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Month: August 2011

Navigating the pension maze…

Pensions are a very complex area and, despite the huge number of individuals and organisations apparently offering help, they all seem to have a vested interest i.e. getting their hands on your cash! Here’s a quick guide to what I’m doing and why.

First of all, let me make it clear that I’m NOT a Financial Adviser and none of the following should be deemed to be advice, it’s all my opinion. However, if you do your own research I think it all makes good sense.

I’m at the stage where I’m starting to take money from my pension pot so if you’re just starting out then this is not for you – things may very well have changed dramatically by the time you get the opportunity to draw the cash.

Having paid into various pension funds over the years I consolidated into two funds a couple of years ago, luckily just missing the recession which would have seen my pots decimated. That really was luck! I would have consolidated to a single pot but the MVR (Market Value Reduction) brought tears to my eyes and since that one had a guaranteed minimum growth of 4% I was reasonably relaxed about leaving it where it was. I can get my hands on that one in 2014.

Everything else went into a SIPP (Self Invested Personal Pension). Why? Because I got more control and I don’t like Financial Advisers much! Over the course of about a year I looked at numerous investment options but I’m a bit risk-averse so I’ve opted for dividend-bearing shares. I selected large, global companies with a good history of growth and reliable dividend payment. The companies I’m most likely to invest in have good cash-flow projections (like Vodafone), supply products that are in demand Worldwide (drugs, drinks, tobacco, household) and utilities such as energy.

I’ve avoided most of the financial sector for obvious reasons!

Now this is certainly no get rich quick scheme, I’m currently on target to make around 5% this year, but it’s better than being in cash and it will help protect my SIPP against inflation.

I’ve opted to put my SIPP into draw-down mainly because annuity rates are so poor and once I take an annuity I’m stuck with it. On the other hand the payment from the annuity would be guaranteed so, if you want very low risk an annuity may be right for you. In reality, the payment from draw-down is about the same as the payment from an annuity but I’m more likely to get more of my money back under draw-down. That’s because annuity rates are, in part, determined by average life-expectancy and those that live longer are funded in part by those that do not. Unless you take out a joint annuity, when you die the fund dies with you. It’s used to fund those people who live longer than you do. Income draw-down can be passed to your spouse.

To find out how much you might get from your fund search the Internet for a GAD (Government Actuaries Department) calculator. I found one here. The GAD calculations change regularly so check you are using the most up to date tables.

I also took the 25% tax free lump sum but I’ve invested that rather than spent it! The reason for doing this is that I can only withdraw money from my fund up to the upper limit in draw-down so it’s not really cash. Most people who know about retirement will advise moving more and more into cash as you get older so this 25% represents my flexible cash element. I have some cash tied up in longer term, but low-risk, savings to secure a better return while the remainder is in easier access accounts in case of emergencies. A holiday in Spain doesn’t qualify as an emergency!

I also have some property so my portfolio is reasonably diverse.

I do my own research and NEVER respond to cold calls or junk mail even from my bank.

[to be continued]

Politics is just about…well, politics!

Politics is just about politics and it should be about more than that. It should be about leading, about governing and about building for the future. That’s the problem, there’s far too much one-upmanship¬†to allow anything useful to be done. Too much sniping and too much stabbing in the back. We’re also very much a blame culture – someone makes a mistake and they’re forced to resign, never allowed to learn from their mistake and move on.

No doubt that the recent riots, primarily in London but latterly spreading to other cities, will be followed by opposition calls for an end to austerity measures. If only it were so simple!

Long before cuts were mooted graduates were coming out with degrees but no jobs to go to. There’s a limit to the number of jobs available to graduates so there’s no point having loads of well-qualified people with nowhere to work. Then there’s the ‘stupid’ degrees like David Beckham studies (Staffordshire University, UK), that’s pretty useful in the world of work! Then, of course, despite all that expensive education they STILL can’t spell for shit…

Then there’s all the cannon-fodder that used to get mopped up by manual labouring jobs and the armed forces, but are now languishing on benefits because the armed forces are cutting back and immigrants take all the labouring jobs. It pays less than benefits anyway! Point is, there’s little or no social mobility any more so people see no chance of improving their lot – not that there’s a simple answer as far as I can see.

Politicians need to not only listen more, they need to DO more. Do more with the ideas they get from the electorate instead of fobbing people off as though they were mindless simpletons. Yes, Theresa May, we know you believe in policing by consent. Well, ask the people in the affected areas of London what they think about the riots and you’ll get your consent – to send in the Police with water-cannon, CS gas etc. and give the rioters a bloody good hiding.

While the Police do their job politicians should consider this. Politicians made the country what it is, engineered a situation where it was possible for a mob of mindless thugs to cripple whole swathes of a city, loot, maim and kill with impunity. Longer term, politicians should be thinking of ways to atone for previous mistakes.