Trusting people to invest your money

[Dave A]

Bruce Cameron talks about the risks associated with hedge funds in this article.

For me the issues it raises goes beyond just hedge funds. It challenges faith in the entire investment industry itself. And particularly the notion of a statutory pension scheme providing for the nation's retirement.

I can't help thinking what it will do is provide wealth to a handful of individuals long before you and I will ever derive any benefit from it.

For starters, look at the admin costs whittling away at the return.

Any performance is undermined by the excessively high cost structures, which are normally two percent of assets plus 20 percent of returns each year.

As the asset value climbs, you're getting an ever diminishing return. You could even reach the point where your contribution is the same as the admin fee!

It all seems so... inefficient and risky.

[wynn]

Having worked for a number of companies over the years I often wondered why they get to choose the pension investment company and when you resign they pay you back your contributions plus minimum interest.
Wouldn't it be better if you chose your pension company and when you resigned from the company they would be repaid their contributions saving you the loss of other benefits and you avoided the tax implications.
After all who is the pension for in the long run?

[Dave A]

Wouldn't it be better if you chose your pension company and when you resigned from the company they would be repaid their contributions...

I believe with current practice, the company contribution portion belongs to the staffer at withdrawal, not the company.

One of the original incentives for a company to have a pension fund in place was to promote company loyalty - the reward for the employee being the big prize at the end. That incentive for the company no longer exists.

Come to think about it, what is the incentive for a company to put a pension fund in place nowadays?

[Dave A]

The survey findings indicate that for the fourth consecutive quarter, investment managers have reported contracting fund flows.

Large and small fund managers alike are losing funds, as investors withdraw funds in uncertain times.
from Business Report here

Surely that's more than the credit crunch talking if that's been the trend for a year already?

[Graeme]

The answer really is to make your own pension arrangements, or at the very least to have your own as well as the pension fund. Takes some discipline, but wow, it pays in the end.

[Dave A]

Interesting story from down under.

Australia, long regarded as a model for global pensions reform, has some explaining to do after the markets meltdown, and not just to its own citizens.

Having forced Australians over the past two decades to trust in markets to provide for their old age -- and tempted other nations to go down the same path -- it is watching horrified as a big chunk of its retirement savings go up in smoke.

Last year's plunge in financial markets has wiped out about a quarter of Australia's $1-trillion in pension-fund savings in real terms, according to OECD data, a figure surpassed only by the vastly bigger economies of the United States and Britain.

Australian pension funds lost about $200-billion in the first 10 months of 2008, compared with $300-billion for the UK and a staggering US loss of $2.2-trillion, the data showed. Over 10 years, Australian data still shows positive returns but even local industry figures point to the worst decade in 30 years.

As a result, Australians who never dreamt of queuing up for a state pension are now doing just that, feeding a crisis of confidence in a pension model that has served as a trail-blazer for other nations around the world, from Asia to Europe.
full story from M&G here

Apart from showing that there is no such creature as a sure thing, what burns me is this...

Fund managers are still going to get their slice of assets under management and their slice of contributions made.

[Dave A]

Save so that you can pay!

This is the kind of article that gets me going. There is all this wonderful advice about coping with a budget, and then guess what -

Why you need to plough a fortune into managed retirement funding!

See what you think of this one: http://mg.co.za/article/2009-02-03-b...-new-buzz-word