stakeholder pension query

off-that-internet!

I'm on a tracker mortgage which has come down quite considerably recently, so what's the best thing to do with this extra cash? I was thinking about increasing payments to my existing royal liver stakeholder pension. other than the obvious tax benefits (i.e. the government putting their stake in), is this worthwhile doing or is it money down the drain. this is currently my only pension plan and I am paying in £50 per month (I am 44, married with children).

dunstonh

£50pm contribution is very low. However, you dont mention what your total provision is. As discussed on another thread a few days ago, you would ideally be getting your retirement fund to around £35k by the time you are aged 35 if you want a fairly decent amount. How much are you above/below that?

Retirement provision is all about making sure you have enough in retirement. If you dont put enough aside, you will have to rely on the state. Your state retirement age is 67. So, insufficient retirement planning would rule out early retirement. If you are self employed you are looking at lower state pensions than an employed person. The basic state pension is just £4700 a year. You may get a bit more if you are employed from the second state pension but even if you got the max, you are not looking at much more than £7000 a year.

So, how much do you want in retirement?

off-that-internet!

thanks for the help.

I've just been looking into my paperwork a bit more and it seems a bit more complicated that I first thought. I have a couple of other policies and these have to take into consideration my wife who doesnt have a pension

I just wonder whether a stakeholder pension is my best option - is it the best pension deal? or would I be better off putting the money somewhere else.

anyhow, many thanks for your advice, which has definitely helped me to some extent

regards.

dunstonh

I just wonder whether a stakeholder pension is my best option - is it the best pension deal?

Depends on whether you would use an IFA or intend to DIY. Royal Liver isnt the best stakeholder by a long shot and I personally wouldnt have my money in a stakeholder but use a personal pension instead. However, a stakeholder may be best for you.

You must do your retirement planning jointly. You can end up very easily paying £2000 a year more tax just in retirement just because your got your planning wrong.

jamesd

The extra tax that dunstonh mentioned is because both of you get a personal allowance with no tax to pay on it. Once over 65 that's expected to be about 10,000. So you're generally best off trying first to get both of you a pension that's about 10,000 including state pensions. This often means making pension contributions for a wife, who will get a basic rate tax rebate for gross contributions of up to 3600 a year even if she's paying no tax at all.

At 44, are you a higher rate tax payer? I'm wondering whether putting some money into a pension then using the 25% tax free lump sum at age 55 might be efficient for you as a way of both increasing pension income and helping to pay off the mortgage.

edinburgher

Have you considered other options for the money (including overpaying on the mortgage)?

Just a thought

margaretclare

off-that-internet! wrote: »

thanks for the help.

I've just been looking into my paperwork a bit more and it seems a bit more complicated that I first thought. I have a couple of other policies and these have to take into consideration my wife who doesn't have a pension

I just wonder whether a stakeholder pension is my best option - is it the best pension deal? or would I be better off putting the money somewhere else.

anyhow, many thanks for your advice, which has definitely helped me to some extent

regards.

A stakeholder might be an idea for your wife to consider, if she can afford putting some money into a pension for herself. Stakeholders allow someone to pay in, and to gain the basic personal allowance, even if they haven't got earned income - this used not to be the case. So your wife could put in e.g. 80p to which the taxman would add 20p making £1 to be invested. Or any other more realistic amount - I believe there are stakeholder plans which start at £20 a month.

HTH

off-that-internet!

many thanks for your advice

seeing as I'm not too knowledgeable about pensions, perhaps I'd be better off going to see an IFA, although because of your pointers, I'll at least be able to go and see him with a bit more of an idea as to what he's talking about

regards

dunstonh

perhaps I'd be better off going to see an IFA

Cannot do any harm. even if you did on commission basis rather than fee you should still come in better than the Royal Liver product (assumption there on how that was set up but its almost certainly a correct assumption).

edinburgher

seeing as I'm not too knowledgeable about pensions, perhaps I'd be better off going to see an IFA

It is your future, so I very much agree that you'd want professional advice on doing what's best. IFA is probably the best idea.