Pensions Advice Please

picklepace

Hi Peeps,
I am new here and this question has probably been asked a thousand times before so bare with me. I want to start a pension plan.... I think. I am 36 years old I earn £12,500 a year. I get a very small payrise every year. I can afford to put away between £100 - £200 a month into a pension and still have some money for separate savings. Which is the best way to do a pension, given the current financial poo going on in the world today.
Hope this makes some sense.
Kind regards.

EdInvestor

Given that you have no employer contribution and pay basic rate tax, you would arrguably be better to save in a tax free stocks and shares ISA at a discount broker such as https://www.h-l.co.uk which will give you the same investment opportunities but with much more flexibility than a pension.

You will of course be accumulating 2 state pensions via your NI conts,get a forecast of how much you are likely to get here:

https://www.thepensionservice.gov.uk

At present you should aim for max pension income of 10k a year incl state pensions (which will all be tax free) and the rest in ISAs (also tax free).

HarryD

EdInvestor wrote: »

Given that you have no employer contribution and pay basic rate tax, you would arrguably be better to save in a tax free stocks and shares ISA

Or you could go for a unit trust ISA, which might be simpler. For example an index tracker unit trust ISA which has low charges and is easy to set up online. Or you could invest via a personal/stakeholder pension plan. Whether ISA or pension plan is better is much debated, see the ISA vs pensions thread.

As always the more important things isn't so much the wrapper (ISA or pension) as the underlying thing in which you invest: shares, unit trusts, emerging markets or whatever takes your fancy.

downshifted

Before you think about long term savings, do you have some basic savings already - say at least 3 months salary?

How much do you need to live on in retirement? What will your expenses be?

Does your employer make any pension provision? There is an argument that says people on less than average incomes will only be able to save enough in pension provision to prevent them claiming benefits, without really making their retirement any better

downshifted

HarryD

downshifted wrote: »

There is an argument that says people on less than average incomes will only be able to save enough in pension provision to prevent them claiming benefits, without really making their retirement any better

That argument is made, but it assumes the rules governing pensions and benefits will be more or less the same in 25 years or so when pickle retires as they are now.

It's anyone's guess what the rules might be then, but my guess would be that incentives to make provisions for one's own retirement will be increased to make it worthwhile for people on lower incomes to save for retirement.

Making the decision not to save and to rely on benefits in retirement may be the right one, but it is not one that I would recommend.