Private pension schemes

[SiSiSi]

I've always worked for local goverment and have therefore always paid into the pension scheme. I've no idea how pensions work, it's just something I've always paid into because I assumed I had to. I'm about to take a job with a private company with no pension scheme. So, my question is do I take out a private pension or do I just try to save some cash for retirement? What are the advantages of taking out a private pension? How do they work? (sorry, more than one question!)

[steelhead4]

There are no advantages , in order for the provider to earn profit and pay people to manage the fund you will pay more and receive less. Dont give up on the LGPS just yet though , its fully funded and cash rich , its only the Tory lies that makes it sound like its unaffordable.

[andyofborg]

you almost certainly should not leave the local government scheme, however you will no longer be able to contribute to it and your final pension will be based on your final local government salary and how many years you have been in the scheme.

 

depending how long you have left to retirement then you should consider either joining your new employers scheme or contributing to a personal pension.

 

you really need to take proper financial advice about this and not rely on the rambling of the people on here.

[erebus]

Sadly pensions are just honey pots for the banks to plunder, so as stated keep you existing pension, but even saving is a bit of a joke these days. We are told that inflation is around 5% but with energy, fuel, vat, and not forgetting food price hikes we ordinary fokl find we are paying several times the official figure.

 

As costs rise we also find wages either stay the same or are less, as the banks require all our money, through one scheme or another. They are professional robbers, and despite getting us into this mess, it seems we are here mainly to work and give them our money. Rather they get our money one way or another.

 

Save by all means, but the truth is inflation will make you money it disappear almost like magic. What £10 will buy today, in ten years could be less then what one pound buys today. So money in the paper form or figures in a bank account, loose value over time. One thing that keeps pace with inflation is gold and its cousin silver, so £10 of gold today will it seems buy you the equivalent in 10 years time. People say gold goes up in value, but the reality is paper money, and bank account savings go down. When I say gold I do not mean jewelry, but bullion, and you can start with £2000, and buy the real metal at the right high purity. That is a safer bet then in figures in a bank account or storing bits of paper that become worthless over time.

 

We are being swindled by the banks who have financial tentacles in every commodity going, hence they continuously rise in price as they are manipulated globally.

 

Unfortunately the governments we call democratic, do what they are told by the paymasters, the banks, who rule us all, not just in the UK, or Europe, but globally through personal, as well as national DEBT. The world owes the banks all they can give, and more, as interest rates vary depending on which government plays along with the swindlers worshiping at the god of greed.

[Rupert_Baehr]

Your local government pension should be frozen, so you will eventually receive that.

 

As Andy said, you need professional advice but beware of advisors who are tied to a particular company. - Even those who claim to be 'independent' may be getting a better commission from some firms than from others, so their advice may be biased.

 

You say that your new company does not have a pension scheme. It might be worth asking what the company's existing employees do to provide for their pensions.

 

How you invest depends on your personal circumstances (as well as any personal preferences you may have.) When you are young, you can afford to take more risk - because you have more time to make good any shortfalls caused by poor performance. As you get older, you become more 'risk-averse' - you can't afford to make speculative investments (unless you've got plenty of spare money.)

 

The ONLY investments which can be described as 'safe' are those backed by the 'full faith and credit' of the government ... and some governments have better credit ratings than others. In the UK, that means Gilts. The British Government can't run out of money so it will always be able to repay you. - If it does, it will print some more and pay you with that. - You will get the right number of pounds, but they might not be worth as much. Inflation is the biggest risk to 'safe' investments.

 

There are almost certainly going to be investments which will out-perform the rest and might make you very wealthy. (If I knew what they were, I would be a very rich man.)

 

During the late 1970s/early 1980s (a period of very high inflation) 'English Oak' (as in furniture) appreciated by 2000% in a couple of years.

 

Hindsight is wonderful, but it doesn't make you much profit and - notwithstanding the huge gains - any advisor who had told somebody who was saving for retirement to invest in English Oak furniture would have been providing poor advice. - The outcome had you followed that advice might've been pleasing, but the advice itself would've been SWAG. (Stupid, Wild-Assed Guess.)

 

AFAIK, SSAP'S (Small Self-Administered Pension Schemes) are no longer available in the UK (and even if they are, they may not be available to employed [as opposed to self-employed] persons.) There are schemes managed by banks/other agencies which will allow you to save tax-free. (The names have changed and I've no idea what the current name is ... I've got a few thousand in one.)

 

Personally (and this is a personal viewpoint) I wouldn't put my money into any scheme which required me to use my savings to purchase an annuity. Annuities are like 'upside down' life insurance. With life insurance, you are betting against dying. The premium you pay is dictated by the company's assessment of your chance of dying early. - If you die young, they have to pay out a lot of money and have received little in premiums.

 

An annuity is the reverse bet. They are hoping you'll die young so they don't have to pay out much.

