Pensions are a gimmick

[ClubMan]

Just remember if it sounds to good to be true you know the rest,

What is that supposed to mean? Nobody has said that pensions are, of necessity, a sure thing. There are many variables - how much and how consistently over time you contribute, what you invest in, what charges apply, when you want to retire, how much you want to retire on, what the tax regime may be over the pension investment and retirement terms, etc. etc. - about which informed and judicious decisions need to be made in accordance with then circumstances and needs of the individual. However, all things being equal, investing in a diversified range of assets over the long term is arguably the best way to cater for retirement cash lump sum and income needs. Other than implying that we should all maybe move to Finland due to the state pension Nirvana that you seem to think that pertains there what considered and pragmatic arguments and suggestions have you got to make on the issue?

 

[Stagsy]

....errr, getting back to pensions

I point I want to bring up is the notion of "phased fund switching" which basically means that as you approach retirement more and more of your fund goes into deposits, government gilts, bonds etc. (i.e. very secure assets that are unlikely to fluctuate much).

This means that you shouldnt be totally screwed if you happen to retire during a bad year in the markets. I know its a basic statement but I think people may have this fear.

Diversification is key to avoiding big losses - dont put all your eggs in one basket (more basic commonsense). In my own case I've a AVC PRSA scheme with Eagle Star (together with a recent employer scheme) and so far I've diversified goodo into high risk stuff around the globe, its doing ok so far and maybe it'll tank some year or other but its got 20 years before I even start thinking about retirement. So on average across a wide portfolio I should be ok.

Also, when markets are down you buy in cheap - now you might also be "catching a falling knife", but with 20 years to play with then, on average, history would show that you should make returns above deposits/more secure investment.

With the tax relief involved I think its undeniable that pensions should form part of someones financial picture, notwithstanding the misgivings people have about various aspects of the industry (& I'm not in the industry myself).

I have heard that Hibernian are offering a suite of pension funds that follow this route, something like 8 or 9 funds in the suite, with consecutively lower risk. The amount of time you have left to retirement determines which fund your contributions are in at any time.

This seems fairly prudent given this year's drop in equities. I wouldn't like to have been retiring this December if all my pension was in shares (not affiliated with Hibernian by the way). The funds are called Focus Managed I think.

 

[ClubMan]

Most if not all pension providers offer a range of funds varying by risk/reward profile etc. allowing people to choose those that best match their specific needs and also allowing those nearing retirement to gradually shift from higher to lower risk/reward investments to guard against volatility hitting them as they near retirement. (Those rolling some or all of their pension funds into further investments such as A[M]RFs may not want to do this). And the default investment strategy for PRSAs take this sort of approach too.

 

[Betsy Og]

(Those rolling some or all of their pension funds into further investments such as A[M]RFs may not want to do this).

Thats a good point, if you're going to ARF your fund, and presuming you replicate the investment strategy you previously had, then even if its a terrible year your fund is down but the investments are cheap to buy back into so you havent crystallised/locked in losses.

Presuming that at some point you'll actually need the money to fund your lifestyle in retirement then your "phased fund switching" idea will come into play as you approach that drawdown date.

Just to mention I gather there are also "Lifestyle" funds where you buy in and the fund itself edged more into cash as you approach retirement, so theres no need to switch funds as such, the fund morphs into what you need it to be. Obviously the provider needs to group people with the same time horizon to pension together as 1 fund couldnt satisfy diverse needs.

 

[alan.caulwel]

canada life have a new fund available OPPENHIME FUND check it out excellent track record. over last 15 yrs has aggregated approx 14% compound out performing average fund manager by 4-5%. has only become available recently

 

[ClubMan]

canada life have a new fund available OPPENHIME FUND check it out excellent track record. over last 15 yrs has aggregated approx 14% compound out performing average fund manager by 4-5%. has only become available recently

Past performance is no guide to future returns.