My grandad was one of those whose retirement was stolen by Maxwell, an event he never emotionally recovered from. I agree with all of your points Damien. I’ve build up more wealth in my 20s inside my sipp than I have equity in my home - even after the crazy years of growth in the uk housing market. A pension is not a scam, but unless you choose to get educated on how to use the system, you will lose.
SIPP, is good, on paper but it is in the control of the government, who will mess around changing the system itself. They are about as trustworthy as Bob Maxwell managing it. I’ll continue to save into the SIPP, but as a long term bet, lack of accessibility and control makes them a bit of a punt. So no matter how much you understand the system today, who knows what it will be in thirty years time.
@@CloutMasterGeneral Thanks, I’d never considered there would be such a thing as a protected age. Previously, it would see, some schemes did have this, hard to get today. My SIPP is with Vanguard who say “The Vanguard Personal Pension (SIPP) doesn't have a protected pension age. As such, you can access your Vanguard SIPP from the minimum pensionable age, this is currently age 55 as per government regulations, and we will be required to adjust this as the regulations change in the future.” So, I stand by my original beef with the SIPP. Hard to know when you can access it and on what terms as they are likely to change as the government changes the system.
They are not user friendly definitely. Why do we have to ‘track down’ old pensions? We should be able to log into a government website with our NI number and get a simple list and contact info for all providers we’ve been signed up to - all the info should be available easily. Being able to just ‘lose’ billions because you can’t find a bit of paper is insane.
100% Also since you can't move them to another country, when you work in several countries, you can leave small pots in pensions and 40 years later completely forget it exists
Spot on, why even have a national insurance number if it doesn’t do the job of giving your financial identity, they know exactly how much tax you owe and can imprison you if you avoid it but it’s okay for them to act clueless when you want to know where your pensions are, governments should be held to same accountability as its citizens but yeah I think that concept will only ever exist in fiction.
Correction Damien - The personal pension age is not linked to state pension age in legislation, the only legislation currently is the raise to 57 from 55 in 2028. There was a vague suggestion by the coalition government to make it State Pension Age - 10, but that has never been written in to legislation, but unfortunately its sort of stuck and is often repeated. Not saying that any future government won't make changes, but just clarifying that the only confirmed raise is the 55 to 57 one in 2028.
I used to pay into my workplace pension for about 15 years because it had always been drummed into me by everyone, including all media, that it's the best thing to do. I opted out a few years ago because I realised that it wasn't right for me, as I'd rather have the money now, than wait until I'm in my late 50s/early 60s to access any of it. I may not even live to that age. I recently transferred the amount that I had previously built up, to a SIPP. It's far more transparent than the pension I had, and I have complete control and visibility over where the money will be invested. I wish I'd done this years ago, but better late than never, I suppose.
Great video, probably the biggest scam is the fee’s associated with default funds, auto enroll has created an entire industry of high fee employer schemes.
Generally the opposite. When AE was launched in 2012, the annual management charge (AMC) was a maximum of 0.75% for default funds and remains so today. However, since then, some providers have reduced the AMCs below 0.5% to become more competitive and offer better value to members. They can also apply a fixed charge in addition to the AMC and there can be some variation, both in the AMC and Annual Charge (AC), between providers. As operating costs have increased some have increased the AC in recent years. Some providers reduce the AMC, the greater the pot value. Small pots held by a large portion of members in some AE schemes attract the same pension levy fees as larger pots. Consolidation can benefit both providers and members, enabling the provider to reduce the AMC %, the greater the value of a pot either by reducing the AMC % itself or providing a regular rebate to member pots, thus achieving the same thing. Workplace pension schemes are chosen by employers. It is important to review the fees when leaving an employer/the scheme and considering whether it would be in your interests to transfer the pot you’ve accrued to another provider, perhaps the one chosen by your new employer. In some cases it could be worth transferring, in others staying put. Investment returns should also be considered. Imagine transferring to save 0.3% in the AMC but seeing your new investment fund under performing compared to that you just left by 4% pac.
The high fees I believe are government led to repay the billions it cost to set up the auto pension schemes in the first place. You would think that given the massive amounts of cash coming into the top ten auto enrolment providers that they would not need to be part of this excessive charging.
My Aegon default fund has a 0.06% ongoing charge, plus any underlying transaction costs within the fund. I think total fund charge is about 0.15%. The overall total charge is 0.5%
damien you mentioned a great point about shifting money over from your workplace pension provider over to a SIPP every so often, i’ll be maximising this as my work pension provider currently has 4x more fees than Vanguard SIPP
I always remember in the early 90's (when I was a teen) some scumbag pension 'adviser' coming to my parents house and abruptly walking out mid way on us because my dad dared to ask him about a fund or investment company he wasnt affiliated with. The audacity and rudeness of the guy put me off pensions for life! I thought they were all scammers on massive commissions. Thank God for the internet & channels such as pensioncraft and yourself came along to help us make more informed decisions.
What people don't understand is pre/early internet these types of 'advisers' were absolutely rife!! ready to skim off a high percentage of you cash forever and gain a massive commission into the bargain.
@@DamienTalksMoney Fortunately those days are long, long gone. The ‘bar’ to being a regulated financial adviser has been raised significantly since then. The risk is in the public approaching pension-provider companies directly, speaking with a telephone-based operator and mis-believing that that conversation constitutes ‘advice’.
Yes because that’s how the world works. I make something on the cheap then sell it to you for way more then what I paid. You can’t make money without someone being exploited or scammed. We pay tax for the government to provide us with services like healthcare and roads but not for it to be syphoned off to rich Tory donors.
In Canada our government pension (the CPP) is fully funded for at least the next 75 years. They make small adjustments, as needed, to ensure that it can continue. I think it's an important part of our social system and I'm glad we have it. That being said, it won't pay enough to rely solely on it for retirement - people should also be saving for their retirement individually.
Canada's pensions rank 12th with a "B" grade as there are issues with long term sustainability. CPP itself says its solid for 75 years - but that's stretching facts beyond acceptable limits imho as it assumes things will go according to plan with investments, longevity, population growth, income and inflation for the next decades (if it was a private fund I'd say they where lying). Regardless, 12th is not bad and sound policy changes should be able to cope with any challenges ahead.
Pains me that people so often make these kind of misguided and ill informed kind of claims. They are not helpful in fostering an informed discussion about our socioeconomic challenges or possible solutions for real problems. Median weaith in the UK is over 300.000 GBP. There is lots and lots of money around. @@MOCHI-ek6rc
Canada is a third world authoritarian state that won't be able to provide anyone with anything in the next few decades. the massive influx of migrants and refugees also hurt the economy and benefit system.
My big worry is that, (if I live long enough) because I have a workplace pension, I will be means tested as too 'wealthy' to have the state pension. Seems the more you do the right thing, the more you are punished.
This is why i will be using my pension before state kicks in… it’s not a choice more a realisation that my body won’t be able to continue until gov retirement age.
@p9917j yep. Other than the big boss, (who chills in an office and goes home at 2pm absolute latest) there is nobody else in my workplace at 60+. Not many in their 50s come to think of it!
Can't see any Gov in future not paying those who have paid their NI contributions over the years not pay state pension. The reality is state pension will only be a top up at most and any quality retirement will have to rely on a personal pension
What kind of fees are you paying? I do like mutual funds and I know some of them are expensive like the Golden Sachs ones are often more than others like BlackRock and Vanguard etc
Smart pension was charging a flat fee of £39 per month to invest it in their fund. Crazy when you calculate this over longer terms, My work chose this as its one where the employees pick up the cost, my SIPP is about £13 for exactly the same service. From what I have read, your employer, doesn’t have to give you a fair or reasonable deal in terms of provider, it just has to provide you with a pension regardless of good value. so technically if I want to move it away from them, I believe My Work will see it as an opt out of this scheme, so I would lose their contribution. Still looking into it though.
If we force providers to have too low fees we may end up harming new competition from starting. Not only does NEST have terrible fees they are the slowest and most obstructive common pension provider when customers want to transfer out, there are more steps than most other providers
I recently noticed that, i was hoping to transfer out, but have to stop paying in, before they will even consider a transfer, and then some. I got no choice, as im part time with a Agency ( Manpower), and thats their choice for workers pension.
@@garyten13 You have to hope that the vague plans for Pension Provider Choice are made concrete at some point, this will mean that the employee can choose their provider, and their employer will make the contributions direct to that provider rather than their default provider. Most employers use standard third party salary management systems anyway that must already support many providers.
I like my work pension, currently put in 238 a month myself, in total with employer contributions 804 goes in a month. I’m 27 and hope to retire at 55-60.
@@coderider3022 so ive been doing this since i was 22, started on a low salary and now have doubled this since. I have also changed the funds to a more aggressive approach and will lower the risk in time
@@coderider3022 10k a year pre 30s assuming rising contributions over the course of career progress is certainly a reasonable start point. 55 might be ruled out by not being able to begun pension until 57 which might have increased in the next 20 years.
