Pension contributions

J

Jamieladhero

Guest
Hello,
I'm looking for advice re my pension scheme.
I'm 30 years of age and am paying €150 a month into a pension scheme being operated by Bank of Ireland. I'm wondering if I should reduce my contribution because of what's happening with the markets and the financial meltdown we're now finding ourselves in.
I spoke to somebody from the bank who said because my investment is going to run over a long time, now is a good opportunity for the money to be invested, as shares etc are being bought at a time when they are very very cheap and in another 30 years, they will have been a very good investment at this time.
However, thats the bank I'm investing in telling me to keep investing. Am I right to keep investing the €150 or is the money I'm investing being evaporated.
What should I do? Should I reduce my contribution?
Thanks for your help,
Michael
 
It makes sense to buy stocks on a regular basis in a falling market as long as the circumstances are right:

1) You can afford it.
2) You have a significant term to retirement (Which you do).
3) You are buying a mixed (Business Sectors & Geographically) pool of stocks.
4)You fully understand long and short term the risks and rewards attached to stock market investment and the charges associated with the pension plan the bank has sold you.

If these basic points are right then look at the example of the SSIA. There was a large drop in stocks markets in the second half of 2001 and in 2002 (Not as bad as the current mess) and people who invested in the equity SSIA and were buying units in a falling market made the most when the SSIA matured because of the recovery. This market fall is much worse, there is more pain to come and will take much longer to recover but the same principles apply.

Make sure you get the right advice from your bank and don't be afraid to go and talk to an independent advisor, make the bank work for your business.
 
In this instance I'd actually believe the bank. As Bay28 pointed out, your regular contributions are buying units in your fund at relatively low prices and you have plenty of time to see an upswing before retirement. The tax relief alone is probably making up for any loses in the fund to date.

If it was me I'd stick with your normal contribution provided you are comfortable enough with that amount and your income situation doesnt change.
 
Bay28 and StevieC, thanks very much for your advise. I need to find out a bit more about the long and short term risks and the charges associated with the pension I took out, and I may well seek independent advice.
Thanks for both helping me out
 
If you are a taxpayer your pension contributions are saving you tax. If you are paying the higher rate of tax you are saving more than 40% (ie that €150 is costing you less than €90 and at the lower tax rate it costs you €120). So even if your pension loses value in the short term it has to fall more than the tax you save before you lose money.
 
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