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groak

3,254 posts

63 months

[news] 
Tuesday 2nd October 2012 quote quote all
fandango_c said:
groak said:
....of course, not all "investment professionals" agree with what an annuity actually IS.....laugh

http://www.bankrate.com/brm/news/drdon/20020411a.a...
...of course, this article is about financial products in the USA, not the UK....laugh
......which may NOT be, particularly, a reason to be cheerful..readit

http://www.telegraph.co.uk/finance/personalfinance...

fandango_c

1,124 posts

70 months

[news] 
Tuesday 2nd October 2012 quote quote all
groak said:
......which may NOT be, particularly, a reason to be cheerful..readit

http://www.telegraph.co.uk/finance/personalfinance...
That's a more relevent article, although it's not about annuities.

If you read it, you'll see that it's about the assets that pensions are invested in, not the pension products.

sidicks

5,441 posts

105 months

[news] 
Tuesday 2nd October 2012 quote quote all
groak said:
......which may NOT be, particularly, a reason to be cheerful..readit

http://www.telegraph.co.uk/finance/personalfinance...
Hmmm. Article says:

Pension companies in Britain invest a higher proportion of their money in stocks and shares rather than government bonds.

The credit crunch and subsequent falls in the value of shares have exerted “major stress” on these private pension funds.

So basically:

The underlying investments in many of these funds i.e. equities went down in value.

And people in the UK had chosen to invest in a higher proportion of equities than people in other countries.

So their funds performed worse in the global economic crisis.

Well who'd have thought it...

(so as I've stated on numerous occasions, nothing to do with the pension 'wrapper' and everything to do with the chosen underlying investment strategy).
rolleyes

Edited by sidicks on Tuesday 2nd October 22:58

groak

3,254 posts

63 months

[news] 
Tuesday 2nd October 2012 quote quote all
fandango_c said:
groak said:
......which may NOT be, particularly, a reason to be cheerful..readit

http://www.telegraph.co.uk/finance/personalfinance...
If you read it, you'll see that it's about the assets that pensions are invested in, not the pension products.
....which, in layman's terms, is like saying "She's a beautiful girl. True, she's got gonorrhea and herpes but....she's still a beautiful girl.." laugh

sidicks

5,441 posts

105 months

[news] 
Tuesday 2nd October 2012 quote quote all
groak said:
....which, in layman's terms, is like saying "She's a beautiful girl. True, she's got gonorrhea and herpes but....she's still a beautiful girl.." laugh
Gosh you're tiresome.

Whatever you say groak, it's quite clear you don't understand and won't ever understand.
frown
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fandango_c

1,124 posts

70 months

[news] 
Tuesday 2nd October 2012 quote quote all
groak said:
....which, in layman's terms, is like saying "She's a beautiful girl. True, she's got gonorrhea and herpes but....she's still a beautiful girl.." laugh
laugh

No, but that's very amusing.

Welshbeef

17,493 posts

82 months

[news] 
Tuesday 2nd October 2012 quote quote all
groak said:
....which, in layman's terms, is like saying "She's a beautiful girl. True, she's got gonorrhea and herpes but....she's still a beautiful girl.." laugh
Can you update your garage with honest current and previous cars thanks.

groak

3,254 posts

63 months

[news] 
Tuesday 2nd October 2012 quote quote all
Welshbeef said:
Can you update your garage with honest current and previous cars thanks.
Nope, but my last toy (sold in June after 6.5 great years) is currently back for sale on PH

http://classifieds.pistonheads.com/classifieds/use...

Next one's in the womb, but due to be born around the middle of this month...

Edited by groak on Tuesday 2nd October 23:46

GBB

1,724 posts

43 months

[news] 
Wednesday 3rd October 2012 quote quote all
Interesting thread.

I'm a director of my own company. I'm fortunate to have been in company final salary schemes (4 of them) from 1987 to 2005, but since then I've not contributed to a pension as I've been investing in growing the business.

I'm now at a point where I think I should start considering a pension. However I'm a cynic and reckon that if I'd been putting into a normal contributory pension over the last few years it's hit or miss whether it would have gone up in value.

I'm considering going the SIPP route, however I'm not too confident in the perfomance of equities over the next few years - what can/can't I invest a SIPP in?


ringram

13,959 posts

132 months

[news] 
Wednesday 3rd October 2012 quote quote all
Diversified assets smile

Property
Stocks
Bonds

etc..

All can be held in a SIPP.

