The State pension – how the low paid can end up subsidising the well-off
If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck; that is of course unless we are talking about the state pension.
Despite the fact many of us consider it part of our overall pensions saving plan and that we all contribute to it, the state pension is a blunt instrument that has no means of adapting to the varying circumstances of the individual.
Unlike other pension types, there is no flexibility to drawer earlier rather than later and there is no increase in benefits for those with a short life expectancy. The net effect of this is that those in some of the poorest places in the UK can end up subsidising those in the most well off.For example, the residents of Calton in Glasgow have good reason to feel hard done by. In this deprived inner city area, average male life expectancy is just 54 years and many won’t receive anything from the state pension they are entitled to at all.
Compare this to male life expectancy of 82.4 years (at age 65) for the well heeled gents of Kensington & Chelsea and we start to see that the benefits of the state pension are far from progressive.
What’s more, the gap between the highest and lowest life expectancy in the UK is increasing, according to Andrew Gaches of Club Vita, an organisation which monitors UK lifespans.
If that were not bad enough, the coalition government has mooted raising the state pension age for men from 65 to 66 by 2016 and to continue raising it in line with growing life expectancy.
While that’s fine for the average 65 year old across the UK, who can expect to live another 17.4 years (for men) and 20 years (for women), average life expectancy figures clearly hide a huge range of life spans.
With life expectancy largely dictated by where you live, your wealth and former occupation, those on low incomes, former manual workers and those living in the north of the UK have a significantly shorter life expectancy than affluent, white collar, southerners.
To compound matters, the physical stresses and strains of manual work often mean that, on top of shortening a person’s life expectancy, it also reduces their working life so that they are less able to carry on working through to 65 or more, meaning they will face a gap between ceasing work and being able to claim the state pension.
So if the government decides to implement a higher state pension age, it must at least address the gap in life expectancy and link any increases to the lower end of the spectrum. Otherwise, an increasing number of the poorest people in society will die before receiving anything much for a lifetime’s worth of national insurance contributions, while subsidising the better off.
Pam Atherton is a freelance journalist
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I find it unbelievable, that some people still believe that their UK State Pension will be enough to fund their retirement, but this just isn’t true. Don’t kid yourself! Nowadays, nobody in the UK is able to live comfortably just from his or her State Pension. Indeed, pensioners may well be worse of in 2015 than they were in 1980.
Unless we accept severe cut backs in our living standards, in the near future, it’s our children and their children who will have to pay for our ballooning pension, health and elderly care system.
It is clear to me that the current welfare state as we know it will have to change dramatically, even disappear as we simply cannot afford it any longer.
As an individual you need to make sure that you are prepared for what’s heading your direction and that you are able to withstand the tumultuous times ahead of you if you want to retire in relative comfort.
People’s aspirations of a comfortable retirement has the potential to turn sour as longer periods of retirement leave a lasting and expensive burden on ever smaller future generations of workers.
The sad fact is that for most of us the idea of a fixed retirement age will be a fondly remembered quirk of a passed age. You will only be able to retire when you can afford to maintain a lifestyle that is acceptable to you. Which may well be substantially less than you are used to.
Instead of suffering an abysmal old age people will need to take control of their retirement planning from the youngest possible age, and invest for a comfortable retirement.
Once you realise that the majority of your future wealth is created from investment income rather than savings or employment income, it makes sense to focus on investing for retirement rather than working more.
Stevene Dotsch
Editor
http://www.Early-Retirement-Investor.com
Be Happy: Retire Earlier and Richer!
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Hi Steve, as you rightly point out it will soon be completely impossible to live on the UK state pension, which is now the lowest in the civilized world. Also those who saved for their retirement rather than paying into any pension scheme, of which there are quite a few pensioners, are now being cheated by the government and BoE which is sequestering part of their savings through inflation and having the effrontery to also charge them income tax on their loss!