@@coderider3022 A SIPP following a mix of ETFs such as FTSE All-World and S&P500 would get him a decent pot at 55, even starting at 0 (although he'd want to reduce risk at 50 so the final few years might grow less, but more safely). In a fees-charging mass-market pension provider that is invested poorly, clearly not. Also I would imagine he would get above-inflation promotions two or three times in his career that would bump up his contributions. OTOH children and other shocks might cut back contributions for a while.
I am a member of the Halcrow Pension fund. When Halcrow was sold to an American company, they gave members the option to lose 10% of their pension or fall into the PPS. They walked away from their commitments to benefit share holders. Members were forced to accept the change and the regulator and government allowed this to happen. You pay into a scheme for years with a promise to payout and then the rug is pulled out from under you.
I am fortunate that I've worked long enough, and am old enough, that I will get the full state pension at age 67. I was also auto-enrolled into the workplace pension which I paid into until I stopped working in 2022. 18 months later, that pension pot had not grown at all, so I've moved it to a company that actively manages it, and I'm seeing the benefits already. Yes, I pay a fee, but I'm ok with that. I started my first shares ISA last year, it has 5 divident stocks. I will add again in the new tax year. I also have a general investing account. That's about all I can do for my future. Hope it's enough.
Good for you for monitoring and taking action if you are not happy. But just need to temper that with saying 18 months really isn't long enough for returns, and it is likely your improved returns are actually more reflecting the market than the fact they are now actively managed.
I think Royal London charge way too much. Tied into to a policy that was protected rights SERPs until I am 55 so in 2 years I will be moving it to my company Standard Life as the management fees are very low !
Thank you so much for these videos. It's teaching a lot. I've been pretty bad with investing. I opened a vanguard account back in 2018 and really tried to understand the differences of each fund. I ended up putting in terrible funds that did very poorly and I totally got scared when it all cam crashing down in 2020 because I didn't understand why. So I totally missed out on these last few years haha
Love it Damo! I am waiting for a transfer from SW to SIPP to V. I have asked SW how many times I can do a partial transfer in a year and the response was as many as I want. Happy days! Take care Damo!
SIPP is the way to go for me. I asked 25 employees at my family business about their pensions, most didn't even know who the Pension company was, they had no idea what investments the company was putting their money into or what the fees were when they are of age to withdraw.. I'm not a big fan of these 'generic' Pension Companies.
Sounds v similar to local Gov pension numbers but that's a defined benefit scheme. My employer does 7% contribution max which I thought was good compared to the minimum 3%
But you still need to determine whether that will give you enough income in retirement to live the lifestyle you hope for. ( Those calculation can be done. )
I was one of those people for many years. Much of that came from a lack of understanding and education on investing and importantly,the value of compound interest. Schools should provide better financial education. This is not financial advice. But providing young minds with the tools to navigate the world of financial understanding.
Yes. Everyone should have a basic understanding of APR and AER, money coming in and money going out. I couldn't calculate compound interest, I'd use a calculator, but I at least know what it is and why it's either a good or a bad thing depending on which way the money is moving.
You can normally only leave half of your pension to your partner, the government takes the rest. That's not on in my book. My dad didn't even get that, he only got 10 percent of my mum's pension. She worked for the local council, but he's not even allowed 50 percent. It was a waste of money, paying into it for them. Most pensions are crap tho anyway. They say you'll have a million pounds in your pension, but a million pounds when I'm old will be like 5 years money.
That's a defined benefit pension... there was nothing stopping him contributing to his own personal pension. The government hasn't taken anything... the scheme only paid your dad till he died. They're not gonna pay your mom the full whack as well, that's just silly 🤣🤣
@@chrishardy34731, He did contribute to his own pension, what makes you think he didn't? 2, My dad is still alive, he hasn't died. 3, Plenty of people get half of their partners pension, if they die. Getting only half of what your partner paid in, is a joke. You should get all of it.
A major issue is that people are invested in default funds within workplace pensions. These are totally unsuitable for long term investments held by young workers.
The crazy thing is that the spending power of the current generations of retirees is a huge boost to the economy. The next generations of retirees are going to be far less well off on average, that means the UK economy is going to take a huge hit. Retired people will be spending less money, they will pay less income tax on their pensions and fewer people will own their own homes which means fewer people will be able to finance their end of life care through that assett. The result will be a doom loop of a poorer ecomony and higher taxes for those still working. That fact alone should trigger even a tory government to do more to ensure people build up adequate pension savings. But as Damien said for many politicians who are not really interested in the long term good of this country that's a tomorrow problem, a some one else problem.
That generation will inherit a lot of wealth too don't forget. Report in today's news saying Millenials will be the richest generation ever so that theory doesn't stand up.
after watching one of your videos, i did indeed notice that i had been put on a default retirement pension plan on Nest. I have changed mine to a higher risk plan to see how it goes. im only 46 so have plenty of time before retirement..
Great video once again Damo 👍🏻 I contacted NEST last year regarding partial transfers and the answer was no. I remember reading a few years ago that the NEST high fee structure was because it was government funded initially to create it and obviously the government want their cut!!
Surely they can't just say no?? It's your pension money, you can hold it with whatever provider you want and in whatever amounts. I have found with transfers, best bet is to operate through the new provider, and let them do the leg work for you. So for example if you wanted to switch to Hargreaves Lansdown from NEST, open an account on HL, and initiate the transfer from there. They would then use their clout to knock NEST into line. Bottom line, NEST can't dictate to you where your money goes
@@M8d9R Here is the main parts of the reply I got from them. You’ve asked us if it's possible to make partial transfers from your Nest account. We are sorry but you'd be unable to do a partial transfer out of Nest. Nest only allows full transfer of pensions at the moment. You can transfer out from Nest to a UK based pension scheme that’s registered with Her Majesty’s Revenue and Customs (HMRC) or a Qualified Recognised Overseas Pension Scheme (QROPS). We can see that you’re still an active contributor with Nest from your employer ‘XXXXXXXXXXXX’. If you wish to transfer out of Nest, you’ll need to be a non-contributor. You can stop contributions from your end as well so that you can become a non-contributor and transfer out of Nest. We hope this helps. If you need any further assistance, you can email us through the secure message area. You can also reach us on 0300 020 0090. We’re open from 8am until 8pm Monday to Sunday. Richard Hardy Nest Member Services Manager
Yep. Uncertainty. At least 20 years ago I took the view that there wont be a state pension by the time I get there. Coupled with numerous company pensions from changing jobs with silly little pots. Yeah I can combine etc. But yes, pots under my own control I think is the way to go.
This is something ive thought about a looooot recently. Ive come to the conclusion that im going all in on index funds until closer to retirement when ill start moving funds to safer places. Ive still got 29 years until i will likely retire. The ultimate flexibility and control with a potential for higher returns is just too tempting for me.
My work based pension is with the Peoples Pension, there is an annual charge of £4.50, then a management charge of 0.5%. They have a rebate system depending on the size of your pot, pots over £25,000 get 0.25% of your management charge back and pots over £50,000 get 0.3% back. It seems a bit more reasonable from what i see the other providers charging.
I understand your frustration at the pension age linking to state pension age. I'm a just couple of years older than you and have similar goals (and a Brummie for my sins). From a governmental standpoint however, given the shrinking workforce and demographic challenges we face, they will try and keep all of us within the productive workforce as long as possible. This pressure is only going to mount and I can see it both ways.
Lots of self learning and a huge amount of luck is how I somehow made it to early retirement. Thanks for your help on this treacherous journey. I heard somewhere, if your hope is for a government to help you, just remember they can’t even sort out the potholes. 😂
@TalksMoney -Their wealth fund does have $250,000,000,000+ for each citizen, while the UK might not have been able to have quite so much per citizen I think we could have managed in the 10s of millions per- scratch that lol I used the british version of trillion so got a few too many zeros in my maths 🤦♂
More government regulation on fees are well overdue. It’s like the wild west out there at the moment. Migrating cash into a more self controlled fund (global index) is what people should consider. But absolutely correct, keep in mind the potential loss of associated benefits that maybe lost. How funds under management still a thing I don’t know.. I know people want more options, but the index that needs to be beaten rarely is.. diversified portfolios in terms of cash isa, stocks and shares isa, LISA, private pension, trading account (but capital gains will likely be gone soon) are all a way of having some self control. I personally believe any government must list a 15 year pension plan when elected and this allows people to plan for their own future. Any other preceding government must abide by the set conditions of this agreement and not tinker with them. We all need more long term certainty not less of private pensions are going to be successful
My first job had no pension, so with nothing to guide I picked a pension with an ultra-respectable company. Their name was Equitable Life. After that shambles I took out a SIPP. Pensions aren’t a scam but in some cases they’re close to one.
