Planning for retirement - damned whatever you do!

spudbynight · 13 Feb 2012 at 09:55

I received a letter in the post today from AIB in Ireland.

I took out a pension plan with them when I was living in Ireland and paid into it around 1999 before I came back to England.

It was a statement of account. I paid in €2723.59 over the space of about 12 months. Now 12 years later that money is worth €943.19. I would have been better shoving the money under the mattress.

I did resolve early in my life not to take out a formal pension plan for two reasons :

1) Lack of control over my investment
2) High costs no matter how bad a job is done

I invested in property and that actually worked out quite well. Despite the attitudes of some people I wasn't trying to "get rich" that was my pension. Unfortunately I was ripped off by a solicitor and lost a lot of money - my entire pension pot. The solicitor in question has now been struck off and can never practice law again. I am taking action against that solicitors PL insurance and will hopefully get some of it back.

That letter this morning has just hacked me off somewhat so I am hoping someone can share a story on planning for retirement that cheers me up.

Randomface74 · 13 Feb 2012 at 10:00

Agreed, I'd never sign up for a standard issue pension just because it's meant to be the norm. I'm lucky that my employer also contributes, so even if it loses a bit I'm still better off. If they didn't contribute, I'd probably be combining long term savings accounts and equities - I'd also have a better house deposit, and save a bunch off that purchase.

spudbynight · 13 Feb 2012 at 10:03

One thing about pensions that I really hate is the fact that the company makes its money whether your funds go up or down.

grimm · 13 Feb 2012 at 10:17

You're not investing in the fund house/manager though, you're investing in the underlying financial markets and instruments. What you're paying for is to have the fund house/manager do a better job of managing the underlying investments than you could. If you had invested it yourself, no doubt you would be in a worse position (unless you got really lucky or you have 7 hours per day to dedicate to doing research and gaining knowledge/experience in that field).

Even if you did invest yourself, there would be dealing/stockbroker charges to be paid, and obviously it wouldn't be in the pension environment, so you wouldn't gain the tax advantages unless you were willing to pay the pension provider's charges in order to subscribe to a registered pension scheme.

Do you expect to get paid for the work and services you provide even when you have no control over the final outcome? For example if you sell mobile phones, if all of the Iphones you recommended and sold to people were to break, would you still expect to get paid, even though it is the manufacturer who is at fault?

Sometimes on old fashioned pension policies ther charges are really excessive, however if you are worried about that you should go to see a financial adviser and get them to review it for you and possibly recommend transferring it into something cheaper/better value like a stakeholder pension. They will also be able to ensure that the funds you're invested in are actually suitable for your risk tolerance (it sounds like the OP was invested into some funds that were higher risk than they were actually comfortable with).

SKYNHEDD · 13 Feb 2012 at 10:19

Call me thick but how can you LOSE that much money?

I mean christ, just the rate of inflation would have made it worth more...

SuperBOB · 13 Feb 2012 at 10:19

My plan is to clear mortgage(s) and worry about a pot of cash later in life.

SuperBOB · 13 Feb 2012 at 10:20

SKYNHEDD said:
Call me thick but how can you LOSE that much money?

I mean christ, just the rate of inflation would have made it worth more...

I imagine/hope the risk profile for this particular pension pot was not 'very safe'.

player · 13 Feb 2012 at 10:31

I only pay into a pension at the moment because of the 40% relief, if the government does away with that I will stop paying into it and invest into property and ISAS

AMMUT · 13 Feb 2012 at 10:32

SKYNHEDD said:
Call me thick but how can you LOSE that much money?

I mean christ, just the rate of inflation would have made it worth more...

Property in Ireland has taken a huge hit. AIB was one of the banks badly hit by the financial problems in Ireland.

anything I don't mind · 13 Feb 2012 at 10:33

When I reach 65 i am moving to a tropical island to live on the beach and fix boats.

SuperBOB · 13 Feb 2012 at 10:37

groen said:
When I reach 65 i am moving to a tropical island to live on the beach and fix boats.

Do you know how to fix boats yet?

anything I don't mind · 13 Feb 2012 at 10:37

No. But i have 35 years to learn that.

edscdk · 13 Feb 2012 at 10:38

SuperBOB said:
Do you know how to fix boats yet?

buy a load of corks, the at night drill cork sized holes in all the local boats?