Physical property in some instances, but Id argue that a diversified property collection perhaps via a REIT or House builder or combination thereof would be the better way to go over a single property.

Also look at diversifying outside the SIPP as well, you are right in having your business, but perhaps ISA's, your own House as well as SIPP and maybe other holdings is also worth considering.

All eggs in one basket is never good as Groak has obviously found out with much chagrin.

Manks

7,499 posts

106 months

[news] 
Wednesday 3rd October 2012 quote quote all
ringram said:
Diversified assets smile

All eggs in one basket is never good as Groak has obviously found out with much chagrin.
Well that entirely depends upon a number of things. For example what you're trying to achieve, what you've done before, how old you are, your state of health, dependents (or lack thereof) and your attitude to risk.



kitz

77 posts

61 months

[news] 
Wednesday 3rd October 2012 quote quote all
With Groak on this one.Money is being printed for fun with no sign of it stoping.
Inflation can kill your contributions it certainly did for me .
Of course if you buy another investment property inflation is your friend.
At least untill the return of rent controls !

GBB

1,724 posts

43 months

[news] 
Wednesday 3rd October 2012 quote quote all
ringram said:
Diversified assets smile

Property
Stocks
Bonds

etc..

All can be held in a SIPP.

Physical property in some instances, but Id argue that a diversified property collection perhaps via a REIT or House builder or combination thereof would be the better way to go over a single property.

Also look at diversifying outside the SIPP as well, you are right in having your business, but perhaps ISA's, your own House as well as SIPP and maybe other holdings is also worth considering.

All eggs in one basket is never good as Groak has obviously found out with much chagrin.
What's a REIT?

A diversified property portfolio appeals, though again I'm not sure that values will hold over next 10 yrs (so yield is key).

TBH if I had a shed load of cash then I'm fairly comfortable with how I'd invest it. But I don't, yet want to start saving for old age. Arguably job one is pay down my mortgage.

Manks

7,499 posts

106 months

[news] 
Wednesday 3rd October 2012 quote quote all
GBB said:
What's a REIT?

A diversified property portfolio appeals, though again I'm not sure that values will hold over next 10 yrs (so yield is key).

TBH if I had a shed load of cash then I'm fairly comfortable with how I'd invest it. But I don't, yet want to start saving for old age. Arguably job one is pay down my mortgage.
Real Estate Investment Trust.

ringram

13,959 posts

132 months

[news] 
Wednesday 3rd October 2012 quote quote all
kitz said:
With Groak on this one.Money is being printed for fun with no sign of it stoping.
Inflation can kill your contributions it certainly did for me .
Of course if you buy another investment property inflation is your friend.
At least untill the return of rent controls !
That's 2 fails then.
Inflation like Japan you mean?

walm

4,501 posts

86 months

[news] 
Wednesday 3rd October 2012 quote quote all
^Agreed. Inflation (not hyperinflation) is typically very good for equities.

Newc's contribution is excellent and if he follows up with answers to his last few points he should maybe put it in a separate stickied thread.

The typical questions of pension/ISA/mortgage/savings are essentially asking the same thing but with slightly different tax treatments.

The under/over performance will be entirely due to the underlying asset and has nothing whatsoever to do with the wrapper it comes in!!!

Newc

716 posts

66 months

[news] 
Wednesday 3rd October 2012 quote quote all

4. What are final salary, defined contribution, and SIPP pensions ?
These are all different types of pensions (so they are the legally defined thing we looked at in #2).

- Final Salary
Final Salary pensions were the original, traditional pensions offered by employers. For each year you worked at a company, a chunk - usually 2.5% - of allowance was put in a pot for you. When you retired your annual pension was set to be your total percentage allowance (so if you’d been there 35 years it would be 35 x 2.5% = 87.5%) of your final year’s salary, which traditionally would have been your highest earnings.

Final Salary plans were really designed for an era when people stayed in the same firm their whole working lives, and when life expectancies were shorter. As those things changed the plans became more and more expensive for employers to manage, and now almost no private sector employers will offer them. They are still the norm (at the moment) in the public sector and they are enormously valuable to an employee because there is no investment risk in them – you know what you will be receiving no matter what happens in the outside world. This is not the case with any other pension plan. One big caveat with final salary plans is that the company itself is usually the owner of the plan, and if the company goes bust or there is corporate fraud you can lose your pension.

If you are offered a job with a final salary pension you should in my view look at it as the equivalent of 15% to 20% on top of the base salary.

