Pensions. Could I be doing better?

Whilst I am here working, I’m also working hard on my pension. But I admit I’ve haven’t thought a lot about how my pension will one day have to work hard for me.

I’m not sure about you, but I’ve found it easy to push it to the back of my mind, maybe because it’s strange to think about a time where I’ll no longer be working, or perhaps because retirement is too far away and there’s more immediate life hurdles to plan for.

But I realise some things are a bit too important to leave as an afterthought and having these conversations are a habit worth practicing. I’d love to hear what you’re doing about your pension. Are you actively managing it? Or leaving it to others? Has it changed at all recently?

What started me thinking about all this was a conversation I had recently with some friends who have had quite unique experiences with their pensions.Tracey did what a lot of us do and opened up a workplace pension right from the start. Unfortunately, she had a minor set back when her employer changed their plan completely, meaning she had to close her existing pot and start a new one with lower returns.

On the other hand, her partner Phil hasn’t had a pension plan for years. It hadn’t really crossed my mind before but being self-employed means he had to ‘make up’ his own pension. He chose to invest in property in 2015 and plans to use the rental income as well as the value in their own house to contribute to their retirement.

It’s hard to say which one is ‘right’ because there are pros and cons to both. Whilst Tracey has the added benefit of having received government top-ups she’s also relying on the company (and government) to do the right thing. Phil, on the other hand, has the comfort of controlling his income, but has missed out on contributions over time.

Both seem to have accepted that that’s what’s best for them, but I wonder if there was another way that could have benefitted them both?

I’m 65+ and started moving all of mine to Pension Bee in August 2019 so I can see an overall picture. I feel so much better for having done this. Was worried when the value dropped 16% because of Covid but it seems to have recovered ok.

Thank you for sharing. What is it about pension bee that helped you? Did it just make you feel a little more in control?

I think for me it was the getting rid of multiple pages (mainly single sided!) from multiple places several times a year. I’d been in IT for over 40 years and had multiple employers as well as a period of contracting for the Y2K period (and yes, we did find & fix things).

As I’m a bit of a techno geek to be able to see it all in one place on my iPhone was so much better. Before I did this I’d have to sit down for over half a day with a calculator and piles of paperwork to see what I might be getting. Of course the converse is now true - when Covid19 struck I was very worried to see how much I’d lost from my pension.

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I didn’t really start thinking about pensions until I got my first professional job in 2017, though at that point I just let my employers pension plan deal with it.

In September I switched employer and since I don’t have to make contributions to my pension on this plan, I decided to set up my own personal pension for my own contribution to my retirement.

I also set up an account with pension bee for that and realised I could transfer my pension from my previous employer into pension bee, which is great :grin: Makes it much easier to keep track of how much money I have going towards my pension. I like to keep an eye on the money building up :eyes:

Plus this way, I have more control over the kinds of things my pension fund gets invested in, which is important to me.

My pension is currently slightly down in value, as should be expected, but I don’t see that as a problem since I’m very early in my career, and pension age is a long way off :smiley:

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As a self-employed person, the hardest bit is deciding exactly how much to put in each year, particularly when you’re trying to buy a house, bring up kids, actually go on holiday occasionally… It’s easy to put in far far too little, unless you’re financially disciplined.

My tactic is to put fixed amounts into my stakeholder and SIPP, then set myself earnings thresholds, above which I’ll add a lump sum. It sort of works. Then I’ve got a long term savings pot, part of which will go into the pension when there’s enough to make it worth investing rather than saving.

I try to spend as little time thinking about it as possible and look at the performance once in a blue moon. It’s all in standard, cheap ETFs.

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These are all really great, thank you. It just goes to show how we all end up in different situations depending where life takes us.

What I think @ColinR @Albatross demonstrate well is that people are wanting to become more involved with all their financial assets, not just their day to day spending. And what’s more, it’s made so much easier with fintechs because we don’t even have to leave our homes. Pension Bee and other’s were right to see this gap in the market but are we’re yet to see a fintech that offers the whole range of financial products and not just aggregate them?

It’s interesting @Albatross that said you don’t feel too worried about you pension decreasing in value at the moment. Do you think that as we grow closer to retirement and therefore are more dependent on them that we become more risk averse?

@Gaoler you bring up a really important point about financial discipline, which is especially hard when there’s so many more immediate things to plan for and spend on I imagine. Great to hear you’ve explored SIPPs, do you have much involvement in what you invest in?

