How to Start a Pension in the Face of Economic Armaggedon - The Bear and Badger

drumbeg

Thanks for the info. Will look into the fees. I pay into it from my own Ltd company, so I can change things up if I'm not happy.

edit : Just checked. My advisor (who I am going to sack off as he does fuck all) takes 0.5%. The platform fees themselves seem reasonable at around 0.3%. Product fee is 0.25% for a Vanguard fund. So by ditching the advisor I knock almost half off the fees!

SpaceGazelle

The shit is about to hit the fan. This happens every few years. Keep putting in regular payments as per.

My advice is to not look at the balance for a while, it'll only upset you. This is all a perfectly normal part of investing (you should've seen the banking crisis, that was a proper crisis) and don't let it unduly worry you.

RamSteelwood

I've not looked or followed anything, but is this also saying if you have money now is a good time to put it in?

SpaceGazelle

It's always a good time to put in but trying to time the markets will get you in trouble. It's all about the length of time you invest for, the best price, and largely ignoring global events. Covid was a bit of an exception because it was so easy to read.

Having said that I'd wait for things to settle down a little. The markets are going to drop on Monday but there's plenty of room to drop much further (if Russian gas is stopped who knows what's going to happen). Up to you.

b0r1s

Anyone nervous with their investments? Seen my first drop and wondering if we are looking at another market drop soon?

poprock

Probably a good time to throw some extra money in, if you have any to spare. ‘Buy low’ is about as basic as investing strategy gets, right?

GooberTheHat

It'll correct itself over the course of time. As long as you keep it in it'll recover, even if it takes a couple of years.

b0r1s

Yep. Just squeaky bum time. Will ride it out.

drumbeg

b0r1s wrote:

Anyone nervous with their investments? Seen my first drop and wondering if we are looking at another market drop soon?

No. To paraphrase Gazelle (and rip off a popular quote)...

"time in the market beats timing the market"

If I was close to retirement I would be spooked, but I have another 20+ years to go. I'm still investing monthly, only now I'm buying on the cheap compared to the last couple of years. If we have a recession and then things recover, then it's all looking good long term still.

For those who invest via a pension, every pound you put in is tax free anyway. As I see it, I've made money as soon as the £ hits my pension, before that cash is even invested; even if my investments drops a few %, I still see it as a profit due to the initial tax saving. I'm sure not everyone sees it this way mind.

Diluted Dante

b0r1s wrote:

Anyone nervous with their investments? Seen my first drop and wondering if we are looking at another market drop soon?

We might, but a lot of this is the effect of the Russian invasion. I'm hoping that's not still going on in 20 years.

Subbax

I'm at -6% but I had a long pause of adding funds unfortunately so I'll just keep it going now I'm back on track, of sorts.

SpaceGazelle

b0r1s wrote:

Yep. Just squeaky bum time. Will ride it out.

Stay on target, this happens all the time and you get used to it. You might even start putting a bit more in when this happens again, and you've seen a few rebounds.

You should've seen 2008, which was a proper apocalyptic end of capitalism disater until it wasn't. Some very rich, powerful and unpleasant people have your back on this because your interests are also theirs.

SpaceGazelle

Also, it may well drop substantially more. When you start hearing headlines like "the end of capitalism" and "will never be the same again" is when it's deffo time to stick a bit more in so keep some cash handy if you can, but not at the expense of the regular payments you're putting in. DO NOT START PUTTING IN LESS. Then you will be gambling proper, and you'll get into trouble.

b0r1s

Cheers SG. It’s already turned around in a week. Still not back up to what it was but way above any other saving account.

Funkstain

SpaceGazelle wrote:

Also, it may well drop substantially more. When you start hearing headlines like "the end of capitalism" and "will never be the same again" is when it's deffo time to stick a bit more in so keep some cash handy if you can, but not at the expense of the regular payments you're putting in. DO NOT START PUTTING IN LESS. Then you will be gambling proper, and you'll get into trouble.

Do you think there'll come a time when this...doesn't happen? When equity just stops growing over the long term? Or is there always more value to be extracted?

Diluted Dante

Come the revolution...

SpaceGazelle

b0r1s wrote:

Cheers SG. It’s already turned around in a week. Still not back up to what it was but way above any other saving account.

Remember the whole point of this is to 'set and forget'. We're not active investors and we put in just like any other regular savings plan, every month without fail. Whether the market goes up or down in a given year is not a concern because we're betting long, and long looks like this.

SpaceGazelle

Funkstain wrote:

Also, it may well drop substantially more. When you start hearing headlines like "the end of capitalism" and "will never be the same again" is when it's deffo time to stick a bit more in so keep some cash handy if you can, but not at the expense of the regular payments you're putting in. DO NOT START PUTTING IN LESS. Then you will be gambling proper, and you'll get into trouble.

Do you think there'll come a time when this...doesn't happen? When equity just stops growing over the long term? Or is there always more value to be extracted?

Population growth has to level off at some point but even then the stock market might follow a bitcoin-like growth in that it's worth what people are prepared to pay for investing in shares, even if the shares themselves don't reflect irl value anymore at that point.

Funkstain

That feels very speculative, but also a long way off. Carry on

SpaceGazelle

Well it obviously is speculative, but people are used to a cettain level of return and sometimes that propels itself. If crypto can can keep going then anything can, but we'll see where that heads.