In addition, this article makes a comparison between particular areas where life expectancy is a higher or lower average and pronounces this to be unfair, since all have paid the same for their state pension; however, that is a completely untrue overall comparison, and smacks of Socialism! For a long time now the contribution for a state pension has been levied on the basis of income; if you earn more then you pay a much larger amount for an identical state pension. So many earning more are already getting a very bad deal from the present state pension, and as if that were not enough the agony is piled on by Brown’s absurd Pension Credit rip-off, with the additional associated benefits like Council Tax rebate, which further discriminate against those who have been provident and who have earned more and paid more! Then anyone who has a currently maturing pension and has to convert it to an annuity at current rates will be ripped off. So your claim that “it makes sense to focus on investing for retirement” has no substance, except to keep people like you employed in continuing to rip-off future pensioners!
All UK pension schemes are a rip-off at present and part of the current political rape of pensioners to enable the payment of fat bonuses to bankers. Until people see any change in this direction then less and less will see “investing” in a future supposed pension as worthwhile. The problem is that there is no guaranteed yield in real terms; that gives all the rip-off merchants, including the government, carte blanche to make deceptive and misleading claims about the future and a likely future supposed pension!
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Hi Damiel
Whilst most of your comments are ‘sort-off’ interesting, I have to take issue with your view that “investing for ones retirement has no substance” and that you imply that I am a ‘rip-off’ artist employed by the pension industry.
First of all I am not employed by the pension industry in any way. Never have been. If you would have read my personal write-up at the website mentioned you would have seen where I am coming from and what my long-term investment and retirement views and strategy are.
Further, I regard your view that “investing for ones retirement has no substance” as a fallacy. At the very least, I would say, that it all depends which retirement vehicle one uses in order to maximise ones retirement ‘pot’ and what type of investments one would consider.
For instance, investing in dividend paying companies via an ISA, re-investing ones dividends over and over again is certainly not a rip-off. It’s a possible way to an early retirement, as long as one starts early enough!
Once one decide to retire one has the freedom of taking out any income from ones ISA retirement portfolio tax free. Or keep it invested in order for the re-investment of dividends to continue.
I suggest you have a read at the website.
Steven Dotsch
Editor
http://www.early-retirement-investor.com
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Hi Steve,
I did not mean to imply as you claim that you are a rip-off artist employed by the pension industry, nor did I state any such thing, so I cannot understand why you have concluded that, unless it is by Freudian association. Nor did I suggest that you were employed by the pension industry at all. My comment was directed in part to your earlier comment and in part to the article on which you had commented. I stand by my criticism that the pension industry today has become generally a rip-off, unable to deliver. In that I am not alone, and many prominent advisers such as Dr. Ros Altmann have made the same points.
It seems that your approach is based upon investment in equities, albeit via ISAs, and it seems that you are attempting to use this web site to direct traffic to your web site and thus increase your commission. This I believe is somewhat questionable and normally is prohibited on sites like this representing a neutral organisation without commercial interests. My advice would be that if anyone looks at the overall performance of equities over the last 25 years these have in general lost real value against real inflation. It is a common myth that equities have retained value against real inflation. There is no effective way now, nor has there been in reality for some long while, for anyone to provide for and protect their retirement scenario on the basis of a guaranteed yield against inflation, except government and taxpayer funded golden inflation linked Public pensions. Starting earlier just makes the problem worse if you look at reality. You just loose more real value. Madoff appeared for a while to have found a way to deliver what we all need and fooled many, but eventually he was exposed for the trickster which he was.
The only way to have a decent retirement now is to be extremely wealthy, so that although you too will loose a great deal of your wealth due to inflation, you will still have enough left after that large loss as you grow older to live comfortably. Nothing will offset the ravages of real inflation, particularly the inflation which is coming. The real problem is that most people actually believe the government’s fake numbers for inflation, and are fooled into believing that if they can offset this understated official inflation they will preserve their standard of living!
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Damiel,
I have read through Steve’s website a couple of days ago and he is not an IFA and does not make specific recommendations for stocks.
