Pensions are rubbish!

Tuesday, 6th September 2011 15:35 - by Resident IFA

I visited a couple of Company Directors last week. It was my second visit; to present my Pensions recommendations to them. At the first visit, one had been very 'up-and-at-em', keen to get their Pensions underway and make up for lost time. His risk assessment showed him to be a higher-risk individual, his business partner more of a medium-risk nature. Putting aside the basic fact that this reflects their personalities - one more highly strung; the other more calm - it was still interesting how his viewpoint had changed within the last month. Standing back, it is pretty self-evident that the recent market tremors have 'spooked' many, many people - Pension investors included. Even I was open-mouthed at quite how swift the decline was; the FTSE100 moving from over 6,000 points to nearly 5,000 points in just over a month...incredible, frightening stuff! All is not lost. I explained my recommendations and both were complimentary about the quality and breadth of research and work I had undertaken on their behalf. The 'calm' partner wanted to go ahead, but I suggested both wait on the 'highly strung' partner's wish of a month to consider his feelings and desire (or not) to take action. I faced two issues with the (all-of-a-sudden) less-confident partner: - He had spoken with a lot of friends, family, and pub mates. - His viewpoint could not be shaken away from the short-term. The first issue is always pretty prevalent in making financial decisions, but the rule of thumb of people always trumpeting their bad experiences rings true; akin to the Pareto Principle (80:20). On top of this, you can be sure that a lot of the Pension experiences he heard were from people with old-fashioned Pensions sold by Banks or old-fashioned Advisers i.e. high-charge, poor investment choice/expertise available behind the plan. The second issue was just as harmful to him planning for his retirement. He had a spread-bet on that day which was already in a loss-making situation he couldn't really afford; allied to the fact that he had clearly been heavily influenced by the stockmarket carnage and certain negative commentators. Don't get me wrong...things seem pretty appalling for investors...at the moment. As I will not talk to people about investing money, Pension or otherwise, for less than 5 years, I couldn't care a jot in some ways about the here & now, or even the short-term. The fellow in question has 20-odd years until retirement, thus allowing the taking of a longer-term view of investing and stockmarkets. With the right contract, the right investment management options, and the fight financial adviser relationship - he has the best chance to see profit on his Pension fund to take him into retirement. He quoted the likelihood of 60% falls in his money, what with inflation. I'll reasonably confident that professional investment management and his 20%/40% tax relief on contributions will help him towards at least breaking-even!! Please feel free to respond to this Blog with your Pension experiences and questions. Until next time...