Pension, or not to pension...

zzaammm

Hi Money Savers!

I'm looking for some wise words....

I'm 25 and looking to start saving for the future. Bit late you say? Well I'm getting that a lot at the moment, but am unsure whether it's wise to start a pension in the current financial meltdown? Would I just be burning my money? Should I save in an ISA until things become more stable in a few years?

Also if I did go for a pension should I invest in risky markets as I'm young, or invest in a more stable market whilst things are shaky?

I can afford to save £125p/m. My employer doesn't offer a contribution so will have to go for a stakeholders pension.

Martin's page is excellent, but I'm not sure when it was last updated:
http://www.moneysavingexpert.com/savings/discount-pensions

Thinking of going through Cavendish to avoid paying a large setup fee...
http://www.cavendishonline.co.uk/pensions/stakeholder.php

Any thoughts?

Thanks for your time

MrMicawber_2

Start a pension. You don't have to do a stakeholder, you can start a SIPP which need not be expensive (there are a number of low cost ones around), or a personal pension as well. (Many low cost SIPP's do not charge a set up fee and remember that whatever option you go for you can always take independent advice (fee paying) on your investment choices).

I personally wouldn't go for a shoot the lights out fund (e.g. a single country emerging markets fund) if I was just starting but given the time you will be investing for I would be prepared to take a reasonable risk. I would certainly be prepared to invest in equities and arguably now is a good time to do so.

A couple of global funds might be a good start or a global fund and a solid UK fund. Some people like global funds & some people hate them. I happen to like them. The trick is to find good managers / funds and don't be tempted by short term performance (not much of which is good at the moment anyway).

If you weren't sure you could split betwen pension and ISA. E.g. £50 into two funds and £25 into an ISA.

There are pros and cons of ISA's v Pensions. They are both good tax efficient ways of saving / investing but possibly the single big advantage of a pension is that you can't get at the money until you take your pension.

I don't know anything much about Cavendish but others might. Check that there is a decent choice of well regarded funds and that ongoing charges are sensible.

dunstonh

Martin's page is excellent, but I'm not sure when it was last updated:
http://www.moneysavingexpert.com/sav...count-pensions

Its very out of date and contains inaccurate data. If Martin was a financial services company he would be facing a telling off by the FSA.

Thinking of going through Cavendish to avoid paying a large setup fee...
http://www.cavendishonline.co.uk/pen...takeholder.php

An IFA is your cheapest option. Cavendish is not.

However, given the content of your post, you need advice and some undestanding on how investments work. Or at least time to understand that.

HarryD

zzaammm wrote: »

Also if I did go for a pension should I invest in risky markets as I'm young, or invest in a more stable market whilst things are shaky?

Good question, but it has been true for the last 80 or more years that the time to invest is when things look dire. True, things may get worse but unless we are witnessing the end of capitalism they will get better some time. If you wait you may never start. Unless you know of a way in which you can start your pension at a younger age, Dr Who, then 25 is the very best age at which you can start saving for a pension.

cyclonebri1

25? and too late? NO.

What is too late is when you look back in another 25 years after NOT taking out a pension:eek:

Just do it.

edinburgher

Hey there zzaammm!

I know pension contributions seem something of a sacrifice now, when you're probably just getting established with a career and would rather be spending your money on fun things, but we all have to start at some point.

Although my circumstances are a little better than yours (purely in that my employer pays a fairly generous contribution towards my pension), I've doubtless had many of the same considerations that you have as a youngish pension starter.

I won't give any specifics on providers etc. as I don't want to mislead anyone by making financial suggestions bar the general sort, but you're not alone in wanting to get started at a sensible age.

All the best

A fellow 25 year old pensioner.

zzaammm

Thanks for all your input. I've finally got round to filling in the forms last night, after much more research!

In the end I compared several pension providers, then compared their funds. Then looked at the history of these funds (luckily the provider provide a graph) so I could see how the funds shaped up before/during/after the recession. I'm going to split my pot into two funds to spread risk.

I did go through Cavendish because they cut the annual fee from 1% to 0.6%. Also it's only about £30 set up fee, compared to the "with advice" method which costs about £2,000.

I do feel better about starting a pension now that economic "grass roots" are beginning to show.

Here's to an early retirement!

dunstonh

I did go through Cavendish because they cut the annual fee from 1% to 0.6%. Also it's only about £30 set up fee, compared to the "with advice" method which costs about £2,000.

Not exactly like for like though is it. I have just finished doing the paperwork on a pension that is paying me £1500 and has a reduction in yield of 0.3%.

You went with a pension with a reduction in yield of 0.7% to save the adviser being paid £2000.

it doesn't matter what the adviser gets paid. It matters what you pay in charges. In your case Cavendish get paid £1470 less than I did but my client is more than 50% better off than you.

Its a bit like you buying a washing machine and finding the model you want at two retailers. One costs £500 the other costs £800. However, The one that sells at £500 has the higher profit margin. Most people would buy the £500 one. However, because you want the retailer to earn less, you buy the £800 one thinking you are better off.

jack705

Being a student of economics i will advice that it is more fruitful to invest a little bit rather save a huge amount because inflation will sink the value of your money into a pot hole which never ever be recovered in its original value.:T

DiggerUK

zzaammm wrote: »

........I do feel better about starting a pension now that economic "grass roots" are beginning to show......

After studying the economic lie of the land as you have done, for the best part of a year and a half, were exactly are the green shoots you refer to?

bendix

DiggerUK wrote: »

After studying the economic lie of the land as you have done, for the best part of a year and a half, were exactly are the green shoots you refer to?

Yes, I noticed that. 16 months to reply and decide. How long will it take the OP to decide on his asset allocation? 8 years?