Your own advice that there is not, and has not been any way to provide for and protect one’s retirement pot apart from the old chestnut – government/public sector pensions. I don’t have one of those because it was my choice not to work in that career so good luck to those who have a nice index-linked pension to help them through retirement.
Cash savings (unless lots of it) won’t get the average or low paid earner there either. The only thing left has to be investments along with some cash savings so that you can draw out cash for a couple of years whilst the markets experience their corrections/crashes.
Buy and hold investing I agree has taken a hit in last 11 years but I do give myself about 30 minutes a day away from the Television etc to read financial articles and sites. I missed 2 crashes (2000 & 2008) through just trying to be financially aware, let’s face it there were enough warnings about the dot-com boom having to end and the credit crunch affect on NR along with the
high valuations of shares in late 2007.
A bull or bear market cannot go on forever, nor can anyone time the market highs and lows perfectly but it is possible if you have control of your investments to take a profit if the general concensus is that the markets are due a correction.
I can see Steve’s investment strategy as being a decent one for those who cannot or do not want to spend time checking for news on their funds or shares as the high yielders tend not to suffer as bad as growth funds for instance during a correction.
When there has been a decent size correction in share prices then it can be a good time to put away more money into funds/shares, I make regular contributions anyway but also increase these during the dips.
Don’t get me wrong, I am a keen saver or have been when getting the rates of 6% or more, but to beat inflation and to make a retirement pot a decent size one has to take some form of higher risk with their money whether it is directed to shares, property, collectibles, precious metals, fine wines or others. They all have their own individual cycles and there is cash also for times when we need to be out of the relevant investment.
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Hi Peter,
If that is your way to provide for your retirement and you are happy with it then great. I was not intending to criticize that as a way of saving for retirement if anyone is content with it.
I was simply addressing the common deceit used to steer people in that direction on the basis that it will preserve such provision against inflation. If you look at the facts over the last 25 years equities in general have not given that preservation. Indeed some analysts have shown that in general over that period equities have not performed better than cash savings against inflation, and in the near future there is likely to be a further stock market crash. Granted that if you are lucky, or if you have a magic crystal ball, or a Tardis to enable you to see or travel into the future, you could happen to select particular stocks which could out-perform the norm. Of course in retrospect you can always pick out particular examples which perform way above average, and any that choose those can be extremely fortunate. However, that is what risk is all about. Some win; some lose more. It is easy to be wise after an event.
The real problem thus is that even professionals cannot pick the stocks which are going to win. This is why pension schemes at present are doing so badly, and why Final Salary schemes have almost all now been discontinued. It just is not possible to invest in anything which will give a guaranteed yield against inflation and can be relied upon to provide a particular level of income at the same real value for a complete retirement period, particularly with increasing longevity. Various experts have made statements recently showing this fact. Added to that, present annuity yields obliterate any favourable profits from previous pension pot yields.
So I repeat my conclusion that the only two ways of ensuring a comfortable retirement now are either to be extremely rich, so that the ravages of inflation can be borne with little suffering being felt, or to have a Golden Public inflation-linked pension. If you have £billions then to lose a few millions over the period after your retirement is not going to make any appreciable difference to your lifestyle. If you can amass a sufficient fortune in equities then look forward to a great retirement. For most of us though that is just a pipe-dream. At my age I want to minimize risk, since I am unlikely to have that many more years left to live. My main concern now is what I will have left in real terms to leave to my family, and inflation in that respect is a real worry. In general equities would be likely to give me less protection against inflation than gold.
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Damiel, perhaps the sentence that caused Steven to think you implied he was “a ‘rip-off’ artist employed by the pension industry” was this one:
“So your claim that “it makes sense to focus on investing for retirement” has no substance, except to keep people like you employed in continuing to rip-off future pensioners!”
You’ve obviously not read Steve’s site or put much effort into providing for your own retirement. He does not take commission from the site except maybe some Amazon adverts for investment books. On the homepage he states “Whilst I am NOT providing any financial or investment advice…” which is not the sort of thing a financial advisor would do if they were trying to drum up business. What he’s done is present a valid method of investing for retirement to a forum which is concerned with investing for retirement. For that you should thank him, not criticise him.
