Do you have a pension?

I'm a Financial Broker and in my experience people who value pensions do them and people who don't value them don't. It really is that simple. People who have a negative opinion of them (some justified, some not) look for any reason and excuse to not to them.

I think a big part of the problem is that the industry makes them out to sound more complex then they are and many people simply do not trust anything associated with the financial services sector. I work in the industry and I don't fully trust it so I don't blame people!

That said, what I find extremely fascinating (in an annoying way) is how banks are the least trusted institutions in this industry and yet People do Pensions, Life Assurance and use other services with banks who are normally not the most cost efficient or the superior option.

Back on topic, I find the people that do Pensions do not need to have the benefits explained to them. They have already made their minds up to do them. I don't really try to "sell" Pensions because its wasted breath to people who don't want to understand the value. I am not saying Pensions are perfect or ideal for everybody, but some people get hung up on parts of Pensions that are possibly not as relevant as they believe.

If you are on the higher rate of tax and contribute zero to a Pension you need to serious think again. Depending on your income, you can get between 33%-40% relief on a contribution. So you put in €100 into a pension and the net cost is at most €67.

I am finding that many young people are more astute and interested in Pensions. They also like the fact that they wont have access to their pension until their 60s. they wont be able to impulsively draw the funds out and buy a car/holiday.

So why not just save into a Bank/savings plan? You should do that anyway, but it costs you €100 of taxed income to put €100 into a savings plan. It costs you €67 (higher rate) to put it into a Pension.

But what about fund performance and charges ? (I hear the cynics shout). Yes, asides from what you contribute, the fund performance (more then charges) will be a huge factor in how much you will have at retirement. That is why people should get more involved in deciding where to invest their pension monies. Most big companies and brokerages have generic fund options and people just presume it will grow to their expectation.

Get involved in your Pension planning. Ask questions about the fund performance and what are reasonable expectations. Nobody can say for certain how a fund will perform but you can take lower risks for more consistently returning funds. I have existing clients who only take an interest in their pension value when it goes down. They wont talk to me when its going great, that's the time to consolidate, but people instinctively wait until something bad happens to do something instead of being actively involved in their Pensions journey.

In terms of charges, yes they can be high, but in general the biggest charges are an annual management charge (around 1%) and a reduction in the amount of your premium that gets allocate to your Pension. This is worth considering, but for me if the charge is high, once the fund can justify it (there's one fund in particular that consistently performs well and is worth it!), I don't see why people would complain. If a fund consistently returns what it says it will, why would a person haggle over the charge?

If you don't like Pensions or have had a bad experience with them, ask yourself how involved you were in the process. How much do you really know about them? IN some cases people know very little and don't try to get past the parts of pensions that annoy them. If you are educated enough to make an informed (not emotive) decision, then fair enough, they aren't for you. I would still recommend trying to have an alternative strategy for retirement. If you are on the higher rate of tax, you will do well to find a more tax efficient way of doing that . .