Pension ponderings
Ian's Rural Ramblings
Back in the late 1980s and during another recession I was forced to seek another income stream when my construction self employment hours fell off a cliff. As I had over five years in banking under my belt I applied for and was accepted to train for life insurance and pension consultancy with a major Canadian company. I would be paid part-time for training and then set loose, preferably, according to the company, to sell plans to my friends and family.
As the training got under way I quickly became uncomfortable with the company ethos. Basically, sell, sell, sell to get those commissions and I believe that was not just the Canadian company that was doing this. Maybe it was my pr e-journalism cynic chip kicking in but no matter how glossy the promotional material or the way the pitch was delivered I just couldn’t get how a customer could actually benefit from these schemes unless, to me, over optimistic returns were hit for most years. What was obvious to me too was that the company management and a good deal of the sales people not only knew this but didn’t particularly care as long as the commissions and charges came in. I didn’t stay with the company long and I openly admit now that I deliberately never sold a single policy.
That was 30 odd years ago and over time the worms have come out.The company that I worked for and many others got mi red in mis-selling scandals There have been and will be other instances I’m sure. I also think that worldwide pension black holes are a disaster waiting to happen. I’m not tarring all companies or schemes with the same brush but I do think that low or even negative bond yields, the behaviour of some financial institutions and their employees, past and present, could cause big, big problems going forward. Safe investment returns are becoming increasingly low or even non existent. I don’t have a lot of faith in a lot of company pension schemes either.
I did have a small private pension with a large insurance company and remember when getting my statement one day I noticed that my balance had been rounded down to the nearest thousand I think it was. When I queried this I was told that my balance had been rounded down for administrative purposes. A lady cheerfully informed me that this not a charge but simply ,“smoothing .” I can’t recall what I said but I’m pretty sure it was pretty uncomplimentary about the company. I wondered at the time if one could go to prison for, “smoothing.” I also wondered how many millions of other suckers had their accounts smoothed.
I also recall my, now passed on, father-in-law’s words concerning the private pension he scrimped and saved for. “I wish I hadn’t bothered, ”he said. He had to take early retirement to look after my mother in-law who had MS. As a consequence, his pension payment, all of it, was deducted from his carer’s benefit.
Out of interest I looked on a major Canadian bank’ s website and used its annuity calculator. In order to get a $3,000 monthly payment, which is not a hello fa lot, I would have to deposit around $730,000. Over 25 years in employment that’s saving around $25,000 a year based on low returns. That’s more than a lot of people earn. Like that’ s going to happen.
I think that with an aging population some people may be OK in retirement but that an awful lot of others might become collateral damage when things go belly up. For myself. I’ m mortgage free right now so that’s a good start. Going forward I guess, unless I win the lottery, I’ m going to have to work until I drop