Should I reduce my pension payments?

Ms. Chanandler Bong

Hi all,
I have a meeting with a pensions advisor on Wednesday to discuss my current plan.
Having received my latest annual statement, my plan is currently worth less than I've paid into it, like pretty much every other pension in the country :rolleyes: I'm not due to draw it for quite a long time (hopefully!) though & am wondering about reducing my payments into it for a while. It seems to be monumentally stupid to throw away good money after bad, especially with the lovely new Universal Social Charge taking effect!
Obviously the advisor is going to try & talk me out of doing this though as the banks quite like having money:p So is this a good idea? Or should I continue as I am, paying in what I am currently paying in?
Cheers for any advice!:)

coylemj

I'm guessing that you're female based on your boards name in which case if that is your only pension i.e. you're not a member of a company pension scheme then you are going to need as much money as you can afford in your pension pot when you retire. For starters you will not get the State old age pension until you are 68 if you were born after 1960 and as a woman you have a longer life expectancy than a man of the same age so when you retire and go to buy an annuity you will get less than a man, hence you need to stuff as much money as you can afford into the fund.

I realise that investments have done sh1te in the past couple of years but remember that a pension is a long term investment, it would be a huge mistake to reduce your payments just because of a bad couple of years, think long term and put as much as you can afford into the pot.

Jim2007

The first thing to remember is that a pension fund is a long term project. That means that fund managers will take on risk to achieve better returns because time is on their side, so that they can indeed recover from a bad period in the market, as has just happened!

Accordingly I would not reduce my pension contributions if I were you. However I would take great care to ensure that the pension fund I was investing in, is well managed and appropriate for my station in life. That means properly diversified, asset allocations are appropriate for my age level and management fees are reasonable.

Good luck with that,

Jim.

broker2008

+1 to keep it going. Look at it this way. If you had that meeting 3 years ago and the adviser told you that the value of your fund was worth double what you had put in, would you have reduced or ceased payments then ? You might have even increased payments or bought some bank shares....bang.

You are buying units cheap or cheaper now. Ideally your fund will do badly until the year before you are due to retire and then the fund does a facebook........

Keep paying.

Kennie1

Totally agree with above posts, but here is something worth considering. A lot of pension advisors applied their own appetite for risk rather than their clients when chosing pension funds. What a lot of people dont seem to understand is "risk v reward" What I mean by this is what kind of returns you want from your pension fund, while the last 10 year returns for managed funds have been very poor to say the least the longer term returns have been quite good overall compared to low risk pension funds, but to me this is not a problem as long as you the client know this and are prepared to take the lower returns or the higher level of volitility for a potencial higher level of return.

What I would suggest is that you sit down with your pension advisor and ask the question "what fund will give me the optium level of return for the risk that I am willing to take" Now what you need to understand also is that by taking on a certain level of risk what ever that maybe is, that the higher the level of risk that you take the higher the chance of you loseing and gaining money throughout the lifecycle of the pension. You would also need to ask the advisor is there a provision in the pension to automaticly switch money out of risky assets in to more secure assets as you draw closer to your retirement date. If there is not tell him/her that you want to transfer your pension fund into a new pension that has this facility.

Ms. Chanandler Bong

Thanks for the advice guys (I'm assuming you're all guys:)) While I'm not a complete out-and-out risk-taker, neither am I completely cautious which is why I'm asking for advice. The pension I have is a medium risk plan which suits the level of risk-taking my nature possesses:D It does have the facility to switch to a low-risk plan closer to my retirement already included since that seemed like a really good idea ie protect what I've got at that stage. It also automatically increases my payments in line with inflation (this has just kicked in for this year, hence the review).
So I'll stick with it then! Thanks lads, ye've been a big help:D