If you’d read the site and taken an interest in financial matters rather than assuming investing is worthless or it’s all a con then you might know that high yield investing can work but, like most things, does not provide a guarantee. Stephen Bland on the Motley Fool site began a HYP strategy in 2000 and the results are public. You can see it on the link below – look for “HYP1 — created 13 November 2000″ and note that this has not been actively managed for the whole period – it’s just an example portfolio (though managing a portfolio of this type actually takes very little effort – far less than managing a Fantasy Football team)
http://www.fool.co.uk/Investing/guides/The-High-Yield-Portfolio.aspx
As you can see, the income has not necessarily kept up with inflation but there would have been the opportunity to draw on capital if necessary. Having said that, I’d suggest anyone taking the High Yield approach would need to be able to generate surplus income before they can fully retire. However, with this approach it is possible to semi-retire before the age of 65 and later on to pass the capital on to children.
If everyone had Steven’s attitude towards investing then there would not be a general pensions crisis. Your attitude stinks and the fact that you got more “likes” than Steven doesn’t say much for the people who visit this site. If you know there can be no guarantee of investments beating inflation then what attracted you to this site, which grew out of the anger at interest rates paid by banks being below inflaton?
Gold does not protect against inflation except over very long time spans. It is mostly a protection against crises.
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Mr Quadly Rupple, you are of course entitled to your opinion, even it is not rational. That also means that I am entitled to mine, even if you do not think so. However I must object to certain statements you make which verge on the defamatory.
“You’ve obviously not read Steve’s site or put much effort into providing for your own retirement.” You do not seem to understand what the word “obviously” actually means. You clearly are not a rational person since you have no evidence for your conclusions here. For something to be obvious there must be evidence to immediately show that. In fact I have read the stuff on that site contrary to your childlike conclusions, and I have actually made much above average provision for my retirement, and I shall not have my quality of life diminished significantly for the rest of my retirement. You are thus wrong on all counts so far. If you had actually read what I posted you would not have made such ridiculous statements based on imagination.
It is clear that income is made from the site you refer to, and some “products” are offered for sale. “For that you should thank him, not criticise him.” That may be your opinion, but it does not have to be everyone else’s, just because you say so?
“If you’d read the site and taken an interest in financial matters rather than assuming investing is worthless or it’s all a con then you might know that high yield investing can work but, like most things, does not provide a guarantee.” That is precisely what I implied. You have not bothered tro read the detail but have glibly made assumptions based on your own views. The fact that you admit that it is a casino-like activity supports what I implied. With a crystal ball you can guarantee success. Without it you are looking at a lottery. I would point out that I worked in Banks and Financial Institutions in the City of London, Tokyo, New York, Franfurt, Zurich etc. for many years; so I have contrary to your opinion “taken an interest.” in fact a detailed professional interest in “financial matters” for a long while. There go your wrong opinions again.
“As you can see, the income has not necessarily kept up with inflation…” Well now! Perhaps you are unwittingly supporting my points?
“If everyone had Steven’s attitude towards investing then there would not be a general pensions crisis.” That may be your opinion, but none of the Pensions experts agree with you, and the proof of the pudding is in the eating. Why have most final salary Pension schemes now disappeared? It is because unless you have access to the insider City dealing data or a crystal ball it is impossible to ensure an adequate yield from the investments which you are advocating.
“Your attitude stinks…” Well thank you. I will not stoop to inform you what I think of yours!
“…the fact that you got more “likes” than Steven doesn’t say much for the people who visit this site.” That sounds like a gripe from someone who is the only one in the world who believes themselves to be right. It is childlike and most ill-informed. Grow-up!