@@DamienTalksMoney Talk about young people Going Galt and reducing their income on purpose and also whether we have options to invest in mining companies or gold via pensions in the UK because I can't find anything.
Just before I was due to retire I was told to speak to a FA recommended by our union. He sounded really promising and sent me a recommended portfolio which utilised a top London investment firm which people at my level normally couldn’t access, with a great track record of high returns. The documents were plentiful and the guy didn’t give me enough time to thoroughly go through them before contacting me to see what I thought. I had, however, checked the fees and the forecast comparison between my existing personal pension and the suggested one. The fees reduced the projected returns by at least a third! And the estimated value of the pot at target retirement date was almost exactly the same if I just left my money where it was. The FA was not pleased when I told him to take a hike.
1,5% buyin and 0,3% management? Here in Belgium 2,5% buyin with 2+% annual fee is normal. On a 4% return fund! The 30% tax break is lost in a few years on fees alone and in 40 years, almost 70% of the total potential is lost to the annual fee eating away your savings. I'm exhausted explaining this time after time when someone tells me they're saving in a private mention scheme at one of the major banks here in Belgium...
Trusting in the pension system is a trust in the state and financial system - both of which have a history of mass corruption, fraud and mis-management. Be cautious, the future you are promised is not guaranteed - and the state can decide to change the age/ conditions to access at anytime.
I'm fortunate enough to work on the railways where you can get a Final Salary Defined Benefit scheme. My biggest worry is the moving pension age will make it almost pointless putting money into a SIPP. The majority of my investments are held within an isa and thats likely where my allocation will lye for at least a decade.
One way to alleviate the concern over a government changing the rules in 30 years is that making a negative change to pensions is a vote loser whenever they do it. So it will be a vote loser in 30 years time as well. The best money decision I ever made was to ignore all the overly worried folk in the late 90's and early 2000's, who were running scared of pensions. I've paid AVCs throughout (ramping this up over time) and retire next month aged 53, bridging the gap to 55 with other investments. Everyone who can, should do this. We don't drive our cars worrying if the road just stops around the corner.
Completely agree, standard regulation of fees, and also payouts should be at the forefront of any future pension reforms. The biggest scam IMHO is annuity purchases at retirement. Many are forced into this without knowing there are options. My last wrokplace pension quoted 160K at 65, giving me 40k lump sum and 3k a year pension, It's now in my SIPP, and doing much better than they forecast. The other issue, is the crap returns from most DB investment options. Many don't change their investments from the standard Lifestyle options in their schemes. You don't need schemes investing in low risk funds in your 30s
Your analogy regarding pensions and cars is a good one , the problem is that many people fail to study either subject properly and rely on others to deal with the complexities of both. I am a firm believer in , never take your car to a garage and never let anyone deal with your pension. Repairing cars and trading shares in a SIPP are both enjoyable pastimes , saving money and building wealth. George Osborne gave us all the chance to manage our own pension , keeping it uncrystalized and never having to purchase an annuity , drawing out what we want , when we want , while keeping the capital to pass on to our children.
The biggest casualty of the Steel workers pension scandal is it’s now virtually impossible to transfer a final salary pension !!!! I gave up even though it would have been in my best interests
Having a nightmare getting my head around the US pension schemes now I work in US. Naturally very cautious when seeking advice on my 401k and Roth IRA pension schemes.
Excellent overview. Spreading your investments to de-link domestic political risks is very under-valued advice amongst those talking about pensions. I have lived long enough to see several fundamental changes. So good call! Btw had a real scare with my private pensions where one of my banks - without warning - liquidated all my assets (stocks, ETF's etc). Due to tax penalties it was a 250.000£ loss (!). I have meanwhile been fully compensated except for a pending 20.000£ payout - but it was several terrible weeks before the dust settled. I'm still a believer in the pension and banking system - but naturally moved the money to a new bank. So also have several banks if you have wealth and don't mix savings and loans in the same bank!
We need you on GB news doing a financial education slot all the topics you cover with Martin Lewis as lead perhaps and people featured like Nisha..you are doing great work!!
I have a small amount in a SIPP and I have DB scheme but I am putting pretty much most of my money into my ISA first as I have no trust in Gov and want to retire at 50, id love to abuse the tax benefits more but just not worth. I think they only make sense if you are already in your 50s and dont have to wait too long to get it.
Brilliant video Damien, I am watching more and more. I have been for more than than 20 years in a Standard Life Pension, global equity 50:50 but half of that is in the UK, the fee is 0.5%. Its done OK, but I would prefer to be in for example an Invesco FTSE all world at 0.15% Fee's. Ideally I would like a 30/30/40 spilt into 3 funds, Money, Bonds and All World. What i would like to learn is how to do partial transfer. My employer I assume will only want to pay into SL. Id like to learn more about SIPP and especially the risks, and the process to transfer. Great Video put across in a very understandable way
The partial transfer process is actually pretty easy but the key things are 1. Does your pension provider allow them 2. Does you current pension have any benefits you should look to protect. An example might be protected retirement age (some pensions say you can retire at X age) and even with rule changes they stay the same, ask you provider about the benefits and features of the scheme and if a partial transfer would impact this. But the actual mechanics of this are really a SIPP is just like a stocks and shares isa in terms of setting it up and navigating it and then on most of them there is a ‘transfer in’ button and you just follow that process. In terms of risks the key one is you investing your funds badly as you have full control over how they are deployed I hope this helps a little
You do realise having it split in bonds and cash and stocks , your potential return is a lot less than having it all in stocks My works pension was split 50 50 Stocks and bonds Stocks have for years out performed the bond part So last year I changed it so it was all in stocks It’s returned 27 percent But my mates who still have 50 50 There stock portion also grew 27 percent but there bond half only grew 5 percent
The scam is the constant pushing off goalposts. Retirement age from 57 (I think)and I guess by the time we retire it will be 70. Put the money into an isa and have freedom to move it out of the rules of the game are going to change. With a pension you’re trapped.
It’s a scam on the basis you are told one thing when you sign up but told different later after you commit a tonne of money. You have no choice to disagree with the increase in retirement age.
Like Damien says, invest in both. You can retire at say 55, use the ISA money to live off and the pension pot will cover you in later years. You could even obtain a bridging loan, maybe borrow money for house renovations and pay it back when the pension is crystallised. So, there are work-arounds.
Paid into a workplace pension for years, as I was told to by everyone at 22. After 4 years, I realised it was a scam. Worth £20. I also got hit with a £2000 tax bill..
My problem with the pension system is for example, If I get a certain private pension provider, my company pay 2.5% of on top of my wage into the pension, but If I opt out they keep that amount of money instead of giving it to me. I know not much about how business deals work, but that seems like something to do with the tax of the company maybe, but the point is, that this deal is somehow only beneficial to me if I let a company make a business deal with my company. Somebody could enlight how it works exactly?
@7:40 "but I'm fine because I own 7 flats and I bought them all in one go so I didn't have to pay stamp duty and I'm creaming it in at 2k a month each..."
I started my Pension at 30, i'm now 43 and have had to really push to make up for the gap between 20-30 but I'm not put over 30% of my salary in saving pretty much 40% that would have gone to income tax
Take a bow @damiantalksmoney. Clear, articulate and balanced as always. Your videos are providing a real public service. Thank you for everything you do.
Something that absolutely is a terrible investment is buying missing state pension years, if you figure out how much each additional years buy and calculate how much you will get paid assuming it doesn't change other than inflates at the average rate of what inflation has been on average and assuming you live to the average years after pension age you will see that buying state pension is multiples times worse than a 7% yearly compounding gain and that is assuming pension age won't go higher. The only exception is if you are close to not having enough to ge the minimum payments a few years bought might be beneficial but not if you will have the minimum already. Damien please do a video on this
I think this depends on personal circumstances, it can be a great investment if you are close to retirement and unable to reach the full 35 years NI contributions needed for the full state pension. I can't think of many investments where a one off payment of £800 buys you £300 of index-linked income for the rest of your life. Won't be suitable for everyone but I think saying it 'absolutely is a terrible investment' is a bit misleading.
I’ve never seen this suggested as anything other than an option for people who don’t have enough years to meet the minimum threshold. My understanding is that that’s the point. It’s not designed as an investment for just anyone, but as a way of enabling people who’ve had spotty work history in the UK to still get the state pension
You do have to ask yourself sometimes as to who it is, who is getting the backhander to allow these company’s to charge up to 2%, (including management fees) and then provide you with such a crap service and dire investments that you wonder if it was worth it in the first place. It would be much easier if you could, as you say sign up to a pension that you know is providing you with a product that is in your best interest in the long-term. Personally, I think it’s companies like the ones that I’ve been employed to provide the government’s pension scheme that I’m giving Pensions, a bad name even now
Spot on. This is the real 'scam' about pensions. Except it's not a scam, it's just typical corruption of government whose sole responsibility is supposed to be acting for the interest and protection of citizens.
