2016 Pension Summary

Its that time of year when I receive my pension statements, yet again they are depressing reading.

For yet another successive year, the ‘paid-up’ schemes are going down and the new revised plan targets using their new ‘calculators’ show my pension dropping. What is even worse this time round is that my old personal pension (which I can transfer and lose 9% of its value in ‘actuary fees’) is the most depressing reading. They are quoting a growth rate of 2.4% and an inflation rate of 2.5% … in other words …  a negative growth rate – no wonder we are so disillusioned with the financial services industry.

I am considering moving this to a SIPP and taking the hit of the 9% loss in transfer value and try and make this up by new contributions (I cannot re-open this scheme in its current form, its ‘paid-up’, so it is stuck in this strange limbo where I cannot do anything but watch it being eaten away by inflation and their scheme ‘administration fees’).

I am not surprised by the lack of trust in the pension arena when you see money saved just disappear in charges and locked in policies which restrict what you can do with them. Because it is an old scheme, they will not support the new pension reforms and I would need to transfer this to another scheme to gain any access to the new pension freedoms (losing my 9% in fees in the process!). This shows how these freedoms have not really made any difference to those people who heard the messages at an early age and started schemes as soon as they started their working lives over 20 years ago.

I am glad I am monitoring these schemes, what if I had just left them and not monitored them? I could just be the ‘head in the sands’ type person hoping that the pension company was doing the right thing and that the scheme was growing and that when I reach my retirement age I would have some money – well – based on the current forecast, I doubt I would have much left to take. Its a sad state of affairs when the general public are so unknowing and trusting of these financial institutions to look after and grow your money for you. People need to take more interest in their financial affairs and keep an eye on these so called experts.

Looking overall at the final salary schemes that used to exist. Now that companies are globally owned, it doesn’t take much for a global parent to dump a company and leave the pension scheme in a mess. I have a final salary scheme which is now deferred and should pay out a guaranteed sum when I reach retirement – but will it? If the company is bought by a foreign parent then asset stripped by a foreign parent, anything could happen. The number of large UK corporations that have gone bust after years of successful operation due to global pressures.

My current employer was a long-standing manufacturing employer and has lots of history but it has shrunk over the recent years as global competition has picked up and it has now fallen victim to the foreign buyout and now has a foreign parent that has no interest in the history or any loyalty to is past or present employees. This also means you cannot guarantee that a long-standing UK company will still exist in years to come as they are under global rules of operation and need to provide the profits and sales growth expected by their foreign parents and if they don’t succeed (even though they are doing well in the UK market) they will be dropped like a hot brick. The results of this can cause what would be a good UK company into administration and resulting in the end of an era.

 

 

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3 thoughts on “2016 Pension Summary

  1. Be very careful about transferring now. There is an FCA consultation about capping exit charges at 1% for people who can take the pension (so currently age 55).

    As a result you may find there is a significant reduction in exit fees at that point. Of course, if hat is a long way off then it will be harder for you to decide.

    One more thing to dig into, as can be hugely complex!

    David

    • I have heard the stories but it yet again sounds like ‘talk’ and no action because the industry doesnt want this as it will cut their profits. Their fees are just so high and unnecessary. Its a balance between exit fees and growth potentials over the future years – although now that Brexit is on the cards, any form of growth has just been jettisoned as the global interest rate drops due to a world-wide slow down.

  2. When I started my working life I guessed on two outcomes on my pension on the back of too many getting full pensions in their early 50s, 1) I’d stay at the bottom of the income ladder and pension wouldn’t support me, 2) my to good a deal final salary pension plan would get cut/closed. A few years ago the latter came true with my pension being frozen and starting out contributing to a new one.

    Similar to yourself my DC pension value is a couple percentage below what has been put in (worst as I’ve not taken inflation into account). My journey assumes my pensions won’t be good enough and will come too late to be useful in supporting me on their own, plus I’m in an industry where redundancy in an all regular risk – I don’t want to retire in my 60/70s. I want my route to FIRE to support me on its own and will treat any pension income as a bonus.

    I’m untrusting of pensions (more the government), whilst understanding that they are important, I’ve not invested in private pensions like SIPP, mainly I don’t understand them and unsure of the wanting to lock away to my 50s – I know I’m missing out of the tax advantages.

    I did get a pleasant surprise last month when checking my state pension contributes to find I’d have full 35 years by the time I’m 52 – didn’t realise you go some years whilst still at school – knowing the government the goalposts will move.

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