Self employed - £100 to invest per month - what should I do ? Pension ? ISA ? help?

jaspal

Hi I work for a company that match my pension contribution - currently im putting in 4% per month (approx £100 pm) and my company doubles that. I think it is ok ? comments please. I have been with my company for 1 year and am 30.

My fiancee is self employed, she is 29 and has never had a pension. She has about £100 to invest per month. What should she do ? Do a private pension ? is it worth it ?

Please help any advice appreciated. I do not know much about pensions so please no technical jargon.

thanks

JK

dunstonh

Specific advice cannot be given here and when you are asking about pension vs ISAs, there are things, such as personal allowances, taxation, working tax credits and childrens tax credits which could alter the postition from one or the other.

Ideally, retirement planning should be split to utilise both of your personal allowances. Failure to do so could cost over £1000 a year in tax in retirement.

At this stage I would go with pension. At least to build up a lump sum in the pension which will pay out and utilise the personal allowance in retirement. Once enough has been saved in the pension (which at £100pm, will take about 10-15 years), she can then look at the alternatives, such as an ISA.

As I said though, your personal situation may sway more towards pension or more towards ISA and we dont know enough to give you real advice.

deemy2004

jaspal wrote:

Hi I work for a company that match my pension contribution - currently im putting in 4% per month (approx £100 pm) and my company doubles that. I think it is ok ? comments please. I have been with my company for 1 year and am 30.

My fiancee is self employed, she is 29 and has never had a pension. She has about £100 to invest per month. What should she do ? Do a private pension ? is it worth it ?

Please help any advice appreciated. I do not know much about pensions so please no technical jargon.

thanks

JK

Doubling ! That sounds like a good deal - you put in 4% net, they add 4% gross, plus your 4% gets grossed up... by the tax man.

Maybe later, when you have become more finance savvy, you could look at moving your pension fund to a SIPP.

The deal I have is 7% employer contribution, where I don't have to put anything in.

Your fiance for now, should stick to meeting the cash ISA allowances of £3k per year.

EdInvestor

I would also suggest your fiance uses the ISA not the pension as she has no access to a company pension with free money from an employer.

As of next year the rules will change so you can make big lump sums into a pension closer to retirement and get tax relief on them. At the moment if you don't contribute annually, you lose that year's allowance.

So it will make more sense to leave the pension till later and instead pay into the ISA, which still has the "use it or lose" tax arrangement on a yearly basis.