worthwhile imo.

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    Re: Pensions

    for the record, I have UPPED my pension contributions last year as soon as I saw the markets falling...

    The way I see it, the market is on it's arse, and I buy more of it. I don't NEED my pension yet... you only lose out on a pension's "value" if the market is low on the day you retire. What occurs is that all the money the'yr emade for you, ad that you#ve paid in, come out and buys an Annuity. And it's that annuity that pays you for the rest of your life.

    The less time you are likely to live the more they'l give you per month. So smoking heavily in that time of you life might be a good thing to be doing

    Women get a lower payment for their annuity cos the'yre likely to live longer than men.

    So, in essence, people looking to retire in the last few years have had it DAMN HARD>..cos the money they thought they'd earned has crashed and burned and they can only buy a small annuity. So m,any of them carry on working.. putting more into the pension hoping it will go UP at the same time AND becaue they're getting older, the payment the annuity will pay out gets higher because they're getting closer to death


    SIMPLES /sucks air through teeth

    I like pensions.. as a part of your overall plan for life. I don't pay everything into my pension.. I'm overpaying my house off. I had to decide.. pay house off faster or pay pension at higher rate.. and I'm a spread betting man. So I'm doing a bit of it all ..and a few premium bonds per month too

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    Re: Pensions

    Long story short - get a pension. Don't be disheartened by the current financial crisis, times will change. Don't store up a crisis for yourself that puts you in the position of being elderly and can't afford your bills.

    A little bit every month now will be worth so much more to you when you want to enjoy your mature years. Noone can rely on state provision alone.

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    Re: Pensions

    As an actuarial student I would advise investing in your pension. Now in terms of this acronym switch you are talking about I'm guessing it was changed from "DB" to "DC"? i.e Changing from a defined benefits system where the benefits you receive at the end are determined by a fixed formula to a defined contributions system where your contributions are fixed and when you retire you then purchase an annuity from an insurance company with your pot.

    In general a DC scheme is actually better off for younger workers as you can accumulate a bigger pot by the time you retire and more flexibility in what you want it to do in future. Also I believe you don't pay tax on contributions to a certain point and once you retire you can take out a lump sum of 25% of your accumulated pot tax free. Don't forget that if you are on a company pension scheme your employer also usually contribute and covers expenses.

    Regarding the economy: yeah things are bleak now however they will recover and reach stability over time. It should definitely have recovered by the time you retire.

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