Pensions Rip-Off


K

Kevin Rayner

Just had my annual statement and it is that reminds me what a rip-off
pensions are and not to contribute another penny, just as the liar and cheat
who was booted out of the Home Office a few months back is now thinking of
making contributions compulsory.
Two years ago my pot stood at £57299 and would buy a pension of £4540 per
year. In Feb 2004 it was £57336 and would buy a pension of £4180 a year. In
Dec 2004 it had grown to £61660 and buy a pension of £4380 but now having
grown to £63791 it will only buy a pension of £3870 a year.
Am I missing something here or am I being ripped off. The bigger the pot
gets the less the size of the pension. Is this some sort of con to get me to
contribute something so that I can be ripped off even more. In fact I have
just
worked out that at that level of depreciation my annual pension will be
£168.
Not bad for a life's time investment.

Kevin
 
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J

Jo Reed

If you think you can do better than annuity's (and you probably can), then
change it to a SIPP (self invested personal pension) and go into draw down
(ie, you don't buy an annuity). You can keep this up until you're 75 at
current rules, and this may be extended.
 
C

Colin Wilson

Not bad for a life's time investment.

Don`t worry, by the time you`re old enough to take a pension they`ll have
moved the goalposts so you have to work until you`re 75.

Yes, most people die before they reach 75.

Look at it another way - they avoid a pensions crisis completely by
making you ineligible to claim one (you`ll be dead), and the pension
deficit will magically disappear - 95% of potential claimants will have
died before the pension funds have to pay out.
 
L

Layezee

If you think you can do better than annuity's (and you probably can), then
change it to a SIPP (self invested personal pension) and go into draw down
(ie, you don't buy an annuity). You can keep this up until you're 75 at
current rules, and this may be extended.
Why is it the only long term method of saving and getting any tax advantage
thru' tax relief is by putting into a pension fund that is at the mercy and
whim of the stock market or some other SPV where "past performance is no
guarantee of future performance". If the government allowed people to put
cash into an SPV that still locked up the money until retirement, but
provided a tax free interest at least the base rate and allowed tax relief
similar to existing pension arrangements, I am sure millions of people would
be far more interested in saving for their retirement then they are
currently.
 
J

Jo Reed

Layezee said:
Why is it the only long term method of saving and getting any tax
advantage thru' tax relief is by putting into a pension fund that is at
the mercy and whim of the stock market or some other SPV where "past
performance is no guarantee of future performance". If the government
allowed people to put cash into an SPV that still locked up the money
until retirement, but provided a tax free interest at least the base rate
and allowed tax relief similar to existing pension arrangements, I am sure
millions of people would be far more interested in saving for their
retirement then they are currently.
Quite why cash is banned I don't know, presumably because of all the
possible places to put your money, cash would have been the worst over a
long period of time. You can almost emulate cash though by using 5 year
gilts or bonds.
 
A

Alex

Layezee said:
Why is it the only long term method of saving and getting any tax advantage
thru' tax relief is by putting into a pension fund that is at the mercy and
whim of the stock market or some other SPV where "past performance is no
guarantee of future performance".
You can get a pension that's linked to an index, or am I missing something?
 
R

Rob graham

Quite why cash is banned I don't know,
It isn't, in the sense that you can use a cash fund and not have any
stockmarket risks at all. The current bad press about pensions is at least
in part because the markets have been bad this century. But they haven't
always been.

Rob Graham
 
J

Jo Reed

Alex said:
You can get a pension that's linked to an index, or am I missing
something?
you can put almost anything in a SIPP, just not cash.
 
J

Jo Reed

Rob graham said:
It isn't, in the sense that you can use a cash fund and not have any
stockmarket risks at all. The current bad press about pensions is at least
in part because the markets have been bad this century. But they haven't
always been.

Rob Graham
hi Rob,

Could you let me know of some such funds please? How do I go about buying
them? Can I get them through comdirect for example?
 
M

Matt Robertson

Kevin Rayner said:
Just had my annual statement and it is that reminds me what a rip-off
pensions are and not to contribute another penny, just as the liar and cheat
who was booted out of the Home Office a few months back is now thinking of
making contributions compulsory.
Two years ago my pot stood at £57299 and would buy a pension of £4540 per
year. In Feb 2004 it was £57336 and would buy a pension of £4180 a year. In
Dec 2004 it had grown to £61660 and buy a pension of £4380 but now having
grown to £63791 it will only buy a pension of £3870 a year.
Am I missing something here or am I being ripped off. The bigger the pot
gets the less the size of the pension. Is this some sort of con to get me to
contribute something so that I can be ripped off even more. In fact I have
just
worked out that at that level of depreciation my annual pension will be
£168.
Not bad for a life's time investment.

Kevin
I suspect that the latest statement takes into account an index such as RPI
and shows the anticipated buying power of the fund at retirement rather than
what it will be worth in pound for pound monetary terms.

Many companies are now issuing illustrations on this basis.
 
