Why bother with a pension?

ClubMan

Registered User
Messages
50,378
While most pension funds have suffered due to market falls in the past couple of years I'm not aware of any that have been "wiped out". The people worst hit (at least on paper) by recent market falls will be those who started their pensions in the last few years. However a pension is a very long term savings/investment vehicle so (notwithstanding the advisability of reviewing performance etc. on a regular basis - e.g. annually) worrying about short term performance is arguably missing the big picture.

Whether or not one needs to make personal arrangements for retirement income (e.g. through a personal pension plan/retirement annuity contract, occupational pension scheme, PRSA, AVCs, other non pension/non tax deductible savings/investments etc.) depends on whether or not you reckon that you can live comfortably on the relevant [broken link removed] assuming that this will be available and at more or less the same level when you retire. In general it is considered prudent to make arrangements for retirement income over and above the state pensions usually through a pension scheme. This is why the Government give such generous tax reliefs on contributions. outlines my understanding of why equities/shares are generally considered the "best" option for pension savings (at least until one nears retirement).

I wouldn't get too hung up about breaks in pension contributions (I'm in the same boat) but would instead concentrate on determining what level of retirement income would be desirable and aim towards saving/investing with that as the goal. This is a bit of an inexact science in that it involves making many assumptions (e.g. about ongoing inflation rates, future investment returns, likely future annuity rates etc.) but it should give you an idea of how much you need to put away each month in order to have some chance of retiring in comfort (which means very different things to different people). Have a look at to get a very rough idea of what I'm talking about. Obviously the assumptions and actual performance of any pensions savings/investments will need to be reviewed regularly (e.g. annually) and any remedial action required (e.g. increasing contributions, switching between funds etc.) taken. Some people are happy and informed enough to do this on their own. Others may prefer to employ some sort of independent, objective, professional advisor to help out (not your local bank manager/clerk or any sort of sales person!).

As with any investment there is some level of risk involved in but the long term nature of a pension scheme means that the chances of even pure equity based funds maturing to less than what you put in would generally be considered pretty slim. Again, as one nears retirement it would generally be considered prudent to move away from equities and into safer havens such as bond/cash based funds in order to protect against volatility as you near retirement.

When shopping around for a pension it makes sense to choose one which offers the required level of flexibility (e.g. stop/start/vary contributions as required without penalty) and with low up front (e.g. no or low bid offer spread, policy fee etc.) and ongoing charges (e.g. annual management fee, fund switching fees etc.).

Does make some sort of sense to you? Have a read of the AAM Guide to Savings & Investments and have a read of some of the other posts here on AAM which contain a lot of useful advice and information. Feel free to post further queries on this topic if necessary.

Hope this helps.
 
Who do I talk to?

Re "Others may prefer to employ some sort of independent, objective, professional advisor to help out (not your local bank manager/clerk or any sort of sales person!)"

-> Where would I go to find such a person? What I really want to do is sit down and go through all my existing pension contributions with someone, talk about how I can work out roughly how much I want to pay, and then arrange to set up a personal pension/PRSA/whatever that I can use to accomplish this. My current employer does not offer a pension scheme, and I tend to change jobs frequently anyway so it wouldn't help much if they did.

Is there somewhere I can ring / someone I can go through all this with?

Thanks in advance.
 
It has been said to me that there have been loads of
instances recently of pension funds being wiped out. Is a pension wise at all?

Does everyone take one out?
Am I really losing anything by not taking one out?

I'm 30, have contributed to various schemes over the years, but haven't paid anything in the last two.

I feel that anywhere I go to ask, I will be ripped off by commissions, fees, insufficient information biased towards the seller, and that my existing pension payments won't be used to the best of my advantage. I obviously want to retire on a good pension, but I don't want to spend 30 years paying into something that won't be worth a toss when I retire.

Please help!
 
Re: Who do I talk to?

Note that all employers who otherwise don't have an occupational scheme open to all employees will be obliged to facilitate access to a PRSA, deduction of contributions via payroll, access to "advisors" (which may unfortunately simply be sales people in this context!) etc. from September. In your case it certainly sounds like you could benefit from a detailed pension review/health check with a suitably qualified, authorised, trustworthy, professional advisor who specialises in pensions. In practice this means (in Central Bank speak) an authorised advisor or a RAIPI advisor (see here). As far as I know the Central Bank will send you a list of authorised advisors and/or RAIPIs on request. Basically you want somebody who is not simply a sales person or other tied agent but somebody who will do an objective review of your situation and help you plan for the future! Ideally you should agree the work you want done and the remuneration terms for this up front. Personally I would recommend our own * (an RAIPI I believe?) but others may have their own recommendations and by all means look/shop around.

* Disclaimer: I am personally familiar with Liam and have done small bits on website work for him on an unpaid basis but otherwise have no vested interest in his business.
 
Back
Top