Nitefly · 13 Feb 2012 at 10:38

As far as I can see, property is the way forward. One you have a small portfolio with tennants, you are pretty much laughing as the income from rent will pay off the mortgages and you will continue to have an income from rent once those mortages have been paid off way down the line.

Sadly, you need to be pretty good at saving and be on fairly decent salary to pull this off. Otherwise, it's a silver spoon system.

SuperBOB · 13 Feb 2012 at 10:41

Nitefly said:
As far as I can see, property is the way forward. One you have a small portfolio with tennants, you are pretty much laughing as the income from rent will pay off the mortgages and you will continue to have an income from rent once those mortages have been paid off way down the line.

Sadly, you need to be pretty good at saving and be on fairly decent salary to pull this off. Otherwise, it's a silver spoon system.

I agree property seems to be a good plan for the UK.

booyaka · 13 Feb 2012 at 10:43

So basically you invested €2723.59 into a pension, did not review it, got no one to review it and your annoyed that it's lost money over 12 years??

The financial markets have changed dramatically over 12 years and without regular reviews, fund updates/switches if required, you can not expect miracles. If it was invested in property funds, then most property funds have dropped dramatically over the last 5 years

I would liken it to a car - would you drive a car for 12 years, without any servicing and still expect the car to be running well and in good condition 12 years later? No you wouldn't, so why expect the same from a pension plan?

Charges, fund performance, annual management charges, bid offer spreads etc are all things that may have affected your pension value. Reviewing it regularly would potentially have highlighted issues that may have been able to help you in avoiding such large drops.

I review my investments within my pension fund each year, I pay into a pension because I get 40% tax relief on the premiums so year payment I make gets an immediate 20% increase in value plus the other 20% is claimed back via my tax return.

A pension is the only investment which gets 20% "growth" immediately upon payment to the pension - show my anything else that does that!

People are generally very ill informed about pension and you will only hear the "horror" stories of how much people have lost, who ripped who off, bankers taking all the money etc. I bet there are more people who are happy with their pension but just don't shout about it

edscdk · 13 Feb 2012 at 10:44

Nitefly said:
As far as I can see, property is the way forward. One you have a small portfolio with tennants, you are pretty much laughing as the income from rent will pay off the mortgages and you will continue to have an income from rent once those mortages have been paid off way down the line.

Sadly, you need to be pretty good at saving and be on fairly decent salary to pull this off. Otherwise, it's a silver spoon system.

/agree

unless bird flu manages to kill a good % of the population..

also rent it out via a good agent...

randomshenans · 13 Feb 2012 at 10:48

Nitefly said:
As far as I can see, property is the way forward. One you have a small portfolio with tennants, you are pretty much laughing as the income from rent will pay off the mortgages and you will continue to have an income from rent once those mortages have been paid off way down the line.

Sadly, you need to be pretty good at saving and be on fairly decent salary to pull this off. Otherwise, it's a silver spoon system.

That's my aim over the next 2 years to start on this. I'm not worried about buying somewhere to live at the moment, as I don't know where I will end up living. I would prefer to buy to invest.

Pensions are useless in my eyes, not worth it.

My aim (in my head) is to be bringing in c.3k a month in rent, having paid off the mortgages. That way I could retire and bring in 3k a month, which would be enough to get by on, especially with no mortgage myself.

See in 25yrs how I'm doing.

SuperBOB · 13 Feb 2012 at 10:51

I think renting places out (particular more than 1) is going to be a headache. Also there seems to be an increasing amount of talk to reduce the BTL market. Gets some quite negative press..

Nitefly · 13 Feb 2012 at 10:54

SuperBOB said:
I think renting places out (particular more than 1) is going to be a headache. Also there seems to be an increasing amount of talk to reduce the BTL market. Gets some quite negative press..

It could be a headache, but I'd rather utilise an agency to take care of most matters for me, even if it does mean I take a cut in rental income.

Anyway, for most it's a pipe dream. Most people have no hope of buying 2 properties let alone 3/4 if they have a family and want to have a relatively decent standard of living.