I have multiple pensions setup by various former employers. Me being silly, didnt realise that the pension funds are subject to monthly fees. In one case my pension dropped to a fraction of what it was due to fees because I hadnt been contributing to that particular scheme. Now I hold all pensions in one place but ultimately Im down due to fees and also a drop in the investment the pension scheme was involved in. So, I believe they're scam like your pension will be drained one way or another and cannot be relied upon to retire. 🤔😓😭
My wife cancelled her pension with Now:Pensions today. 1.75% ‘admin’ fee, then 0.3% ‘asset’ fee, no support, and no information on where the funds are allocated other than a ‘diversified portfolio’ which could mean anything as long as it has more than one asset in it. She will miss out on a 3% employer contribution but given the uncertainty we feel she is better off taking as much income as possible and placing it in a vanguard low cost index fund. One of the reasons we had to move is because Now:pensions said we couldn’t do a partial transfer.
Don't do this. Ask employer about pension provider or funds. Otherwise try monthly transferring out into your SIPP. Dont just throw away the employer matched contribution. That's 42% (3/(3+5)) of your monthly pension contribution.
It’s because of people like Damien who have educated me that I am now on the cusp of retirement in my mid fifties. I didn’t know what funds I was in, or that drawdown was even a thing, before I started watching these videos. Now I know exactly how much I have, where it is, what rates I’m paying, how it’s growing, the risks and how I can spend it later in life. Thank you for providing this much needed service. It’s a shame we have to rely on some dude on RUclips when it’s our entire future at stake. This should be part of the school curriculum, alongside tax management, ISAs, paying bills, mortgages, how to create a CV, how to do well in a job interview etc etc instead of learning about some Saxon king buried in a mound somewhere…. And you’re bang on about the rules constantly changing. This makes a complicated issue even more difficult to grasp. Come on government, give us a chance here!
So glad I could help you out with this and we’ll done for being on the cusp of retirement. I agree I should not exist we should be teaching this in schools.
With the fees being so expensive from workplace pension providers that your workplace chooses and not you, is it better to opt out of a workplace pension and open a SIPP and contribute the same amount in there instead?
I stopped paying in to my SIPP. I weight up what I would lose if I stopped the payments, against the amount I would lose if I died before I reached 65+ and couldn't justify the risk. I am a champion saver, but I'll never be able to save more than the £20,000 allowance I get with my ISA each year, so earmarking half my savings a month for a pension I may never see, is not worth the risk. So now I just put the whole lot (About £1000/month) into my S&S ISA. I realise that I'm leaving money on the table, in the form of Tax Relief, but it will never be as much as I would lose by continuing to pay half my money into a pension that I may never see. If I do make it to retirement age, I'll get a nice little tax-free payout of about 20 grand or so. So not all is lost. Meanwhile, I have my main savings pot in my S&S ISA.
Something you don't mention about financial advisors , If a person is switching to another company or advisor , They will probably be restricted, Meaning they can only put your money into certain , possibly low performance funds. You could be worse of. A lot of financial advisors really don't care what happens to your money, Damien offers good advice, It is important to try and understand what is happening to your money, A Sipp or a Share Dealing Account is something people should also consider, However you need to understand what you are doing. Good Luck .
I like my 401k far better as when I die if I managed my finances well there will be a large lump sum for my heir to inherit. The moment you die the pension stops paying anything.
They are not scams. The only people who say that are those who are clueless about finance. If there is a scam it's the UK state pension, which is the lowest in the OECD.
I'm in a default pension with Aviva, but my employer must have negotiated something as the fees are 0.25%, it's close to 100% equities and a little surprisingly a risk rating of 7/7. It's called a "LIP Global Equity". I'm surprised it's regarded as a 7/7 for a passive equity global fund, but I'm happy with the fees and the the fact it's a passive global fund so I'll probably just leave it. Unless I'm missing something?
Hey Damien, my wife works for one of the Auto enrollment companies (not NEST thankfully) but while they not be the best option, at least people will have something, which really was the whole goal of the scheme. There are many on this channel who watch are probably more than capable of managing their own funds, like yourself, and millions more that won't. Just a reminder that dont let perfect be thr enemy of good 🙂. Hopefully ) probably being too generous with that word, we're in the UK after all!) either the auto enrollment will get better, or people will be better educated and informed in what they're options are. Again, least people who dont know better have something, rather than nothing. I still love your idea of just tucking 5k for every newborn in an account that matures at 65! But thats logical and would never happen in this country
Workplace pensions are basically so that in the future by the time people who are 45 and younger there state pension will be means tested, the more private pension income you have the less state pension will have, pension consultants were talking about this in 2010, when auto enrolments was being introduced
I can for sure being this a thing and I hate this. I can't really form a good quippy sentence on why, but it will be around people being penalised for being prepared. I think knowing it will be means tested in the future when I initially started my pension at a young age, I would have treated my money very differently. I can only see your example happening so I may have to think about how I treat my pension differently.
Don’t panic, Tory manifesto for 2035 or 2040 will have it good, labour will up pensions and means test the rest until then. Aging population, screw the young folks, bigger voting block will keep it. Pensioners will get more and poorer overtime.
@@JamesStonee no ones if the people who pay for a pension now via a DC schemes will be penalised when it comes to the state pension will be means tested, or will be people who didn’t/couldn’t afford to save into a DC pension that they will be penalised that the state pension will be a pittance. Its one hell of a massive decision now for something that you cant predict
I bit my lip.. Check out Manual here and get 55% off your first order using my code DTM55.
bit.ly/4a13ZVi
I think I'm too far gone for this to help!
Used for 3 months and you reccomend lol. Everyone has a price don't they!
@@adamfromabove84I have been using it for much longer than 3 months.
Thank you for your videos.
My grandad was one of those whose retirement was stolen by Maxwell, an event he never emotionally recovered from. I agree with all of your points Damien. I’ve build up more wealth in my 20s inside my sipp than I have equity in my home - even after the crazy years of growth in the uk housing market. A pension is not a scam, but unless you choose to get educated on how to use the system, you will lose.
Really sorry to hear about your grandad mate Maxwell robbed normal people of their retirements just so he could keep up appearances.. Coward of a man.
SIPP, is good, on paper but it is in the control of the government, who will mess around changing the system itself. They are about as trustworthy as Bob Maxwell managing it. I’ll continue to save into the SIPP, but as a long term bet, lack of accessibility and control makes them a bit of a punt. So no matter how much you understand the system today, who knows what it will be in thirty years time.
@@philipjamesparsons check your terms and conditions. Your withdrawal age might be protected in your current scheme.
@@CloutMasterGeneral Thanks, I’d never considered there would be such a thing as a protected age. Previously, it would see, some schemes did have this, hard to get today. My SIPP is with Vanguard who say “The Vanguard Personal Pension (SIPP) doesn't have a protected pension age. As such, you can access your Vanguard SIPP from the minimum pensionable age, this is currently age 55 as per government regulations, and we will be required to adjust this as the regulations change in the future.” So, I stand by my original beef with the SIPP. Hard to know when you can access it and on what terms as they are likely to change as the government changes the system.
Majority of them collapse or have hidden fees you better in property and to say otherwise is devoid of reality
They are not user friendly definitely. Why do we have to ‘track down’ old pensions? We should be able to log into a government website with our NI number and get a simple list and contact info for all providers we’ve been signed up to - all the info should be available easily. Being able to just ‘lose’ billions because you can’t find a bit of paper is insane.
100%
Also since you can't move them to another country, when you work in several countries, you can leave small pots in pensions and 40 years later completely forget it exists
Spot on, why even have a national insurance number if it doesn’t do the job of giving your financial identity, they know exactly how much tax you owe and can imprison you if you avoid it but it’s okay for them to act clueless when you want to know where your pensions are, governments should be held to same accountability as its citizens but yeah I think that concept will only ever exist in fiction.
They are currently developing a pensions dashboard which will enable this function. I believe it's meant to be available from 2026.
Where’s there’s money, there’s scams.
Correction Damien - The personal pension age is not linked to state pension age in legislation, the only legislation currently is the raise to 57 from 55 in 2028. There was a vague suggestion by the coalition government to make it State Pension Age - 10, but that has never been written in to legislation, but unfortunately its sort of stuck and is often repeated. Not saying that any future government won't make changes, but just clarifying that the only confirmed raise is the 55 to 57 one in 2028.
Thank you for clarifying this!
I used to pay into my workplace pension for about 15 years because it had always been drummed into me by everyone, including all media, that it's the best thing to do. I opted out a few years ago because I realised that it wasn't right for me, as I'd rather have the money now, than wait until I'm in my late 50s/early 60s to access any of it. I may not even live to that age. I recently transferred the amount that I had previously built up, to a SIPP. It's far more transparent than the pension I had, and I have complete control and visibility over where the money will be invested. I wish I'd done this years ago, but better late than never, I suppose.