“If you know there can be no guarantee of investments beating inflation then what attracted you to this site, which grew out of the anger at interest rates paid by banks being below inflaton?” I did not say that there can be no guarantee of investments beating inflation. I stated the only options which are the most likely ones to do so at present. Again you do not read or comprehend adequately. You clearly think yourself to be the fount of all knowledge, and your opinion (you believe) is the only one which counts” I don’t believe
“…what attracted you to this site…” Nothing actually attracted me to this site. I came to this site and joined in the discussions because I felt that SOS might be able to accomplish a change of BoE and government policy with regard to a savings culture in the UK. I now think it unlikely that they will be successful in achieving that, since there is no positive action being organised.
Who said that this site “grew out of anger at interest rates paid by banks being below inflation”? I think it unlikely that the proponents of SOS would agree with you about that? I think there is great anger in the UK against the continued government policy of debaching the currency to inflate away debt, contrary to the written opinions of Keynes, and then pretending that it is Keynesianism, but that is a different issue.
“Gold does not protect against inflation except over very long time spans…” There you go again with the “it is only my opinion which counts” stance. That may be your opinion, but most experts do not agree with you. Why do you think the price of gold is rising continuously at present? Perhaps you have not noticed?
As I included in my reply to Peter, “If that is your way to provide for your retirement and you are happy with it then great. I was not intending to criticize that as a way of saving for retirement if anyone is content with it. I was simply addressing the common deceit used to steer people in that direction on the basis that it will preserve such provision against inflation. If you look at the facts over the last 25 years equities in general have not given that preservation. Indeed some analysts have shown that in general over that period equities have not performed better than cash savings against inflation, and in the near future there is likely to be a further stock market crash.”
So similarly in your case. If you are happy with that approach I would not criticise your decision. What I do and did criticise is those who propagate deceit to encourage others to follow that route, when all the real evidence is clearly the opposite to their claims, so that can make income out this scam, by deluding others into believing that it will guarantee a comfortable retirement income. Many have been caught in this trap, and they are now pretty angry. Fortunately I have not. I have an extremely comfortable retirement ensured, but inflation is a worry, in terms of what I can leave for my children. However, inflation is now a serious worry for anyone with a brain in the UK, whether they invest heavily in equities or not.
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If it’s your intention to make people feel unwelcome here then you’re doing a great job. In discouraging people from participating, do you think you’re helping the campaign?”You are thus wrong on all counts so far” Well I think I got it spot on about why Steven thought you claimed he was a rip off artist for the pensions industry. What was it you told him? ” I cannot understand why you have concluded that, unless it is by Freudian association.” And you repeat that same childish tone with me! He concluded what he did because that’s what you told him, not because of a psychological flaw! It’s no surprise that Steven decided not to come back and re-explain the situation to you and the forum. I hope others can see that he was only here to help.When I used the word “obviously” I was assuming you had the capacity to understand that his site was not the commission-based site of a pensions industry insider. I can see that crediting you with that was obviously wrong and that I should have used the word “apparently”. Sorry for that. In my defence though, I should point out you claimed that to “focus on investing for retirement” would “keep people like [Steven] employed in continuing to rip-off future pensioners.” But after reading Steven’s website you knew that he is not employed in that industry. Furthermore, following Steven’s advice of investing in high-yield shares in ISAs, which you had read in his website, would mean that none of your money went anywhere near a fund or pension manager to be syphoned off. So perhaps you can see where the confusion came from. As you could see from reading his website, Steven has no opportunity there to rip off future pensioners. So the opinions which you formed upon reading his site were obviously irrational and I can tell you it was that which led me to make my small mistake.Gold has not kept pace with inflation for the last decade, it has surpassed it. It had not kept pace with inflation for the previous two decades either, it lagged it. So you and the “experts” are demonstrably wrong, though to be fair to experts, I know of plenty who understand gold’s purpose. It’s odd that you’d ask my opinion on gold after being so unappreciative, but here goes: I think the price of gold has been rising because of the increasing appreciation of the risk of systemic failure and the lack of suitable safe havens at a reasonable price (and some of the rise would have been due to momentum investors).It is not because I am “someone who is the only one in the world who believes themselves to be right” that I commented on the number of “likes,” it is because Steven offers a message of hope whereas yours is one of futility. Steven’s attitude should be the better appreciated on this site and you should thank him for informing the forum of his site and giving hope to the hopeless. So it’s worrying that it is you, with your belief that there is no substance to the claim “it makes sense to focus on investing for retirement” who is the more popular.Please note, it is my opinion that I should not have to make it clear that I have stated opinions in the preceding paragraph. I don’t need people to point out to me what is my opinion and what is not (in case you’re confused that last one was a fact). I expect people to work out for themselves what are only opinions and to accept my right to express them, not go all whiny. I think you’ll find a lot of people feel the same way.You are either wrong, naive or petty throughout your reply. You’ve written a lot of nonsense and you appear to need a lot of explaining before you understand. I’m a very charitable soul but I just don’t have the time to help you through your confusion and I don’t believe you care to be told all the details anyway. Suffice to say, “you clearly think yourself to be the fount of all knowledge, and your opinion (you believe) is the only one which counts”.