A maybe more realistic guess would be backing individual companies, so gambling basically. At some point there'll be no playing it safe like we're doing here by betting on the global economy ever growing, but there's obvs going to be opportunity in new companies coming through. Then you really will need to know what you're doing or have the best algo, but i suspect it'll be down to luck. The lucky ones who bet on the winning horse will claim/think they know what they're doing just like they claim now.

It is a long way off though and it shouln't trouble us too much.

Funkstain

Yes I was thinking this. Trend betting (long term: renewable energy, water stuff, property/land, agritech; short term: fossil fuels, weapons, gold) possibly safer betting but still absolutely gambling, but inevitably global stocks will reach some kind of zero growth / stagnation state at which point “passive long term” will look less sure and fool proof

I’m absolutely still betting on that for now - pension is 100% tied up on passive investment diversified global equity - but not sure it’ll last even until my retirement

The big thing of course is regardless of current return on investment, pensions are still the best investment due to tax relief on contributions and zero tax on return - it’s the only investment with that sure fire 25% / 67% uplift depending on marginal income tax rate

drumbeg

Funkstain wrote:

I’m absolutely still betting on that for now - pension is 100% tied up on passive investment diversified global equity - but not sure it’ll last even until my retirement.

Same here. As I get older, I will alter the mix. 80% equity, then 60%, then 40%, until, at retirement age, it's pretty much all in bonds or whatever is safest. Currently at 100% equity and feel like I'm buying cheap at the moment. Further drops in the short term feel like opportunity to me.

Funkstain wrote:

The big thing of course is regardless of current return on investment, pensions are still the best investment due to tax relief on contributions and zero tax on return - it’s the only investment with that sure fire 25% / 67% uplift depending on marginal income tax rate

This is crucial and should be hammered home. If set-up right, you aren't just buying shares. The government is paying you back in the form of tax relief. Can't be understated. Every £1 that hit's my pension fund, I've paid less than half of that for.

SpaceGazelle

There's obvs a limit but everyone should be putting it through an ISA as per og post and maxing it out if you're putting that much in. On substantial growth that is a ridic tax break.

GooberTheHat

Funkstain wrote:

Yes I was thinking this. Trend betting (long term: renewable energy, water stuff, property/land, agritech; short term: fossil fuels, weapons, gold) possibly safer betting but still absolutely gambling, but inevitably global stocks will reach some kind of zero growth / stagnation state at which point “passive long term” will look less sure and fool proof

I’m absolutely still betting on that for now - pension is 100% tied up on passive investment diversified global equity - but not sure it’ll last even until my retirement

The big thing of course is regardless of current return on investment, pensions are still the best investment due to tax relief on contributions and zero tax on return - it’s the only investment with that sure fire 25% / 67% uplift depending on marginal income tax rate

You're forgetting about asteroids and mars. There is alway room for profit and growth, as long as there is someone and something to exploit.

SpaceGazelle

Yeah but it's still population dependent, and we're a long way off colonising space in a meaningful way. Musk is talking bollocks about Mars colonisation in the next decade or so. Aint gonna happen while we're alive.

drumbeg

SpaceGazelle wrote:

There's obvs a limit but everyone should be putting it through an ISA as per og post and maxing it out if you're putting that much in. On substantial growth that is a ridic tax break.

Pension is still the best method though right? It beats an ISA due to tax breaks?

Diluted Dante

SpaceGazelle wrote:

Yeah but it's still population dependent, and we're a long way off colonising space in a meaningful way. Musk is talking bollocks about Mars colonisation in the next decade or so. Aint gonna happen while we're alive.

Daddy Musk is never wrong.

SpaceGazelle

drumbeg wrote:

SpaceGazelle wrote:

There's obvs a limit but everyone should be putting it through an ISA as per og post and maxing it out if you're putting that much in. On substantial growth that is a ridic tax break.

Pension is still the best method though right? It beats an ISA due to tax breaks?

Can't you do both? I don't know so much about work pension schemes. If you're getting 2 to 1 then yes, that is better assuming capital gains tax stays at 20% or so, but if you can also stick that 2 to 1 gain in an ISA then that's obvs a bonus.

Funkstain

No. there's no tax relief at contribution point for ISAs, just pensions. You can open a SIPP effortlessly and can treat it exactly as an ISA (tax-free on investment return but with that added bonus of tax relief on contributions), but you do pay income tax on withdrawal (albeit with the option of an up-to 25% tax-free lump sum withdrawal from the age of 55, and the idea is that you don't need as much income in retirement so will pay overall less tax.

For those lucky enough to have 40% marginal rate of income tax, the benefits are enormous: you contribute £60, government adds in £40; you get tax free return on the £100 invested and compounded returns and dividends if any; then you can choose how to withdraw once you're 55 (ie: stay under the 40% tax threshold with your annual withdrawals and only pay 20% marginal rate).

So yes you can do both but you'd be better off hitting the annual pension contribution limit (£40K per year per person) before moving on to ISAs unless you need liquidity, which is a key point: ISAs you can empty out on a whim, pensions you need to wait until you're 55 and then pay income tax.

Funkstain

Of course the other massive benefit I didn't mention (because I can't take advantage of it) is that most workplaces have pension schemes where they will top-up more to your contributions: usually more than you put in yourself! So you'll put in say 5% and your employer will add 8%. Now only your contribution attracts the tax relief at marginal rate but that's still a jolly nice top-up

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