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I personally think there should be some mandatory pension contribution with income tax for the self-employed. Then discipline isn’t such a big deal. Of course, the whole distinction between employed and self-employed is ripe y for reform anyway.

Mine is just a wrapper for a Vanguard Lifestrategy. Set up and forget. For the sort of sums I have, there’s not much point in micromanaging. That could change, of course. But then, you can open as many as you want, unlike ISAs, so I may create a separate SIPP for more active investing.

I went via Cavendish/Fidelity, but may transfer to Vanguard itself, now they offer SIPPs.

I suppose I’ve managed the contributions and selected the type of investment, but have set them up for minimum hassle! No way is it worth it for me to start creating my own portfolio and doing rebalancing etc. I’d make a right mess of it.

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Definitely, I think that if I’d been at the opposite end of my career and coming up towards retirement age, I probably would have been very concerned about the effect of the current economic situation on my pension.

But at this current point in my life, a dip in value is absolutely fine to me. To be honest, I would assume (with my limited kowledge of investments and economics) that it’s potentially quite good, since anything I’ve been depositing over the past couple of months has a better chance of a large rise in value going forwards :smiley:

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Really very interesting conversation, and from members from very different age groups which shows how talking generally about pensions is complex because we (the readers) have such different requirements.

Personally I’m in the middle - way beyond the time I should have started but not yet close enough to consider retirement, so I feel it is a potentially exciting time to get more involved in managing my pension.

I’ve had a few realisations about pensions (and investments) recently, including how we rarely get joined up advice that suits us as individuals.

One moment the advice is about pension planning, and how you should maximise your plans to take advantage of top-ups, etc. Next article will be about savings for the medium term, including ISAs and fixed-term deals, so that you can make ‘savings’ work for you. Some will be about day to day spending and budgeting / planning.

But as @Gaoler points out, it is up to us to find a way to balance these competing choices - and the consequences can be serious to us in future.

I also, however, have realised that investing is a bit like growing your own food. We get used to having everything packaged and presented to us, but if we decide to get more actively involved, there are thousands of decisions to take and suddenly you realise what you are paying for … and that the juicy tomato you had hoped for turns out to have some blemishes … .

Am I really better to grow my own, or should I just be shopping better? Personally, I am conflicted.

My IFA helped me move all my pension pots to a platform so I could manage them myself, but I am way too nervous to change anything. Have I really gained anything (other than this insight) from the move?

I guess some of it is simply experience (and not just confidence!), and until recently I didn’t have any investment experience, so am taking my first steps in this direction, and hopefully will feel more empowered to take bigger decisions before it gets too late

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I’ve been on a similar journey as @robert describes although now I’ve reached my destination.

It’s easy to view retirement as a destination or step-change life event that needs to have pension plans to form the foundation underpinning a good standard of living in later years. As you grow older your outlook on life and your career will change and you need financial products with the flexibility to accommodate these changes. Like many people, as a young person I invested in company pensions and personal pensions but thought little else about retirement. Later in life, I realised that I no longer wanted to live-to-work and so I changed tack and began to plan for early retirement. Taking an income from a pension plan early means a nasty hit in the actualisation value and so I decided to diversify into other assets whilst allowing my pension plans to run to full maturity. My diversified “pension pot” now consists company pensions, employee share options, private pensions, cash savings (especially savings bonds), cash ISA’s, investment ISA’s, property, commodities, etc. Even stoozing has made worthwhile profits I have added to the pot. The biggest advantage has been that I have been able to ride out cyclical downturns, the 2008 financial crash and one-off events like COVID19 but all the time keeping my plans on schedule. With a narrow set of investment vehicles, retirement at this time would be out of the question.
If I had the chance of a do-over, I would ignore the marketing promises of the pension industry by opting for plans on low fee platforms (managed investment plans with higher fees are poor value and rarely beat the market), invest as early as possible in workplace pensions (which usually have low fees and benefit from employer contributions) and start my diversification into other investment vehicles earlier.

My early retirement plans envisaged I would need to work part-time until my pension plans matured to fill the income gap. In fact, that hasn’t been necessary so now I have time for voluntary work helping others.

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fascinating insights, thank you @4martin

I’m particularly in agreement with this quote:

I’m definitely coming to a similar view and will be trying to ensure my kids (and their friends if possible) internalise this too.