- Defined Contribution
You are however much likely to be offered a defined contribution pension plan. This is now the norm in the private sector, and is the structure which causes most of the anti-pension feeling. It’s a simple setup – an amount of money is put into a pot each month. The money can come from you or your employer or both. The money is given to a fund manager who is selected by your employer. You will usually, but not always, have the option to select which of the funds operated by the manager your money goes in. So for instance, Fidelity, a big pensions fund manager, might offer a UK fund, a US fund, a China fund, a Europe fund, and so on. While nominally you are directing your investments you have no say over the manager used, no direct control over the investments, and crucially no control over the operating costs. You are usually able to switch funds at any time, but you will be charged a small percentage to do so. The value of your pension pot on retirement is therefore the sum of all your monthly payments, plus the investment performance over time. There is no guarantee about the amount you will have to live on.

It’s important to note that all of these investment funds would be available to you if you just called up Fidelity and said “I want to invest with you”. The only thing the pension brings to you here is the tax break, and possibly an employer’s contribution.

The plan usually stays with your employer when you leave (though, unlike the Final Salary the actual money is held by the plan manager so you are at a lower risk of company failure), so you will open a new plan with a new employer and eventually retire with multiple pension pots. It is possible to merge plans, but you will pay a chunky fee to do so.

The funds offered are usually ‘actively managed funds’. This means that you are paying someone to look at, say, all large companies in the US and decide which ones will perform better than others, and invest only in those. You have no comeback if their decisions are wrong and your investment underperforms. You may also be offered some ‘passive funds’ or ‘tracker funds’ by a pension plan manager. These are funds which say simply “I don’t want to try and spot individual firms, I will just buy some shares in each of the companies and hope that the good ones outweigh the bad ones”. These funds typically have very low operating costs, and follow the general market up and down.

It is the lack of control over the costs and the performance in these plans that causes people to be against them. Your money is three or four steps away from you, and the people looking after it are being paid the same whether they do a good job or a bad one. The costs might be ‘only 1% or 2%’, but it’s taken every year and over the lifetime of a pension plan that will mount up to a significant cut in your pension value. If you have a defined contribution plan - and you probably will – then keep a very sharp eye on the fund costs and performance, and don’t be afraid to make a fuss to your employer if you see yourself paying fees to lose money.

- SIPP (Self Invested Personal Pension)
A SIPP is a Defined Contribution plan where you are the fund manager. The mechanics are the same – you and your employer make contributions to a SIPP provider, the contributions are tax free, the money is held in your name – but you are making all the investment decisions. You can buy funds, including exactly the same funds that are offered by pension plan managers if you want to, tracker funds, individual shares, bonds, and in certain circumstances derivatives, land, commercial property and physical assets. The SIPP provider will charge a small annual fee –not a percentage of assets - and probably a per-trade fee.

The plus side of a SIPP is that you are completely in control of your investment decisions and pension pot, and it is independent of your employment so you can take it with you through your working life; the minus side is that it is more complex for your employer to manage and so many employers don’t offer the option, and that you have to take more active care of where your money is going. It is also tempting with a SIPP to try and stockpick and you can fall prey to the temptation to shove a year’s contribution into that surefire Mongolian Oil Drilling firm. Resist that siren call.


To come at my next airport lounge: 5. If not a pension, what other things should I look at ?

ringram

13,959 posts

132 months

[news] 
Wednesday 3rd October 2012 quote quote all
walm said:
^Agreed. Inflation (not hyperinflation) is typically very good for equities.

Newc's contribution is excellent and if he follows up with answers to his last few points he should maybe put it in a separate stickied thread.

The typical questions of pension/ISA/mortgage/savings are essentially asking the same thing but with slightly different tax treatments.

The under/over performance will be entirely due to the underlying asset and has nothing whatsoever to do with the wrapper it comes in!!!
Less fees!

cliffe_mafia

1,088 posts

122 months

[news] 
Wednesday 3rd October 2012 quote quote all
Thanks Newc. I look forward to the next installment smile

kitz

77 posts

61 months

[news] 
Wednesday 3rd October 2012 quote quote all
Another thing to consider is that in Argentina ,Portugal and I think in Hungary
Pension pots have been sized by the Government for ( patriotic reasons ).
As there is simply massive national debt In the U K do you trust the jokers running
the show.?
Think the student loans debacle .
In Ireland I believe a temporary levy has been charged on pension plans .
That's how income tax started..
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