What you don’t know about your pension will shock you

Brett Alegre-Wood
October 14, 2010

A pension shocker

On the weekend I hosted a small workshop of 20 people and at the outset, I told them that within 5 minutes I'd be able to shock almost everyone in the room about the true state of their pensions.

I then asked each of them the simple question: What you don't know about the investment opportunities that make your pension? How will your pension be calculated when you retire? Most people in the room were shocked:

– 6 had one or more regular pension funds but they didn't have the first clue how they were all calculated or – even worse – how much they'd have when it came time to retire. They were in effect gambling that it would all work out. That's no way to live!

– 7 had no pension at all. (No need to try to shock them as they were already hiding underneath their chairs!!) Let's hope you are not in this group

– A small proportion, just 4, had final salary pensions – but only 1 knew how it was calculated. Unfortunately for all final salary pension recipients, the problem that exists is that many are indexed to inflation unfairly, in a way that means your pension doesn't keep up with the cost of living. In effect you get paid less and less the longer you live. Very few of those lucky enough to have final salary pensions are aware of this huge looming problem.

The fact is that unless your pension is linked to an actual asset rather than some index, you'd better find another strategy to back it up because the longer your live, the worse your pension is likely to become.

– And finally, 2 worked for the Government and while they thought their pension was “good”, they didn't know how much they'd have when they retired. But hey, everyone knows that Government pensions are good pensions, right? Wrong. Sorry to break it to you, but you're just as doomed as the final salary folks for the same reason as above.Just 1 person had a SIPP (Self Invested Personal Pension) and was “set up” for retirement.

-By my calculations, an amazing 18 out of the 20 people present at the workshop were hoping for the best with no real idea of how much they'd end up with when they retired. Tell me, which group are you in? Clearly none of them were a property investor.

Live with passion,
Brett Alegre-Wood
Chairman, Gladfish


UK Pension, UK Pension

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