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Mr. Quadly Rupple,
It is clear that you are determined to expose yourself. Even the name you have chosen to comment here would seem to most people to label you for what you clearly are.
Since you evidently do not have an ounce of rationality or good manners, and since you have thus already pronounced me to be (in your opinion) “a stinker”, I shall not reply further to any more of the nonsense you may choose to post hereon.
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Mr. Quadly Rupple (whatever that is supposed to mean), it seems you are attempting to lower the tone of the comments on this site! Why are you using the language which you do and going out of your way to be offensive and abusive to other savers commenting here?
If you are complaining that you do not feel welcomed here it may have something to do with your attempts to insult others and being so arrogant?
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My word! the Voices of Middle England have spoken. For shame! instead of bickering why not take the best ideas of both sides of the story and forge something positive, such as a solution to the problems of individuals not saving enough, the govermnent unable to bail people out and not having enough to live on in retirement.
We had a similar experience in Mermedonia a few years back. In the early part of the 19th Century, we had a massive power cut that lasted for 40 years. This resulted in a huge shoal of Merpeople being born – the highest for centuries – and, of course, 200 years later they’re all coming up for retirement.
Working past 185 is not an option for many, as by now their fins require too much medical treatment and long-term care, as we know, is a hidden cost of retirement that many individuals and the goverment of the UK are not clear enough about.
Meanwhile the industry itself is proud of its high-cost protection packages but of course neither the State nor the average individual can afford to take out this sort of protection, let alone survive on their pensions – just as in Mermedonia.
So what did the Kingdom do? Simply this. Instead of encouraging Instant Gratification – allowing loan sharks to circle the waters with ever-enticing offers of buy now, pay later and hidden interest rate hikes – we banned such pernicious creatures from our media.
Instead, we spoke about delayed gratification – the need to put away those sand dollars now in order to enjoy life to the fullest after retirement.
Instead of making pensions boring, we spoke to individuals about what they wanted out of life, and helped them to see the financial reality of what they needed to do now in order to benefit later and to fulfil their dreams.
A pipe dream you may say. A mere fantasy. Maybe not. Sun Life of Canada has just launched its Sense Check at 60 – one of the most erudite and based-on-reality pieces of research that even those with basic fiscal literacy can understand.
If the government can encourage people to save more and to explain why in words and language that they can understand, and offer better tax incentives for savers, then we won’t need all these clever products. People will be saving for a purpose and will be rewarded for doing so.
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My word! the Voices of Middle England have spoken. For shame! instead of bickering why not take the best ideas of both sides of the story and forge something positive, such as a solution to the problems of individuals not saving enough, the govermnent unable to bail people out and not having enough to live on in retirement.
We had a similar experience in Mermedonia a few years back. In the early part of the 19th Century, we had a massive power cut that lasted for 40 years. This resulted in a huge shoal of Merpeople being born – the highest for centuries – and, of course, 200 years later they’re all coming up for retirement.
Working past 185 is not an option for many, as by now their fins require too much medical treatment and long-term care, as we know, is a hidden cost of retirement that many individuals and the goverment of the UK are not clear enough about.