 

The state pension is an annuity. - If you die, they stop paying. Your local government pension is also an annuity - if you die, they stop paying (Both, of course, are subject to widow(er) payments - which may cost you!)

 

I have an occupational pension and will soon (perhaps - unles they renege on the deal or keep putting the age up) have a State pension. Those are annuities. I also have savings (in tax-exempt schemes.) I'd like to even the odds a bit, so I won't be using those savings to buy an annuity. If I die the day after I start drawing my state pension, both that pension and my occupational pension will stop. - There are no pockets in a shroud, so it won't matter too much to me.

 

If I don't buy an annuity with my savings, my grandchildren will get that. I'm hedging my bets.

 

BTW (though I'm sure I don't really have to tell you this) Beware of ill-informed and unqualified investment 'advisors' posting on internet forums who will try to steer you into investing in specific securities/products when they don't have a bloody clue about your investment requirements.

 

Should you be persuaded by their (purportedly) qualified expert advice and should you lose money as a result of following that advice, then you could of course sue them for damages. You may be awarded damages, but you can't recover them from somebody who can't afford to pay. You can't get blood from a stone, nor can you get it from short pieces of wood. Even if you've got two of them.

[Classic Rock]

I'm sure I read somewhere that there's a law coming in next year for all companies to offer a compulsory pension. Did I dream this? Has anyone else read anything about this or has it all been put on hold?

[Rupert_Baehr]

There are no advantages , in order for the provider to earn profit and pay people to manage the fund you will pay more and receive less. Dont give up on the LGPS just yet though , its fully funded and cash rich , its only the Tory lies that makes it sound like its unaffordable.

 

The OP probably won't be able to continue to contribute to the LPGS - and his/her ex-employers certainly won't be prepared to co-pay.

 

The pension will be frozen however and it won't go away. - If it'S an index-linked scheme, it should start the index-linking immediately.

 

I can't agree that there is no difference between private investment companies, however.

 

The people who manage the investments should be paid by performance (though as we've all seen recently, most of them seem to be paid huge amounts of money irrespective of performance!)

 

Some fund managers are better than others. 'Past performance' of a fund is an indicator, but it's not a 'Golden rule'. The fact that 'Fund A' out-performed 'Fund B' for the last 10 years doesn't mean that it will do so next year.

 

There are other considerations:

 

1. Management fees. Every fund charges them. If the fund in which you invest is 'safe' or low-risk, look for low management fees. If It'S a high-risk fund (and you can afford to take that risk) you might accept higher fees - if the fund manager is really good!

 

2. Loading. Can be either a fixed-fee or a percentage. Can be either 'front-end' (you pay when you put the money in) or 'back end' (you pay when you take it out.)

 

I prefer (personal preference) 'Back end' loading. I don't like fixed fee at either end. - Let them share the risk, too. 'Back-end percentage' is my preferred method.

 

With front-end loading, not only are you buying a pig in a poke, but a part of your initial investment is lost before it had a chance to make any money for you.

 

With back-end fixed fee, they are guaranteed to get a fixed amount, irrespective of how well or poorly the fund performs.

 

With back-end percentage, if the fund does well, they will take more from you, but all of your investment benefitted from the fund's performance, they took a risk too and you are paying them the extra out of the extra money they earned for you.

[Rupert_Baehr]

I'm sure I read somewhere that there's a law coming in next year for all companies to offer a compulsory pension. Did I dream this? Has anyone else read anything about this or has it all been put on hold?

 

I've certainly heard that suggested, but it could turn out to be a poisoned chalice.

 

If the company has to offer the scheme, would the employees be obliged to accept the offer? Would it be a compulsory pension scheme?

 

Who would guarantee the scheme? If the company had to guarantee the scheme, then - since many companies are 'limited liability' companies and comparatively few companies are run by (totally) incompetent people - presumably most companies would insure against losses within the pension fund. The premiums for such insurance would be a liability against the fund itself and the pension payouts would probably be poor.

 

(Lots of 'p's in that paragraph. )

 

Such a law would hit small companies very hard - and might even cause a few to fold.

 

Consider a company like Toyota. They could certainly afford to underwrite a pension scheme for their UK employees. - The company itself is huge and a (local) shortfall could readily be absorbed.

 

Consider Bill Smith & Co Ltd. a 'hundred pounder' with 4 employees and an annual turnover of - say - £600,000. The company is paying its way, staying in business(just) and manages to pay its staff.

 

Bill is now faced with the prospect of funding a guaranteed pension for his 2 employees (he and his wife are directors; they put up the money to start the company and they are prepared to accept nominal pensions.)

 

The cost of providing guaranteed pensions for the other two employees may mean that he has to cut their already low pay (and they'll quit) or the company becomes 'no longer viable' (and it folds.)