I am a 24 year old male living in an EU country, with a gross salary (before tax) of €26,000. I am very new to the world of investment and do not have any experience - at best, I could say that I know the basics.
Other than a home loan with my fiancee, I do not have any debt or other loans. I have a life insurance policy, and keep reading that after sorting out debt, a pension plan is the next step one should take. As a brief background regarding my country, we do not have anything equivalent to a 401K in the US, and employers generally do not contribute towards pension plans. It is therefore up to the individual to take care of this. We do have state pensions, however the general consensus is that by the time I reach retirement age (I believe it is 65), they would not exist anymore.
I have been to two of the top companies which offer retirement plans, and they both seem to have offered similar options. I have attached a scan of the document which one of these institutions supplied me with, showing an overview of the plan which was most suited for me. Both of these top institutions are banks, one if which is world-renowned, so I am dealing with institutions of a certain calibre.
The reason I am writing this question is because I personally do not feel that the return on the attached plan is worth it. Some general stats:
- 1000 eu per year for 40 years
- Government provide a tax rebate of 150eu per year
- Can cash the policy when I’m between 50–75 years old which would be split through a 30% lump sum and monthly installments for the remaining 70%
- I can stop paying for a maximum of 5 years throughout the whole term with no penalty – they call it a “payment holiday”
- If I die before the fund expires, they will pay 101% of the value of my policy to my beneficiaries
- After the first 5 years I can transfer this fund to another provider
- I cannot touch the money until I am between 50-75 years old, as otherwise there will be charges
So to summarise, the way I see it, I would be putting in €40,000 and over 40 years getting a return of around €75,000 (could be more but it could also be less - depending on performance). I personally (with my lack of investment knowledge) feel that with factors such as cost of living increases over 40 years, and not knowing how investments would perform over 40 years, the risk is not worth the outcome.
Since I am no expert, I thought I would ask here. Is it worth going for this plan in my case?