Lease cars and lack of pension provision

[drainbrain]

stongle said:

Seriously, don't post on risk if you know FA about it, because that could've been written by a 13 year old with no understanding of capital asset pricing ( that's for you at the basic end of the spectrum). What's more idiotic, is the preferred retirement vehicle you gleefully bang on about is overloaded with systemic risk and you then diversify into more of the same (so correlated).

There are plenty of ways to model risk, you just can't be bothered to understand them. What you believe is irrelevant with such a poor grasp on risk premia.

Do you get some thrill out of offering crap advice, particularly on retirement planning? I won't be replying again.

Angry Little Man reply.

Pointless. Unpleasant. Worthless.

[rufusgti]

Sorry if my comment came across as an attack, it certainly wasn't intended to. I do also enjoy reading both sides of any argument. It's just sometimes these threads can get repetitive with the same people arguing the same point. You are however right, I'm not the referee of ph so do crack on

[drainbrain]

rufusgti said:

Sorry if my comment came across as an attack, it certainly wasn't intended to. I do also enjoy reading both sides of any argument. It's just sometimes these threads can get repetitive with the same people arguing the same point. You are however right, I'm not the referee of ph so do crack on

It didn't (come across as an attack). And you didn't (come across as a referee)

Gave me an opportunity to vent some selfishness.

Thanks for that

[CarlosFandango11]

drainbrain said:

There are HUGE areas of the pension concept that are unsatisfactory IN MY OPINION. But there is a fast increasing need to evolve a realistic and workable way
in which comfortable retirement income can be generated. Today I am told and further read that the average DB pension is £7k a year!! And - apart from the skilfully managed SIPP, the DB scheme is arguably the holiest of holies in planet pension. And even THAT is becoming deemed unworkable.......

£7k a year?? Who's zoomin' who?

Well?

The average DB pension being £7k a year doesn't imply that pensioners are living off £7k a year. Pensioners seem to be doing ok at the moment:
http://www.bbc.co.uk/news/business-38948369

[drainbrain]

CarlosFandango11 said:

The average DB pension being £7k a year doesn't imply that pensioners are living off £7k a year. Pensioners seem to be doing ok at the moment:
http://www.bbc.co.uk/news/business-38948369

Good article. And you're right. That's just the DB pension.

The article also mentions that 1 in 5 pensioner households have at least one worker. My prediction is that'll rise. Sharply.

And it's also talking about 'average'. So I take it all the old monster-wealthy ( often still working) 'pensioners are included too.

Median would be more interesting.

Edited by drainbrain on Monday 20th February 23:21

[nickfrog]

stongle said:

Similar with leasing, if used to your advantage you can get out well ahead. Of the 2 cars in the stongle household, the 3 year lease on the wife's Touareg is 15k vs 30k depreciation in the same period. I'd have needed to negotiate > 35% discount new to make buying outright more sensible. We took a massive bath on the F30 Touring we bought outright.

In the main, people need this explaining to them but their are too many shouty idiots either end of the spectrum clouding the issue with noise.

I agree - and apologies for getting back on topic.

It's entirely possibly to maximise disposable income dedicated to fiscally efficient pension provision by choosing a lease rather than pay cash for a car (if and when the lease deal proves cheaper than cash, which it sometimes does) and in which case leasing actually optimises pension planning.

Spend a little, save a little. It's so simple only the binary thinkers on both sides of the spectrum can't get it.

[treetops]

£500k pension might return you £18k pa if you're lucky! And you'll be taxed on that too when your state pension is factored in. Pathetic amount for all that effort! You'll never see your money back.

[covmutley]

if it pays out £18k, you would have to live 27 years to meet the £500k, so into your 90's. That is not unrealistic.

The biggest downside I see is that the pension disappears. If the £500k was in some sort of investment making even 5%, you could live off the interest then pass the £500k to your kids.

But then again my employer contributes twice as much as I do, and I dont get taxed on what I put in, so I do it anyway.

[sidicks]

covmutley said:

if it pays out £18k, you would have to live 27 years to meet the £500k, so into your 90's. That is not unrealistic.

The biggest downside I see is that the pension disappears. If the £500k was in some sort of investment making even 5%, you could live off the interest then pass the £500k to your kids.

But then again my employer contributes twice as much as I do, and I dont get taxed on what I put in, so I do it anyway.

Of course you could, but long-term risk free rates are 2.5-3%, not 5% so you'd have to take significant investment risk to achieve that extra 250bps, which could result in a significant capital loss and potentially running out of money.

Of course annuitisation isn't compulsory, so there is always the option to drawdown your money in the way you describe and take the investment risk yourself.

[Shirt587]

covmutley said:

But then again my employer contributes twice as much as I do, and I dont get taxed on what I put in, so I do it anyway.

Exactly this. I am not personally a huge fan of pensions, but the current tax advantages are pretty good and it's effectively 11% more money from my employer (I just can't spend it on coke and hookers yet).

[sidicks]

Shirt587 said:

Exactly this. I am not personally a huge fan of pensions, but the current tax advantages are pretty good and it's effectively 11% more money from my employer (I just can't spend it on coke and hookers yet).

Why are you not a fan, given that the tax advantages are the whole point of the wrapper?

[sidicks]

covmutley said:

I checked just now. My pension is with Royal London, spread across about 10 or so funds (life funds). The performance of these has been in the region of 5-7% per annum over the last 15 years.

http://adviser.royallondon.com/pensions/investment...

Indeed, and you are taking significant investment risk! Those returns are not guaranteed...

[covmutley]

Sorry, deleted my post in error.

of course it is not guaranteed, not much in life is. But equally, im happy to consider a proven 15 year (long term) average as a sound basis of likely performance.

[sidicks]

covmutley said:

Sorry, deleted my post in error.

of course it is not guaranteed, not much in life is. But equally, im happy to consider a proven 15 year (long term) average as a sound basis of likely performance.

Of course, but there is significant investment risk and for a drawdown you need to producing these returns each year, not just on average! If you are taking 5% income just after your fund has fallen 10% then you've significantly reduced the income you can generate in future years!

[covmutley]

You are right. I suppose the answer is to diversify and not have all your eggs in one basket.

[sidicks]

covmutley said:

You are right. I suppose the answer is to diversify and not have all your eggs in one basket.

Indeed!