Great video, probably the biggest scam is the fee’s associated with default funds, auto enroll has created an entire industry of high fee employer schemes.
Call me pessimistic but I'd imagine that's exactly what the main objective was
Generally the opposite. When AE was launched in 2012, the annual management charge (AMC) was a maximum of 0.75% for default funds and remains so today. However, since then, some providers have reduced the AMCs below 0.5% to become more competitive and offer better value to members. They can also apply a fixed charge in addition to the AMC and there can be some variation, both in the AMC and Annual Charge (AC), between providers. As operating costs have increased some have increased the AC in recent years.
Some providers reduce the AMC, the greater the pot value. Small pots held by a large portion of members in some AE schemes attract the same pension levy fees as larger pots.
Consolidation can benefit both providers and members, enabling the provider to reduce the AMC %, the greater the value of a pot either by reducing the AMC % itself or providing a regular rebate to member pots, thus achieving the same thing.
Workplace pension schemes are chosen by employers. It is important to review the fees when leaving an employer/the scheme and considering whether it would be in your interests to transfer the pot you’ve accrued to another provider, perhaps the one chosen by your new employer. In some cases it could be worth transferring, in others staying put.
Investment returns should also be considered. Imagine transferring to save 0.3% in the AMC but seeing your new investment fund under performing compared to that you just left by 4% pac.
The high fees I believe are government led to repay the billions it cost to set up the auto pension schemes in the first place.
You would think that given the massive amounts of cash coming into the top ten auto enrolment providers that they would not need to be part of this excessive charging.
The fee is one issue but likelihood is you're missing out way more by the risk level of the default fund being too low for young investors
My Aegon default fund has a 0.06% ongoing charge, plus any underlying transaction costs within the fund. I think total fund charge is about 0.15%. The overall total charge is 0.5%
damien you mentioned a great point about shifting money over from your workplace pension provider over to a SIPP every so often, i’ll be maximising this as my work pension provider currently has 4x more fees than Vanguard SIPP
Hopefully your provider allows this! Not all do but if they do it’s an amazing way to reduce fees
I always remember in the early 90's (when I was a teen) some scumbag pension 'adviser' coming to my parents house and abruptly walking out mid way on us because my dad dared to ask him about a fund or investment company he wasnt affiliated with. The audacity and rudeness of the guy put me off pensions for life! I thought they were all scammers on massive commissions. Thank God for the internet & channels such as pensioncraft and yourself came along to help us make more informed decisions.
What people don't understand is pre/early internet these types of 'advisers' were absolutely rife!! ready to skim off a high percentage of you cash forever and gain a massive commission into the bargain.
Seems like this was far too common at one point.
Scottish Widows were notorious in the 80/90s.
@@DamienTalksMoney Fortunately those days are long, long gone. The ‘bar’ to being a regulated financial adviser has been raised significantly since then. The risk is in the public approaching pension-provider companies directly, speaking with a telephone-based operator and mis-believing that that conversation constitutes ‘advice’.
Another great video Damien .Would you be able to cover pension options for people running their own business ? Thanks
Dude, life is a scam.
This user could have spoken any language in the world, but he chose to speak facts.
Yes because that’s how the world works. I make something on the cheap then sell it to you for way more then what I paid. You can’t make money without someone being exploited or scammed. We pay tax for the government to provide us with services like healthcare and roads but not for it to be syphoned off to rich Tory donors.
And death is a scam too.
Dying is expensive and then they take inheritance tax as well.
Jeez, strip it all back. You’re right
🤣🤣🤣
At least it’s the weekend mate!
In Canada our government pension (the CPP) is fully funded for at least the next 75 years. They make small adjustments, as needed, to ensure that it can continue. I think it's an important part of our social system and I'm glad we have it. That being said, it won't pay enough to rely solely on it for retirement - people should also be saving for their retirement individually.
You / developed world will eventually, have the same issues as the UK.
Canada's pensions rank 12th with a "B" grade as there are issues with long term sustainability. CPP itself says its solid for 75 years - but that's stretching facts beyond acceptable limits imho as it assumes things will go according to plan with investments, longevity, population growth, income and inflation for the next decades (if it was a private fund I'd say they where lying). Regardless, 12th is not bad and sound policy changes should be able to cope with any challenges ahead.
Savings lol from where?? There is a living crisis in the UK. 90% of people do not have £1000 in their account.
Pains me that people so often make these kind of misguided and ill informed kind of claims. They are not helpful in fostering an informed discussion about our socioeconomic challenges or possible solutions for real problems. Median weaith in the UK is over 300.000 GBP. There is lots and lots of money around. @@MOCHI-ek6rc
Canada is a third world authoritarian state that won't be able to provide anyone with anything in the next few decades.
the massive influx of migrants and refugees also hurt the economy and benefit system.
My big worry is that, (if I live long enough) because I have a workplace pension, I will be means tested as too 'wealthy' to have the state pension.
Seems the more you do the right thing, the more you are punished.
That's there Socialist UK for you...
This is why i will be using my pension before state kicks in… it’s not a choice more a realisation that my body won’t be able to continue until gov retirement age.
@p9917j yep. Other than the big boss, (who chills in an office and goes home at 2pm absolute latest) there is nobody else in my workplace at 60+.
Not many in their 50s come to think of it!
Can't see any Gov in future not paying those who have paid their NI contributions over the years not pay state pension. The reality is state pension will only be a top up at most and any quality retirement will have to rely on a personal pension
@@p9917jspot on once you hits 57 assuming you've built up well by that point it's Time to start withdrawing in the most efficient way possible.
Talking to my pension provider recently, it’s just them taking management fees for 50 years and eating all my profits.
What kind of fees are you paying? I do like mutual funds and I know some of them are expensive like the Golden Sachs ones are often more than others like BlackRock and Vanguard etc
Smart pension was charging a flat fee of £39 per month to invest it in their fund. Crazy when you calculate this over longer terms, My work chose this as its one where the employees pick up the cost, my SIPP is about £13 for exactly the same service. From what I have read, your employer, doesn’t have to give you a fair or reasonable deal in terms of provider, it just has to provide you with a pension regardless of good value. so technically if I want to move it away from them, I believe My Work will see it as an opt out of this scheme, so I would lose their contribution. Still looking into it though.
That’s ok if your have over 100k, mine is .4 and cheaper end of market. I had .75 and .35 before to.
If we force providers to have too low fees we may end up harming new competition from starting. Not only does NEST have terrible fees they are the slowest and most obstructive common pension provider when customers want to transfer out, there are more steps than most other providers
I recently noticed that, i was hoping to transfer out, but have to stop paying in, before they will even consider a transfer, and then some.
I got no choice, as im part time with a Agency ( Manpower), and thats their choice for workers pension.
@@garyten13 You have to hope that the vague plans for Pension Provider Choice are made concrete at some point, this will mean that the employee can choose their provider, and their employer will make the contributions direct to that provider rather than their default provider. Most employers use standard third party salary management systems anyway that must already support many providers.
I like my work pension, currently put in 238 a month myself, in total with employer contributions 804 goes in a month. I’m 27 and hope to retire at 55-60.
Still seem a low for early retirement based on my maths.
@@coderider3022 so ive been doing this since i was 22, started on a low salary and now have doubled this since. I have also changed the funds to a more aggressive approach and will lower the risk in time
@@coderider3022 10k a year pre 30s assuming rising contributions over the course of career progress is certainly a reasonable start point. 55 might be ruled out by not being able to begun pension until 57 which might have increased in the next 20 years.
@@coderider3022 A SIPP following a mix of ETFs such as FTSE All-World and S&P500 would get him a decent pot at 55, even starting at 0 (although he'd want to reduce risk at 50 so the final few years might grow less, but more safely). In a fees-charging mass-market pension provider that is invested poorly, clearly not. Also I would imagine he would get above-inflation promotions two or three times in his career that would bump up his contributions. OTOH children and other shocks might cut back contributions for a while.
You won't the private pension age is rising to 57 in a few yearsm and in 30 years im sure it will be 65+.
I am a member of the Halcrow Pension fund. When Halcrow was sold to an American company, they gave members the option to lose 10% of their pension or fall into the PPS. They walked away from their commitments to benefit share holders. Members were forced to accept the change and the regulator and government allowed this to happen. You pay into a scheme for years with a promise to payout and then the rug is pulled out from under you.
I am fortunate that I've worked long enough, and am old enough, that I will get the full state pension at age 67. I was also auto-enrolled into the workplace pension which I paid into until I stopped working in 2022. 18 months later, that pension pot had not grown at all, so I've moved it to a company that actively manages it, and I'm seeing the benefits already. Yes, I pay a fee, but I'm ok with that. I started my first shares ISA last year, it has 5 divident stocks. I will add again in the new tax year. I also have a general investing account. That's about all I can do for my future. Hope it's enough.
