value of pensions decreasing?

[smarty121]

was considering joining the company pension scheme but was advised not to due to the value of pension funds having decresed greatly in recent years. from what i believe there is less people investing in pensions now than there used to be and this has resulted in pension funds getting lower as less people putting money in and this will lead to less money being paid out on retirement as pool is smaller. can anyone advise if i has recieved accurate information?

 

[ClubMan]

Who gave you this information?

A pension is usually a long term (multiple decade) investment so to make rash decisions based on short term volatility/fluctuations doesn't sound very logical/prudent. And besides not all investment options/funds have fared as badly or as well as others.

I don't understand the bit about less people putting less money in etc.

 

[smarty121]

got this info from a work colleague who apparantly sought advice on pensions etc. as far as i remember the advice was that pensions are decresing in popularity and less people are investing now than a few years ago, as a result funds are drying up with less contributions going in resulting in pension funds running out or decreasing in their value. this means that pensions in years to come wont be worth anything. does this make sense or have i been advised wrong?

 

[ClubMan]

But who did s/he get this advice from? The advice makes little sense to me other than perhaps in relation to state pensions. The tax advantages of private (including personal and occupational scheme) pension investments are very attractive and in most cases what your pension will be worth depends mainly or solely on what is contributed, what the money is invested in and how these assets perform over the long term and inflation over that period - not how many others are investing or how many are drawing down pension benefits. If I was you and concerned about this then I would consider getting my own independent, professional advice rather than listening to seemingly meaningless anecdotal advice such as this.

 

[smarty121]

that makes a little bit more sense alright, as far as i know they got this advice from a financial advisor of a bank, thanks clubman!

 

[ClubMan]

"Financial advisor of a bank" is an oxymoron in my opinion. Such a person is most likely simply a tied agent salesperson for the banks own products regardless of how appropriate or otherwise these are to the customer's specific needs. I am surprised that anybody in a bank would say such a thing anyway. If they did say this then it seems to betray a basic misunderstanding of such financial matters.

 

[roker]

I can understand people not contributing to a pension. I am almost 65 and have had letter saying, due to the market conditions I will not get as much as I thought. There is is also a lot of press on the pensions having problems with the stock markets. Why not invest yourself?

 

[ClubMan]

I can understand people not contributing to a pension. I am almost 65 and have had letter saying, due to the market conditions I will not get as much as I thought.

That in itself is not a valid argument against pension in general in my opinion. If you were hit by volatility then maybe you didn't take enough care to move into less volatile assets/funds as you neared retirement? On what basis were you expecting something that did not come to pass? What charges applied on your pension fund? How much were your contributing? What were you invested in? And so on...

There is is also a lot of press on the pensions having problems with the stock markets.

Of course the markets are subject to volatility/fluctuations but that in itself is no argument against investing!

Why not invest yourself?

Just because you invest through a regular pension product doesn't meant that you have NO control over what you invest in. At the very least you will normally have a range of funds to choose from. Investing directly out of net income misses out on the significant tax advantages of investing through a pension fund.