Sharp: Closing a door [LWN.net]

Sharp: Closing a door

Posted Oct 6, 2015 20:55 UTC (Tue) by Wol (subscriber, #4433)
In reply to: Sharp: Closing a door by pizza
Parent article: Sharp: Closing a door

> > And I suppose I cannot cooperate with you if I do not agree on these "mandatory mutual benefits" terms?

> "mutually beneficial arrangements" are the basis of all human interactions.

The problem I think the OP has (and I do too) is these "mandatory mutual benefits". What if, TO ME, they are an ANTI-benefit. That's why I have a IB problem with that word "mandatory".

Classic example - I have just been enrolled in one of the new "mandatory workplace pension"s dreamed up by our government. Where I pay in 2% of my income, and my company has to pay in another 1%. And where it's probably extremely easy for the pension provider to cream off several hundred percent of the interest in charges, transaction fees, rigged deals, etc etc. Where's the "mutual benefit" for me in contributing? I'd probably do a much better job if I was allowed to invest in my own scheme. Except there are cozy backhanders between the politicians and bankers so my savings can be ravaged by the bankers for use as political contributions ...

I find far too often that when marketers tout the "benefits" of their latest products, my reaction is "but they'll leave ME worse off!"

Cheers,
Wol

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workplace pension scheme

Posted Oct 6, 2015 23:38 UTC (Tue) by tialaramex (subscriber, #21167) [Link] (2 responses)

The scheme isn't mandatory, it's just set up as "opt out" rather than "opt in". If you're the sort of person who actually makes a choice, nothing has changed. If you're the sort of person who just lets things happen to them, vaguely meaning to do something about it "later" and that later never comes, now you get a workplace pension whereas before when you retired you'd have nothing.

The pension provider is regulated, so no, it's not "extremely easy" for them to "cream off several hundred percent of the interest" as their regulator would fine them far more than they could expect to make with such shenanigans. Most of these products are passively managed long term market investments, a mixture of government bonds, shareholdings and that sort of thing. For the passive management service the provider expects typically 0.5% (some older schemes will be 1%) of the total value annually. It would be quite striking if you managed to consistently (remember you need to keep this up for as much as 40 years) beat these numbers with your own "scheme" by enough to make up for losing the 50% boost from your employer for choosing an authorised scheme, but you are quite welcome to try.

The pension provider's product will typically also feature a lifestyle "curve" where as you approach retirement they gradually move funds from the passively managed medium risk investments to a very low risk investment with lower expected income. This reduces the risk that a market "crash" will suddenly wipe out your pension a few years before you retire with no chance to recoup the loss. Managing this yourself requires more discipline than most people can bring to bear. After all, many people doubtless thought in the weeks before the dotcom crash, these stocks just keep climbing, it would be foolish to get out now, wouldn't it ?

workplace pension scheme

Posted Oct 7, 2015 13:39 UTC (Wed) by Wol (subscriber, #4433) [Link] (1 responses)

I really don't trust them - there's far too much evidence of frauds and fraudsters are far too inventive. All you need is a bonus scheme that's based on results, and someone will find some way of rigging it. As for the provider being fined, well that just makes matters worse - your manager has rigged the system, pocketed his bonuses, and left. Then the provider gets fined and, well, where's he going to get the money to pay the fine from? Chances are it WILL end up coming out of *your* pocket. Just look at all the money the mutual insurers paid out to policy holders in the wake of the endowment crash? Where did that money come from? The only place it *could* come from - the policyholders' deferred bonuses!

Problem is, you really need to start with a decent amount of money, because charges really do eat into your returns, but IFF you're prepared to put in a little bit of effort (and it really is only a little) you can make a lot of money fairly easily. Just remember Warren Buffet - "investing is a long term commitment" - day-trading will burn your profits in charges very easily. And only invest in *value* that you *understand*.

I'd look for shares at about the 40, or 110, 260 position in the FTSE that looked undervalued, buy them, and then sell them when they go above the 30, 100, or 250 position for a very nice profit.

Oh - and as for the dot-com crash? Apart from the bubble stocks (which you should have been riding as a gamble, not an investment), pretty much ALL the NYSE or FTSE stocks bounced back and in only a couple of months were higher than before the crash. The typical buy-and-hold investor didn't even make a year-on-year loss! It's only the day traders and johnny-come-latelies piling into stocks they didn't understand that got burned - oh, AND the trackers, who were heavily invested in bubble stocks because they dominated the indices ...

Cheers,
Wol

workplace pension scheme

Posted Oct 7, 2015 20:12 UTC (Wed) by tialaramex (subscriber, #21167) [Link]

Well you seem to have some idea of how you'd do it, knock yourself out. As I said, the system isn't mandatory (for you, it's mandatory for your employer to offer it) so you can opt out and do things your way, go buy those arbitrary shares picked from FTSE and spend your evenings scouring the listings for changes, you can probably even write a bit of Perl to make the buy/ sell decisions and just perform the execution manually.