# Pensions - Are we all mugs?



## TurningGreen (16 Oct 2009)

Today I came across an article written in Sept Irish Times re mugs for having pensions and just wondering what other people think of it - I do agree with alot of it especially re charges - pension funds took a pasting last year yet yearly fund management charges still apply!!! Why should you pay for a service that has lost you money - these charges should only apply for fund increases - no foal no fee.....

[broken link removed]


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## Conan (16 Oct 2009)

The "no foal no fee" system may seem reasonable (particularly after the experience of the last two years), but I suspect it is not that simple:
- Hedge Funds adopt a somewhat similar structure, but the "success" fee is typically 20%. Will you pay 20%?
- If managers only get paid for success, will they then be inclined to take more risk with the portfolio (so as to maximise their income)? That may not necessarily be in your interest.
- Is success defined over 1 year, rolling 3 years? Do you adopt a high water-mark approach? If you look at the year to date performances, many funds are up 15% +.
- Investment managers are similar to many other service providers, who charge a fee for their service. If you hire (say) a surveyor to do a survey on a house you are bidding on, should he only get paid if you buy the house? If you hire an auctioneer to sell your house, should he only get paid if you sell for above your reserve?

Whilst the theory may sound appealing, I suspect that the "no foal no fee" approach also has its problems (it may not be the stallion that is at fault).


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## Brendan Burgess (16 Oct 2009)

that is a terrible article written by a non-financial journalist. I am surprised that the Irish Times published it. It fuels people's reluctance to make proper pension provision.

To extend Conan's comparisons...if you are ill, and you go to a doctor, would you ask him to treat you on a no foal, no fee basis? 

Sarah has savings. She has to decide how to invest them. 

She can pay 50% tax and invest the net proceeds? Where? Probably in a unit-linked fund which has similar charges.  

The charges on many funds are high. However, she would be better off writing about how to minimise these charges, rather than dismissing pension funds out of hand. 

Another issue to be addressed next year is whether toprate payers should continue to contribute if the tax relief is reduced. 

Pensions is a very important subject. It should not be treated to colour writing. 

Brendan


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## TurningGreen (17 Oct 2009)

I take your points Conan and Brendan but as a person who is only just now looking into the ins & outs of pensions costs (after our investments went thru the floor) I can't see the justification for all these charges. In the UK charges have dropped but there seems to be a push to increase charges here. From what I am reading (correct me if I am wrong) about 30% of funds are swallowed in charges over the lifetime of the product. This seems to me excessive in the extreme - and then the government takes a chunk which I suspect is more than what they give in tax relief in the first place (again correct me if I am wrong). Is it no wonder people are suspect of pensions under these conditions. I know it sickens me to think I will have to pay over a chunk to the government after working hard for 40/50 years especially as I have no guarantee on my fund unlike the governments nice number. But thats for another day..........


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## peter wise (10 Nov 2009)

The most interesting thing about the Irish Times article is the response it elicited. There are 19 separate comments. They are virtually unanamous in supporting the views of the lady who wrote the article. Most of these responses draw on bitter personal experience of these products. Rather than criticising the messenger, Brendan and other people in the industry should be taking the message on board.
We are now into our second decade of these risky products underperforming risk-free government paper and risk and fee-free deposit accounts. The only reason that they get away with these products is the generous tax-breaks given to pensions which disguises fees, commissions, and charges these people get for advising us how to lose our money.


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## DerKaiser (10 Nov 2009)

This article is a knee jerk reaction and more than a little tongue in cheek.  It is in no way constructive.

Her plan is threefold.

_First, spurred on by the SSIA scheme, I’m saving my own lump sum and when the world has stabilised a bit, I’ll decide for myself how I might invest that in a flexible way that will suit me._

*The charges will be much the same and you will lose the tax relief.  With pensions you can invest in a flexible way, a lot of people have moved their pensions into cash temporarily*

_Secondly, I despise this stereotype of the old as helpless members of society. I fully intend to soldier on productively and cheerfully – just like Garret._

*More and more people are living past 90, would you bank on robust health for up to 15 years beyond your 75th birthday?*

_And finally, I have borne two fine sons and if my husband permits and the Good Lord sees fit, I might get another one. I’m sure that with a careful mixture of indulgence and emotional blackmail, they’re bound to look after me, just as I have looked after them. I can’t trust a pension company, but I can trust my sons. Right?_

*Surely tongue in cheek and undermines what had to this point seemed like genuine concerns.  Women should not bother with pensions as their husband or kids will look after them???!!!*

Private pensions have served people very well for years.  The protections in place have been second to none and returns on regular contributions over a typical time frame of 30 years cannot be challenged.

I would fully agree that there's been some woeful financial advice given by so called experts over the years, but the analysis here should be able to separate out these shortcomings from the underlying benefits of the product itself.

Time to turn the spot light on the media and the bum steer they constantly give the public on issues such as this


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## Anfear (17 Nov 2009)

Now that the whole issue of Regulation is under debate, hopefully the Dept Finance will take the opportunity to look at the issue of non-qualified people (including journalists & general commentators) publishing/broadcasting sensationalist material which in reality does not serve the general good. I would hope they also include some individuals that might appear "qualified" but escape regulation because they don't charge for their "advice". These people also get away scott-free from such things as having to pay for Professional Indemnity insurance and having to accept professional responsibility for their "advice". I hope the regulation authorities attend to these loopholes.


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