Good for you for monitoring and taking action if you are not happy.
But just need to temper that with saying 18 months really isn't long enough for returns, and it is likely your improved returns are actually more reflecting the market than the fact they are now actively managed.
Amazing practical advice! Looking forward to the Royal London analysis on the pension fund sheet :)
I will get that done in the next 7 days for you! So take a look this time next week
Legend! 🙌
Thank you!
I think Royal London charge way too much. Tied into to a policy that was protected rights SERPs until I am 55 so in 2 years I will be moving it to my company Standard Life as the management fees are very low !
I'm very happy with my Aviva pension. I pay an annual fee of 0.04% and I switched away from the default and my current fund had a 0.20% fee.
This is very cheap!
Jizzlain 😂 not sure if that was an intentional mistake or not
Jizzstain you heard it wrong
😂😂😂
Thank you so much for these videos. It's teaching a lot.
I've been pretty bad with investing. I opened a vanguard account back in 2018 and really tried to understand the differences of each fund. I ended up putting in terrible funds that did very poorly and I totally got scared when it all cam crashing down in 2020 because I didn't understand why. So I totally missed out on these last few years haha
Love it Damo! I am waiting for a transfer from SW to SIPP to V. I have asked SW how many times I can do a partial transfer in a year and the response was as many as I want. Happy days! Take care Damo!
SIPP is the way to go for me. I asked 25 employees at my family business about their pensions, most didn't even know who the Pension company was, they had no idea what investments the company was putting their money into or what the fees were when they are of age to withdraw.. I'm not a big fan of these 'generic' Pension Companies.
I feel very lucky with my pension it's 6.5% of my wage and where I work puts in double what I put in.
You’re 6 still low compared to a public sector employee so it’s not that great but better than most (mine matched to 5)
I work for a bank that rhymes with Rarplays and they contribute 12%. Which is always a huge benefit I’ve thought
Sounds v similar to local Gov pension numbers but that's a defined benefit scheme. My employer does 7% contribution max which I thought was good compared to the minimum 3%
@@coderider3022 my to 3% lol 😢
But you still need to determine whether that will give you enough income in retirement to live the lifestyle you hope for. ( Those calculation can be done. )
‘As some people are just knobheads’ 😂😂😂 too true haha put beautifully blunt and refreshing to hear someone say exactly what I’m thinking.
I was one of those people for many years. Much of that came from a lack of understanding and education on investing and importantly,the value of compound interest. Schools should provide better financial education. This is not financial advice. But providing young minds with the tools to navigate the world of financial understanding.
Yes. Everyone should have a basic understanding of APR and AER, money coming in and money going out. I couldn't calculate compound interest, I'd use a calculator, but I at least know what it is and why it's either a good or a bad thing depending on which way the money is moving.
You can normally only leave half of your pension to your partner, the government takes the rest. That's not on in my book. My dad didn't even get that, he only got 10 percent of my mum's pension. She worked for the local council, but he's not even allowed 50 percent. It was a waste of money, paying into it for them. Most pensions are crap tho anyway. They say you'll have a million pounds in your pension, but a million pounds when I'm old will be like 5 years money.
That's a defined benefit pension... there was nothing stopping him contributing to his own personal pension. The government hasn't taken anything... the scheme only paid your dad till he died. They're not gonna pay your mom the full whack as well, that's just silly 🤣🤣
@@chrishardy34731, He did contribute to his own pension, what makes you think he didn't?
2, My dad is still alive, he hasn't died.
3, Plenty of people get half of their partners pension, if they die. Getting only half of what your partner paid in, is a joke. You should get all of it.
A major issue is that people are invested in default funds within workplace pensions. These are totally unsuitable for long term investments held by young workers.
The chances of us living to the pension age are super slim. Might as well just not pay in to it since we won't cash out
better to invest yourself then trust someone else to do it for you.
though it's not really a choice.
Defo your best video yet for those looking to put some money away but don’t know where
The crazy thing is that the spending power of the current generations of retirees is a huge boost to the economy. The next generations of retirees are going to be far less well off on average, that means the UK economy is going to take a huge hit. Retired people will be spending less money, they will pay less income tax on their pensions and fewer people will own their own homes which means fewer people will be able to finance their end of life care through that assett. The result will be a doom loop of a poorer ecomony and higher taxes for those still working. That fact alone should trigger even a tory government to do more to ensure people build up adequate pension savings. But as Damien said for many politicians who are not really interested in the long term good of this country that's a tomorrow problem, a some one else problem.
That generation will inherit a lot of wealth too don't forget. Report in today's news saying Millenials will be the richest generation ever so that theory doesn't stand up.
@@johnristheanswerdementia and a few years in a care home bye bye inheritance
after watching one of your videos, i did indeed notice that i had been put on a default retirement pension plan on Nest. I have changed mine to a higher risk plan to see how it goes. im only 46 so have plenty of time before retirement..
Damien please could you analyse Royal London pensions and add this to your spreadsheet? It would be much appreciated 🙏
Great video once again Damo 👍🏻
I contacted NEST last year regarding partial transfers and the answer was no. I remember reading a few years ago that the NEST high fee structure was because it was government funded initially to create it and obviously the government want their cut!!
Surely they can't just say no?? It's your pension money, you can hold it with whatever provider you want and in whatever amounts.
I have found with transfers, best bet is to operate through the new provider, and let them do the leg work for you. So for example if you wanted to switch to Hargreaves Lansdown from NEST, open an account on HL, and initiate the transfer from there. They would then use their clout to knock NEST into line.
Bottom line, NEST can't dictate to you where your money goes
@@M8d9R Here is the main parts of the reply I got from them.
You’ve asked us if it's possible to make partial transfers from your Nest account.
We are sorry but you'd be unable to do a partial transfer out of Nest. Nest only allows full transfer of pensions at the moment.
You can transfer out from Nest to a UK based pension scheme that’s registered with Her Majesty’s Revenue and Customs (HMRC) or a Qualified Recognised Overseas Pension Scheme (QROPS).
We can see that you’re still an active contributor with Nest from your employer ‘XXXXXXXXXXXX’. If you wish to transfer out of Nest, you’ll need to be a non-contributor.
You can stop contributions from your end as well so that you can become a non-contributor and transfer out of Nest.
We hope this helps. If you need any further assistance, you can email us through the secure message area. You can also reach us on 0300 020 0090. We’re open from 8am until 8pm Monday to Sunday.
Richard Hardy
Nest Member Services Manager
As someone who has worked in financial compliance at a SIPP firm great insight thanks 🙏🙏
Yep. Uncertainty. At least 20 years ago I took the view that there wont be a state pension by the time I get there. Coupled with numerous company pensions from changing jobs with silly little pots. Yeah I can combine etc. But yes, pots under my own control I think is the way to go.
the only pension i have that i feel secure about and have control of is yellow and shiney
This is something ive thought about a looooot recently. Ive come to the conclusion that im going all in on index funds until closer to retirement when ill start moving funds to safer places. Ive still got 29 years until i will likely retire. The ultimate flexibility and control with a potential for higher returns is just too tempting for me.
I'd love you to do a fair review of St James Place!
My work based pension is with the Peoples Pension, there is an annual charge of £4.50, then a management charge of 0.5%. They have a rebate system depending on the size of your pot, pots over £25,000 get 0.25% of your management charge back and pots over £50,000 get 0.3% back. It seems a bit more reasonable from what i see the other providers charging.
These pension providers also have massive lobbying departments
yep plutocracy
Couldn't have said it better, it's the moving goal posts that make me not trust it.
I understand your frustration at the pension age linking to state pension age. I'm a just couple of years older than you and have similar goals (and a Brummie for my sins). From a governmental standpoint however, given the shrinking workforce and demographic challenges we face, they will try and keep all of us within the productive workforce as long as possible. This pressure is only going to mount and I can see it both ways.
Lots of self learning and a huge amount of luck is how I somehow made it to early retirement. Thanks for your help on this treacherous journey. I heard somewhere, if your hope is for a government to help you, just remember they can’t even sort out the potholes. 😂
Hey Damien,
Great info, thank you.
When are you going to add the Royal London in here? Have been waiting for that for a while… looking forward to :)
Doubt most of us will reach retirement, unless your above middle class it makes little sense to put into pensions
We could have been Norway
I think about this so often with the sovereign wealth fund. One thing is population I guess..
@@DamienTalksMoney 🤔Scotland could have been Norway 🤨
@TalksMoney -Their wealth fund does have $250,000,000,000+ for each citizen, while the UK might not have been able to have quite so much per citizen I think we could have managed in the 10s of millions per-
scratch that lol I used the british version of trillion so got a few too many zeros in my maths 🤦♂
@@Pegaroo_ Yeah we really did piss it all away didn't we..
