The Pension Challenge

Posted on 25th March 2015 by Trevor Reynolds in Uncategorized

A growing challenge for many nations is population ageing. As birth rates drop and life expectancy increases an ever-larger portion of the population is elderly. This leaves fewer workers for each retired person. In almost all developed countries this means that government and public sector pensions could collapse their economies unless pension systems are reformed or taxes are increased.

The Japanese Pension System is only available once you have paid into the system for 25 years, assuming they have your records!  Even so this is only for the basic subsistence level, if you could call it even that, as it is below poverty line income.

So what should one do?  As always DIY – there are many very easy ways to start savings.  One is to sign up for a portable pension plan. This will be a minimum of five years but is best aimed at your earliest foreseeable retirement age. This will normally be between 55 and 60. You also agree a monthly amount to put away. The more you put into the plan, the more there will be for your retirement. However, you should not take on an obligation you cannot fulfill.

It is very easy as one can contribute using a credit card – this is convenient, is cheaper than using a bank to make transfers, and after a few months you don’t really notice the money going out. Your monthly contribution is then invested into a series of mutual funds. Doing things this way gives you advantages:

Access to diversified range of funds. The days of opaque mystery funds and lack of choice are long gone. You can be in range of funds which will sustain overall performance and cushion you from the gyrations of the markets. Yes, you can be in a wide variety of stock funds; you can also be in high-grade or high-yield bond funds, in gold stocks, in resource stocks, or in property income funds. Diversified portfolios do better in the long run.        

Dollar cost averaging means investing a fixed amount at fixed intervals of time. That’s a sensible approach, for example, if it means committing yourself to investing a fixed amount of your salary every month toward your retirement. Dollar Cost Averaging is nothing more than the systematic investment of a fixed dollar amount at regular time intervals. However, once you initiate the plan, the key to success is sticking with it and ignoring market fluctuations. This is part of the investing puzzle that allows you to invest with more aggressive and volatile funds such as China, India, Latin America, Eastern Europe etc. as they hold over 2/3 of the worlds population and they will overtake the current leaders but there will be bumps which cost averaging will help you benefit from.  For Example, you could invest $1,000 every month ($12,000 a year) not that much really when you think about it’s about $33 a day. 

(If one did $12,000 a year for 15 years and got 10% return this would be become about US$419,000, however if you then left this for a further 15 years and did not add anything it would grow to become about US$1,750,000 – the power of time and compound interest.)

Please get in touch with us here at Banner and we can start your savings off on the right track. Please get in touch on 03-5724-5100 or

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