Guest 710- Registered: 28 Feb 2011
- Posts: 6,950
#1
An interesting Editorial in today's Guardian with much to say about the attempts to have the 'Obamacare' debacle replayed over here...
http://www.guardian.co.uk/commentisfree/2012/mar/07/pensions-conspiracy-against-public-editorialIgnorance is bliss, bliss is happiness, I am happy...to draw your attention to the possible connectivity in the foregoing.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#2
It is indeed very interesting and this is something that I have a professional interest in.
NEST is a very badly flawed scheme. It has only one virtue - its cheap, though not as cheap as originally intended. It is clear that this scheme will encourage a lot of 'misbuying' and is a potential millstone around the necks of small employers.
For me the big problem arises simply because it is cheap. It offers a limited investment choice - a range of 'retirement date funds' of limited ambition and 5 others, a Sharia Fund, an Ethical Fund, a couple of gilt/cash based options and one mixed asset with higher volatility. I have little faith in any of them to actually achieve a good return and this may be a scandal waiting to happen.
To many in the media are obsessed with charges and compare like for like schemes on charges using the same illustrative performance. The big flaw there is that the cheap scheme has to actually perform and in the real world that is not easy. That said, yes - there are a lot of much higher charged schemes that are very poor in performance as well. So while cheap does not necessarily mean better, expensive does not necessarily mean better either. This make a real dilemma for anyone who wants to gain value from a pension or any investment.
Value is a combination of performance related to charges related to the risks the investment takes. Does an investment justify its charges by achieving additional performance relative to the risks taken? That is always the big question and it is never an easy one to answer. Put simply, you want gain more bang for your buck but without exposing yourself too much to the explosion.
My own choice for my own pension (and ISA) is to avoid cheap funds/stakeholder pensions. I do not like trackers and I believe firmly in good active management whether by active stockpicking funds or through active assets allocations. My own portfolio is somewhat aggressive and is much higher in volatility risk than I would ever recommend to a client - well the vast majority anyway.... To me cheap does not do the job at hand. Most active funds though (I have 114000 of them on my database of all types...) are either dudd or mediocre and fail to justify their charges - that is where knowledge comes in. I have 307 identified that I consider to be 'superior' in their sectors to the herd.
In my case I earn by providing a service and getting any underlying investment to work hard relative to the risks taken. There are never any guarantees in that but, well, let us just say that I do not do too badly....
WOOOPS - I had better add - none of what I said above should be considered as advice to invest. It is important to obtain professional advice and know the risks of any investment that you undertake. Investments go down as well as up and pensions should be regarded as a long term investment.
Guest 710- Registered: 28 Feb 2011
- Posts: 6,950
#3
Thank you Barry. All well and good...[patience, patience...it's coming] however, we are still left with the restriction of choice and the limitations imposed by the industry. Hence mention of 'Obamacare'.
That all are free to choose outside the scheme ALL should still be free to choose within it too. The well-being of the individual is what is at stake and the lack of pulling-power or overall performance of an industry with way more of it's fare share of 'cowboys' should not think itself worthy of being the tail that wags this dog.
Ignorance is bliss, bliss is happiness, I am happy...to draw your attention to the possible connectivity in the foregoing.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#4
Tom - you and I may have different opinions on what choice actually means here.
I do not like the NEST scheme because it does not give choice, because it is all about costs not quality with few rather poor looking investment option playing only the lowest common denominator. Funds within NEST under current rules have to stay there and cannot be transferred out to a better option as well.
But there is choice.
Employers can choose not to use NEST. There are two low cost alternatives and a range of more standard Stakeholder, Personal and even SIPP options concerned employers could go for. Those options can have a range of investment options as long as your arm - the most sophisticated and most expensive the widest of course, not one I would suggest as suitable in most cases.
Employees have choice too, they can choose to opt out (and would have to do so every 3 years to stay out) and they can choose to pay more in that the basic amounts.
That said of course the contribution level is limited but there is a very good reason for that as no-one really should want too much money tucked inside such a low quality scheme and without the right advice and options to make it work properly. Specially as you cannot transfer the cash out to a better investment vehicle when it gets to be a significant sum.
Guest 710- Registered: 28 Feb 2011
- Posts: 6,950
#5
Ignorance is bliss, bliss is happiness, I am happy...to draw your attention to the possible connectivity in the foregoing.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#6
He really does not understand what he is talking about, with a glimmer of tabloid knowledge only. Not unusual from what I have seen of him. The thought that someone might think to transfer in to NEST, if allowed, really does horrify me.
I had better add to what I have said...
It is important to get a pension for most people and you should take up employer contributions whenever possible - even a poor scheme like NEST is better than nothing.
Guest 710- Registered: 28 Feb 2011
- Posts: 6,950
#7
Ignorance is bliss, bliss is happiness, I am happy...to draw your attention to the possible connectivity in the foregoing.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#8
That is sad, sad because he has lacked the right kind of advice and does not have the right information. There are a couple of things he says that betray that when he speaks of not enough money for stocks and shares for instance. This is one reason why I fear that the lack of proper advice connected with NEST will result in people thinking that way. There are many people now who invested in some terribly expensive pensions in the 80's and early 90's and who, despite that, now have substantial sums they would not otherwise have had. The press do not help with a lot of their ill-informed stories.
#9
And it has to be said pensions advisers have often obfuscated in order to sell, present company excepted.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#10
Bern - there has indeed been a lot of poor selling practise too.