D

davidof

Colin said:
95% of potential claimants will have
died before the pension funds have to pay out.
a bit like how it used to work back in the good old days
 
D

davidof

Layezee said:
Why is it the only long term method of saving and getting any tax advantage
thru' tax relief
You shouldn't be mesmerized by tax relief, the govt gets it back in tax
on pension incomes.
 
J

Jo Reed

davidof said:
You shouldn't be mesmerized by tax relief, the govt gets it back in tax on
pension incomes.
In general yes, you shouldn't be over-awed, but it depends on your situation
really. If you're a 40% tax payer, then for every £60 you put in, you'll
get £100 quid fund. Then when you retire you can take out 25% completly tax
free that you would have paid NI and tax on. Then you've got your 4.5k tax
free status each year to eat up before you pay tax, plus you don't pay NI on
your pension income, that you would have done on the money if you hadn't put
in in the pension shelter. All in all it's only worth it if you're
considerably into the 40% tax bracket as far as I'm concerened, as I
wouldn't dream of putting in more than what would take me below the 40% tax
bracket, I'd rather use ISA's. And if you're not putting away that much
there's no point, cause you'll be killed by means testing. Basically, the
labour government have sucessfully managed to make the pension system only
viable for high earners....and they've decided to cap the limit now at
1.5million!!!! So the number of people it's useful for is vast diminishing.
Gawd, labour stink.
 
M

MM

If you think you can do better than annuity's (and you probably can), then
change it to a SIPP (self invested personal pension) and go into draw down
(ie, you don't buy an annuity). You can keep this up until you're 75 at
current rules, and this may be extended.
Hey, can we have that in English, please! ;) The problem with pensions
in the UK is that they are too ruddy complicated for most people to
understand. Most people are not financial gurus and have an enormous
battle with the small print, trying to pick out the wheat from the
incredible amounts of chaff thrown up by confusion marketing. I think
a lot of financial advice is deliberately clouded in ambiguity so as
to make the case for even more financial advice.

Everything about UK pensions stinks like the worst pigsty.

MM
 
K

kajr

Just spoken with the pension company concerned and their excuse is that
they have reduced their predictions for how well the funds are going to
perform which is very interesting.
In July 2002 I transferred out of Equitable Life (f**king bastards)
£56883. With the fall in the stock market, by May 2003 this had fallen
to £49733 but since then has grown to £63791.
So in 2003 with a fund of £49733 the pension at todays prices would be
£4540 per year, and in 2005 a fund of £63791, a growth of 28%, the
pension would only be £3870.
That to me says that there is some almighty f**king crash coming over
the next 12 years. Have I got this correct? Just as well I am not
paying one single penny more into a pension.

Kevin
 
K

kajr

I meant to add that I hope that somebody is informing messers Blankett,
Brown and Blair that there is a crash coming. Should they really be
incouraging people to put money into a pension if in 12 years time the
money will be worth less than it is now, surely under the bed would be
better.

Kevin
 
J

Jo Reed

I meant to add that I hope that somebody is informing messers Blankett,
Brown and Blair that there is a crash coming. Should they really be
incouraging people to put money into a pension if in 12 years time the
money will be worth less than it is now, surely under the bed would be
better.

Kevin
arguably the best time to invest in shares in when the markets going down,
cause you get more bang for your buck. if you don't want to invest in
shares...DIY. Look into SIPPS and what they have to offer. Try not to
confuse the tax benefits of pensions with the risk of investing in shares.
 
T

Tim

Then you've got your 4.5k tax free status each year to eat up before you
pay tax, ...

Aren't you hoping to get your Basic State Pension?? That'll eat into your
4.5K allowance ...

... plus you don't pay NI on your pension income, ...
OK...

... that you would have done on the money
if you hadn't put in in the pension shelter.
But you pay N.I. on your pre-retirement earnings, **whether-or-not** you pay
pension contributions out of them!
Can't you get your facts straight??
 
K

kajr

Yes, having looked at the figures again it is at today's prices. Still
the growth rate forecast is pathetic. As I see it the growth in th fund
cannot better the expected inflation rate, ie it will be paying less in
11 years than it would do now. I should also have calculated over 11
years remaining not 12, however, their final fund value, if growth is
5% looks more like groth at 4%. My calculation is a bit rough and
ready. They are saying that £63800 growing at 5% will give £94000 so
I can't see how their calculation has been done.
Seems to me that all this pension crap can only promise a rate at least
equal to that of a Building Society. Blair is going to have is work cut
out trying to convince people that a pension is a good idea.
I will have a look at the options that people have made but I can't
believe how bad the pension option looks.

Kevin
 
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J

Jo Reed

I will have a look at the options that people have made but I can't
believe how bad the pension option looks.#
As I said earlier, don't confuse pensions with investments. Pensions are tax
wrappers, similair to ISA's but work in a different way. Are you unhappy
with the pension (the tax wrapper) or the underlying investment? If it's
the underlying investment, then change it.
 

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