pensions advice needed

[colin1]

I'm going to be starting a new job, and they offer a pension scheme.

I'd like a pension scheme, but have never had one before. I think the way it usually works, is that I pay into it and the employer pays into it.

How do things work if I were to leave the company ? Obviously I dont want to ask them this, as it suggests I'm thinking about leaving before I have started.

I just need to know that if I'm paying my money in, it can move with me if necessary.

Is there anything I should know about pensions ?

I guess the company matches your contributions up to a certain level, but would I be able to make over payments into it, like you can on some mortgages ?

How does it normally work ?
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colin1 is officially faster than god

[Itchy]

depends on the terms of the contract, sometimes they give it you back or allow you to transfer it out at an incredibly high cost.

But as said the x25 rule applies.. so think before you pay into it if it is a good deal , ie you want £1 by 2050 you need to pay into the pot £25.

And some depressing news is that pensions 'growth' under Labour's tenure has been -19% (thats minus 19%). Under Major it was close to 14%.

Which means that the x25 multiplier isn't x25 anymore, its x36 to take into account inflation and to offset the -19% growth it needs to be about £42 for every £1 you want by 2050.



The bottom line is this:

A pension is just a promise nothing more, and thus can be broken just like that.
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Spain 2008France 2007Big one 2009 We all die. The goal isn't to live forever, the goal is to create something that will. In the end, your life will flash before your eyes. Make sure it is worth watching.

[colin1]

[Itchy]

here we go...

Look at the thread by Andy C , I explain how CPI the official measure of inflation is fraudulent.

Thus if real inflation is about 10% which is has been the past 10 years, and CPI is 2% , banks give you what 5% , you still lose 5% year on year , as that 5% is actually 4% once the government has taken its bite.

Inflation has effectively been suppressed by the fraudulent measure, and unfair weighting of items. I have no idea how much you get paid but I bet a fair chunk of your pay packet now and future goes on paying your mortgage right?....

This isn't included..... it should be but isn't hence its distorted.


Thus you need to think , how much will I need to survive per month in 2050 ?.

The classic trap is that you get into what many people in the 70s got into...

I tell you , you will get a pension of £25000 a year , sounds good right? , £25000 will buy lots of stuff TODAY, and herein lies the problem, £25,000 at a NPV discounted factor of just 5% the historical rate of inflation , will reduce that £25000 to about

£2,180

Doesn't sound too good anymore now does it? I do tax for lots of people, they have lots of £500-£1000 pensions, when they were in their prime of youth in the 60s and 70s £500 a year sounded like a fortune, they forgot to factor in discounted future value.

Factor in just 1/10th more and that £25K has a NPV of £1,719 can you live on that?.


It gets worse too , in that to get 25K pension your pot needs to be £625K , which seems like a mountain to climb which it isn't as bad as it seems means £800 per month into the pension pot, ~ 20% tax relief should boost this to £1000, and your employer contribution should boost it to the needed £1320 per month needed to save. Which is based on 480 months working life left ie 40 years. As the 'growth' is neglible since your manager of your fund will take a big cut in fees, each time you move your fund will incur a hefty charge of 2-3K.


You might ask whats the solution? , I don't actually have one other than keep yourself fit and healthy such that when the above happens you can still work and feed yourself.
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Spain 2008France 2007Big one 2009 We all die. The goal isn't to live forever, the goal is to create something that will. In the end, your life will flash before your eyes. Make sure it is worth watching.

[fredsredhat]

in my apprenticeship i paid into a pension, i paid a few quid and the company paid a few quid. After 9 yrs and I'd paid best part of £2000 i got made redundant. 5 yrs later my pension is now worth a tad under £100. Fuck pensions

[colin1]

[colin1]

[LeeR]

[syl]

[Skudd]

i had a final salary pension that i had paid into fro 20 years before i was maid redundant. The funds have been frozen until I'm of pensionable age ( or die) or I can transfer them to another scheme, but sadly I can't have the funds in cash. It is still worth more than I put into it as the statements show this so its not too bad.
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[owdamer]

If you pay anything into a pension all you're doing is providing funds for someone else to gamble with or providing a pot of cash for your employer to dip into whentimes are hard. You might as well just go out buy lottery tickets with the money.

[Itchy]

The problem is folks you are looking at 25K now, you are forgetting discounted future cash flows, as I've said 25,000 NOW is only going to be worth £2500 ish by 2050.

This is what catches people out.
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Spain 2008France 2007Big one 2009 We all die. The goal isn't to live forever, the goal is to create something that will. In the end, your life will flash before your eyes. Make sure it is worth watching.

[LeeR]

[Itchy]

its only 41 years away which is

492 months or 14975 days away
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Spain 2008France 2007Big one 2009 We all die. The goal isn't to live forever, the goal is to create something that will. In the end, your life will flash before your eyes. Make sure it is worth watching.

[TheDonUK]

Wouldent you be better opting out of the company pension scheme and just paying the same amount each month into a high interest savings account (do they even exist any more?)?
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[Itchy]

[LeeR]

Depends on the contributions that you and your employer make, as I mentioned earlier my employer contributes almost 5x what I do on this basis alone I couldn't afford to save that much a month.

With an employer's contribution you could invest (if you can manage your scheme that way and you should be able to) in a low risk, low return fund (e.g 4%) which will still probably give you a good return after 25 years, a lot more than if you'd just saved it with a building society.

Alternatively you could buy premium bonds to the value of your contribution each month, you'd get some sort of return throughout the 25 years and all of your money back at the end.
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My claim to fame: Austin Vince nicked my pen...

[syl]

[Itchy]

[syl]

I only used £600 as that was what we used earlier (well, it stemmed from £800 - but I suggested that people who can afford that are probably higher rate payers).

I have a good pension scheme. I pay 7.5% of my gross salary into it. If I had a less good scheme, I would be looking to pay in even more.
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