@TalksMoney I messed up my sums they only have $250,000+ per citizen
More government regulation on fees are well overdue. It’s like the wild west out there at the moment. Migrating cash into a more self controlled fund (global index) is what people should consider. But absolutely correct, keep in mind the potential loss of associated benefits that maybe lost. How funds under management still a thing I don’t know.. I know people want more options, but the index that needs to be beaten rarely is.. diversified portfolios in terms of cash isa, stocks and shares isa, LISA, private pension, trading account (but capital gains will likely be gone soon) are all a way of having some self control. I personally believe any government must list a 15 year pension plan when elected and this allows people to plan for their own future. Any other preceding government must abide by the set conditions of this agreement and not tinker with them. We all need more long term certainty not less of private pensions are going to be successful
My first job had no pension, so with nothing to guide I picked a pension with an ultra-respectable company.
Their name was Equitable Life. After that shambles I took out a SIPP. Pensions aren’t a scam but in some cases they’re close to one.
Another great video
“Some people are knob heads” really tickled me 😂
I just don't dig a pension. Scams, fees, money locked away.
Self employed so would rather invest and have control.
Yeah I get this
Great video mate!! The moving goalposts of SIPPs suck!! So am investing in all 3 SIPPs/ISA/GIAs.
Definitely the best way in my opinion.
@@DamienTalksMoney Talk about young people Going Galt and reducing their income on purpose and also whether we have options to invest in mining companies or gold via pensions in the UK because I can't find anything.
Just before I was due to retire I was told to speak to a FA recommended by our union. He sounded really promising and sent me a recommended portfolio which utilised a top London investment firm which people at my level normally couldn’t access, with a great track record of high returns. The documents were plentiful and the guy didn’t give me enough time to thoroughly go through them before contacting me to see what I thought. I had, however, checked the fees and the forecast comparison between my existing personal pension and the suggested one. The fees reduced the projected returns by at least a third! And the estimated value of the pot at target retirement date was almost exactly the same if I just left my money where it was. The FA was not pleased when I told him to take a hike.
You properly was looking at the chart that only showed the difference between charges which assumes the fund perform the same.
@@aston4736 No chart.
1,5% buyin and 0,3% management?
Here in Belgium 2,5% buyin with 2+% annual fee is normal. On a 4% return fund! The 30% tax break is lost in a few years on fees alone and in 40 years, almost 70% of the total potential is lost to the annual fee eating away your savings. I'm exhausted explaining this time after time when someone tells me they're saving in a private mention scheme at one of the major banks here in Belgium...
Trusting in the pension system is a trust in the state and financial system - both of which have a history of mass corruption, fraud and mis-management. Be cautious, the future you are promised is not guaranteed - and the state can decide to change the age/ conditions to access at anytime.
Yeah , total scam . Who would invest in a product where the rules can be changed at a whim .
I'm fortunate enough to work on the railways where you can get a Final Salary Defined Benefit scheme. My biggest worry is the moving pension age will make it almost pointless putting money into a SIPP. The majority of my investments are held within an isa and thats likely where my allocation will lye for at least a decade.
One way to alleviate the concern over a government changing the rules in 30 years is that making a negative change to pensions is a vote loser whenever they do it. So it will be a vote loser in 30 years time as well. The best money decision I ever made was to ignore all the overly worried folk in the late 90's and early 2000's, who were running scared of pensions. I've paid AVCs throughout (ramping this up over time) and retire next month aged 53, bridging the gap to 55 with other investments. Everyone who can, should do this. We don't drive our cars worrying if the road just stops around the corner.
Dude! I love ur videos and advice! It’s always amazing checking in and keeping current, learning and knowledgeable from u! Thanks
Completely agree, standard regulation of fees, and also payouts should be at the forefront of any future pension reforms. The biggest scam IMHO is annuity purchases at retirement. Many are forced into this without knowing there are options. My last wrokplace pension quoted 160K at 65, giving me 40k lump sum and 3k a year pension, It's now in my SIPP, and doing much better than they forecast.
The other issue, is the crap returns from most DB investment options. Many don't change their investments from the standard Lifestyle options in their schemes. You don't need schemes investing in low risk funds in your 30s
What I'm not clear with is how much of my tax goes into the government pension scheme? I'm in the UK.
Your analogy regarding pensions and cars is a good one , the problem is that many people fail to study either subject properly and rely on others to deal with the complexities of both. I am a firm believer in , never take your car to a garage and never let anyone deal with your pension. Repairing cars and trading shares in a SIPP are both enjoyable pastimes , saving money and building wealth. George Osborne gave us all the chance to manage our own pension , keeping it uncrystalized and never having to purchase an annuity , drawing out what we want , when we want , while keeping the capital to pass on to our children.
But have you seen annuity rates most recently ?
You do it yet again, making informed, precise, detailed financial information, thank you Damien...keep it up..
The biggest casualty of the Steel workers pension scandal is it’s now virtually impossible to transfer a final salary pension !!!! I gave up even though it would have been in my best interests
Having a nightmare getting my head around the US pension schemes now I work in US. Naturally very cautious when seeking advice on my 401k and Roth IRA pension schemes.
My boss lost alot on his pension for Carillion. I still dint understand how that happened.
In Australia private pensions are mandatory to reduce reliance on the state.
Excellent overview. Spreading your investments to de-link domestic political risks is very under-valued advice amongst those talking about pensions. I have lived long enough to see several fundamental changes. So good call! Btw had a real scare with my private pensions where one of my banks - without warning - liquidated all my assets (stocks, ETF's etc). Due to tax penalties it was a 250.000£ loss (!). I have meanwhile been fully compensated except for a pending 20.000£ payout - but it was several terrible weeks before the dust settled. I'm still a believer in the pension and banking system - but naturally moved the money to a new bank. So also have several banks if you have wealth and don't mix savings and loans in the same bank!
I moved my pension from a workplace selected one to an islamic one and my pension has made more in the 5 months I changed it than it ever has.
We need you on GB news doing a financial education slot all the topics you cover with Martin Lewis as lead perhaps and people featured like Nisha..you are doing great work!!
I have a small amount in a SIPP and I have DB scheme but I am putting pretty much most of my money into my ISA first as I have no trust in Gov and want to retire at 50, id love to abuse the tax benefits more but just not worth. I think they only make sense if you are already in your 50s and dont have to wait too long to get it.
Brilliant video Damien, I am watching more and more. I have been for more than than 20 years in a Standard Life Pension, global equity 50:50 but half of that is in the UK, the fee is 0.5%. Its done OK, but I would prefer to be in for example an Invesco FTSE all world at 0.15% Fee's. Ideally I would like a 30/30/40 spilt into 3 funds, Money, Bonds and All World. What i would like to learn is how to do partial transfer. My employer I assume will only want to pay into SL. Id like to learn more about SIPP and especially the risks, and the process to transfer. Great Video put across in a very understandable way
The partial transfer process is actually pretty easy but the key things are
1. Does your pension provider allow them
2. Does you current pension have any benefits you should look to protect.
An example might be protected retirement age (some pensions say you can retire at X age) and even with rule changes they stay the same, ask you provider about the benefits and features of the scheme and if a partial transfer would impact this.
But the actual mechanics of this are really a SIPP is just like a stocks and shares isa in terms of setting it up and navigating it and then on most of them there is a ‘transfer in’ button and you just follow that process.
In terms of risks the key one is you investing your funds badly as you have full control over how they are deployed
I hope this helps a little
Brilliant, thank you ! @@DamienTalksMoney
You do realise having it split in bonds and cash and stocks , your potential return is a lot less than having it all in stocks
My works pension was split 50 50
Stocks and bonds
Stocks have for years out performed the bond part
So last year I changed it so it was all in stocks
It’s returned 27 percent
But my mates who still have 50 50
There stock portion also grew 27 percent but there bond half only grew 5 percent
The scam is the constant pushing off goalposts. Retirement age from 57 (I think)and I guess by the time we retire it will be 70. Put the money into an isa and have freedom to move it out of the rules of the game are going to change. With a pension you’re trapped.
That's not a scam, it's a scandal.
It’s a scam on the basis you are told one thing when you sign up but told different later after you commit a tonne of money. You have no choice to disagree with the increase in retirement age.
Like Damien says, invest in both. You can retire at say 55, use the ISA money to live off and the pension pot will cover you in later years. You could even obtain a bridging loan, maybe borrow money for house renovations and pay it back when the pension is crystallised. So, there are work-arounds.
Paid into a workplace pension for years, as I was told to by everyone at 22. After 4 years, I realised it was a scam. Worth £20. I also got hit with a £2000 tax bill..