Meanwhile the industry itself is proud of its high-cost protection packages but of course neither the State nor the average individual can afford to take out this sort of protection, let alone survive on their pensions – just as in Mermedonia.
So what did the Kingdom do? Simply this. Instead of encouraging Instant Gratification – allowing loan sharks to circle the waters with ever-enticing offers of buy now, pay later and hidden interest rate hikes – we banned such pernicious creatures from our media.
Instead, we spoke about delayed gratification – the need to put away those sand dollars now in order to enjoy life to the fullest after retirement.
Instead of making pensions boring, we spoke to individuals about what they wanted out of life, and helped them to see the financial reality of what they needed to do now in order to benefit later and to fulfil their dreams.
A pipe dream you may say. A mere fantasy. Maybe not. Sun Life of Canada has just launched its Sense Check at 60 – one of the most erudite and based-on-reality pieces of research that even those with basic fiscal literacy can understand.
If the government can encourage people to save more and to explain why in words and language that they can understand, and offer better tax incentives for savers, then we won’t need all these clever products. People will be saving for a purpose and will be rewarded for doing so.
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Take a look at all the comments. The tone was lowered by Damiel Giles’ first post and further lowered with his subsequent posts. Perhaps you think it’s OK falsely to claim that someone rips off future pensioners, and later to pretend that they never made such a claim? I have higher standards than that. Will you be impartial and reprimand him for this abuse/offense?
Steven and Peter both tried to correct him but he dismissed them in a truly pompous manner. He thinks that equities don’t protect against inflation over the long term (and used 25 years as an example) and that gold does. So a chart of the Dow Jones priced in gold should show a general downward trend and 2010 should be below 1985. Even if you ignore reinvested dividends, which make up a big chunk of total returns, that is not the case:
http://home.earthlink.net/~intelligentbear/com-dow-au.htm
As an example, and according to SeekingAlpha, dividends made up 28% of total returns from August 1989 to September 2008 in the S&P BMI World Index. Even ignoring this, you’d have lost about half your wealth by sitting in gold over this period compared with a Dow Jones index tracker. Why is it wrong to point out that someone is misinforming people, or why does it lower the tone to do so? Is pointing out someone’s mistake the same as denying them the right to make that mistake, which Damiel weirdly claimed I had done? It is irrational claims like that which lower the tone, not a fact-based discussion. Saying his attitude stinks wasn’t clever, but just look at the tone he used, what he said, how far removed it is from fact and how detrimental following his advice would be for other savers. It does stink, and it made me angry. If you care about savers why are you not joining me in condemnation of his attitude towards pension saving (ie. that it is pointless), which has been shown to be wrong and is bad advice for savers?
The delusion that investing for a pension is pointless and that the method Steven offered is invalid is important to clear up, but I had written so comprehensively about the defamation of Steven’s character and other matters that it would have looked vindictive to continue in that post. It’s actually a simple investment strategy and should be intuitive to most people from reading Steven’s site and the Motley Fool article I linked to (and the many related articles on Motley Fool). In case it’s not obvious, Steven’s method solves the problems of the current pension system in the following ways:
-It allows people to retire (both partially and fully) when they want, not when the government lets them
-The income does not depend on manipulated annuity rates so won’t take a permanent hit just before retirement
-The potential income (and its variance and growth) is known to the investor throughout their investing period so they know how much they need to save before they can retire, and what they might be able to have in retirement
-There are no management or fund charges
-It encourages people to take an interest in their pension rather than it being opaque and something of a mystery
-The wealth can be passed on to future generations
There are some tax advantages to the “official” pensions system, such as employer contributions being made outside taxable income. If SOS could campaign for employers to be able to pay these into ISA accounts, or allow pension investors access to their funds before a government-determined retirement age, that would be a Good Thing. Trying to hound informed commenters off the site in favour of misinformation and a sense of powerlessness is not.
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What I clearly am is someone with the facts on his side and optimism in his heart. You clearly are not.
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