Really didn’t know about the partial transfer to a SIPP for lower fees
My problem with the pension system is for example, If I get a certain private pension provider, my company pay 2.5% of on top of my wage into the pension, but If I opt out they keep that amount of money instead of giving it to me. I know not much about how business deals work, but that seems like something to do with the tax of the company maybe, but the point is, that this deal is somehow only beneficial to me if I let a company make a business deal with my company. Somebody could enlight how it works exactly?
@7:40 "but I'm fine because I own 7 flats and I bought them all in one go so I didn't have to pay stamp duty and I'm creaming it in at 2k a month each..."
I started my Pension at 30, i'm now 43 and have had to really push to make up for the gap between 20-30 but I'm not put over 30% of my salary in saving pretty much 40% that would have gone to income tax
Take a bow @damiantalksmoney. Clear, articulate and balanced as always. Your videos are providing a real public service. Thank you for everything you do.
Something that absolutely is a terrible investment is buying missing state pension years, if you figure out how much each additional years buy and calculate how much you will get paid assuming it doesn't change other than inflates at the average rate of what inflation has been on average and assuming you live to the average years after pension age you will see that buying state pension is multiples times worse than a 7% yearly compounding gain and that is assuming pension age won't go higher. The only exception is if you are close to not having enough to ge the minimum payments a few years bought might be beneficial but not if you will have the minimum already. Damien please do a video on this
I think this depends on personal circumstances, it can be a great investment if you are close to retirement and unable to reach the full 35 years NI contributions needed for the full state pension.
I can't think of many investments where a one off payment of £800 buys you £300 of index-linked income for the rest of your life.
Won't be suitable for everyone but I think saying it 'absolutely is a terrible investment' is a bit misleading.
I’ve never seen this suggested as anything other than an option for people who don’t have enough years to meet the minimum threshold. My understanding is that that’s the point. It’s not designed as an investment for just anyone, but as a way of enabling people who’ve had spotty work history in the UK to still get the state pension
I have a pension. My monthly retirement check will be bigger than social security. This is on top of my 401k.
This guy knows what he's talking about!
Thanks!
Why has he never mentioned the great taking then lol he’s way behind he ain’t even woken up yet
@@Car_Pornagain, in English please.
You do have to ask yourself sometimes as to who it is, who is getting the backhander to allow these company’s to charge up to 2%, (including management fees) and then provide you with such a crap service and dire investments that you wonder if it was worth it in the first place. It would be much easier if you could, as you say sign up to a pension that you know is providing you with a product that is in your best interest in the long-term.
Personally, I think it’s companies like the ones that I’ve been employed to provide the government’s pension scheme that I’m giving Pensions, a bad name even now
Spot on. This is the real 'scam' about pensions. Except it's not a scam, it's just typical corruption of government whose sole responsibility is supposed to be acting for the interest and protection of citizens.
"..the government’s pension scheme..." ???
I have multiple pensions setup by various former employers. Me being silly, didnt realise that the pension funds are subject to monthly fees. In one case my pension dropped to a fraction of what it was due to fees because I hadnt been contributing to that particular scheme. Now I hold all pensions in one place but ultimately Im down due to fees and also a drop in the investment the pension scheme was involved in. So, I believe they're scam like your pension will be drained one way or another and cannot be relied upon to retire. 🤔😓😭
My wife cancelled her pension with Now:Pensions today. 1.75% ‘admin’ fee, then 0.3% ‘asset’ fee, no support, and no information on where the funds are allocated other than a ‘diversified portfolio’ which could mean anything as long as it has more than one asset in it. She will miss out on a 3% employer contribution but given the uncertainty we feel she is better off taking as much income as possible and placing it in a vanguard low cost index fund. One of the reasons we had to move is because Now:pensions said we couldn’t do a partial transfer.
Don't do this. Ask employer about pension provider or funds. Otherwise try monthly transferring out into your SIPP. Dont just throw away the employer matched contribution. That's 42% (3/(3+5)) of your monthly pension contribution.
@@KelticStingray This. I hope he takes your advice.
The NOW Pensions fund factsheets are downloadable from their website. { Although they're still pants! }
It’s because of people like Damien who have educated me that I am now on the cusp of retirement in my mid fifties.
I didn’t know what funds I was in, or that drawdown was even a thing, before I started watching these videos. Now I know exactly how much I have, where it is, what rates I’m paying, how it’s growing, the risks and how I can spend it later in life.
Thank you for providing this much needed service. It’s a shame we have to rely on some dude on RUclips when it’s our entire future at stake. This should be part of the school curriculum, alongside tax management, ISAs, paying bills, mortgages, how to create a CV, how to do well in a job interview etc etc instead of learning about some Saxon king buried in a mound somewhere….
And you’re bang on about the rules constantly changing. This makes a complicated issue even more difficult to grasp. Come on government, give us a chance here!
So glad I could help you out with this and we’ll done for being on the cusp of retirement. I agree I should not exist we should be teaching this in schools.
Agree, however history is important also as it's often very useful at predicting cycles of human and economic behaviour and trends.
With the fees being so expensive from workplace pension providers that your workplace chooses and not you, is it better to opt out of a workplace pension and open a SIPP and contribute the same amount in there instead?
Just a small point, but what do you mean by "amount of people"? Don't you mean "number of people", or are you measuring people by the tonne?
I stopped paying in to my SIPP. I weight up what I would lose if I stopped the payments, against the amount I would lose if I died before I reached 65+ and couldn't justify the risk. I am a champion saver, but I'll never be able to save more than the £20,000 allowance I get with my ISA each year, so earmarking half my savings a month for a pension I may never see, is not worth the risk. So now I just put the whole lot (About £1000/month) into my S&S ISA. I realise that I'm leaving money on the table, in the form of Tax Relief, but it will never be as much as I would lose by continuing to pay half my money into a pension that I may never see. If I do make it to retirement age, I'll get a nice little tax-free payout of about 20 grand or so. So not all is lost. Meanwhile, I have my main savings pot in my S&S ISA.
Something you don't mention about financial advisors , If a person is switching to another company or advisor , They will probably be restricted, Meaning they can only put your money into certain , possibly low performance funds. You could be worse of. A lot of financial advisors really don't care what happens to your money, Damien offers good advice, It is important to try and understand what is happening to your money, A Sipp or a Share Dealing Account is something people should also consider, However you need to understand what you are doing. Good Luck .
I like my 401k far better as when I die if I managed my finances well there will be a large lump sum for my heir to inherit.
The moment you die the pension stops paying anything.
They are not scams. The only people who say that are those who are clueless about finance. If there is a scam it's the UK state pension, which is the lowest in the OECD.
Not paying into any workplace pension as all jobs i work pay the minimum no point. I wonr be alove at 75
But if the pension fund everything they do is to invest your money in tripe A debt, why not do it yourself buying the goverment bond yourself?.
I'm in a default pension with Aviva, but my employer must have negotiated something as the fees are 0.25%, it's close to 100% equities and a little surprisingly a risk rating of 7/7. It's called a "LIP Global Equity". I'm surprised it's regarded as a 7/7 for a passive equity global fund, but I'm happy with the fees and the the fact it's a passive global fund so I'll probably just leave it. Unless I'm missing something?
I only work 6 months a year i don’t believe there is any point of having a pension
Hey Damien, my wife works for one of the Auto enrollment companies (not NEST thankfully) but while they not be the best option, at least people will have something, which really was the whole goal of the scheme.
There are many on this channel who watch are probably more than capable of managing their own funds, like yourself, and millions more that won't.
Just a reminder that dont let perfect be thr enemy of good 🙂. Hopefully ) probably being too generous with that word, we're in the UK after all!) either the auto enrollment will get better, or people will be better educated and informed in what they're options are. Again, least people who dont know better have something, rather than nothing.
I still love your idea of just tucking 5k for every newborn in an account that matures at 65! But thats logical and would never happen in this country
Thoughts on the NHS pension, when I'll likely die before retirement age, even more so with age increases.
I'm not allowed to do a partial transfer from BC&E. But apparently my pension age of 55 is protected with them as I joined before 2021.
Workplace pensions are basically so that in the future by the time people who are 45 and younger there state pension will be means tested, the more private pension income you have the less state pension will have, pension consultants were talking about this in 2010, when auto enrolments was being introduced
I can for sure being this a thing and I hate this. I can't really form a good quippy sentence on why, but it will be around people being penalised for being prepared. I think knowing it will be means tested in the future when I initially started my pension at a young age, I would have treated my money very differently. I can only see your example happening so I may have to think about how I treat my pension differently.
Don’t panic, Tory manifesto for 2035 or 2040 will have it good, labour will up pensions and means test the rest until then. Aging population, screw the young folks, bigger voting block will keep it. Pensioners will get more and poorer overtime.
@@JamesStonee no ones if the people who pay for a pension now via a DC schemes will be penalised when it comes to the state pension will be means tested, or will be people who didn’t/couldn’t afford to save into a DC pension that they will be penalised that the state pension will be a pittance. Its one hell of a massive decision now for something that you cant predict