Should I Open A Pension?

doire_2

Hello,

Here are my current details.

Age 34
Savings - Cash ISA, high savers account and Stocks and Shares ISA
Job - IT contractor

I opened a S&S ISA last year and had been paying in £250 per month. It has taken a real hammering and so i frooze the payments on it for 6 months (until July '09)

As a contractor my employer would not contribute if i opened a pension.

I opened a S&S ISA to save for the future but it looks as though it was a waste of time so far.

Should i take the pension option instead?

Im also saving for my wedding on May 2010 and a house deposit!

Thanks for any help

EdInvestor

doire wrote: »

I opened a S&S ISA to save for the future but it looks as though it was a waste of time so far.

Should i take the pension option instead?

Why would you expect it to be any different?

Both ISA and pension are just tax wrappers. It is the funds that you choose within the wrapper that make or lose the money. The same funds are available in both wrappers.

Over a 25-30 year period the recent market blip will be meaningless. Why stop contributions when the price of the shares you are buying is cheap?

Since you have no employer contributions and plenty of other demands on your money, I would restart contributions to the S&S ISA. What funds is it invested in? If you prefer something a bit lower risk (and lower return), then change the funds.Changing the wrapper will have no effect at all.

ozzage

Do you have your own limited company? If so then you can pay yourself employer contributions and it's very tax effective.

This isn't what you asked, but to me it seems like a "less-than-ideal" time to stop your payments to your S&S ISA.

Why wait until the prices start to rise again and then start buying? Have you considered that you might be better off making those payments again now while the fund/share prices are all so low.

dunstonh

I opened a S&S ISA last year and had been paying in £250 per month. It has taken a real hammering and so i frooze the payments on it for 6 months (until July '09)

What a bad decision that looks like being. You've missed out on buying units cheap and have deferred until a time that will probably see higher unit prices.

I opened a S&S ISA to save for the future but it looks as though it was a waste of time so far.

You havent even gone a year yet and you have decided its a waste of time. You are missing out on the sort of event a long term regular contribution contract really gains from. Regular contributions need about 15 years at least to make real money out of them. You havent gone a year yet.

Should i take the pension option instead?

No difference as Ed says. The tax wrapper is just a container. It doesnt make or lose money. Just as ISAs dont. Its what you place inside them.

If you get a glass of orange but dont like the orange, changing the glass isnt going to change the flavour.

You need to spend more time researching and understanding investments. Especially if you are going DIY as you are. Market conditions like this occur frequently. Typically once every 7 years you get a big one. You dont know how big or how long it will last but you can guarantee it will never get straight line growth. That isnt how investments work. Never have, never will.

You are looking at current events as a bad thing but many serious investors have moved on from that and are now looking at it as a buying opportunity for the long term.

jamesd

doire wrote: »

I opened a S&S ISA last year and had been paying in £250 per month. It has taken a real hammering

The prices got cheaper.

doire wrote: »

and so i frooze the payments on it for 6 months (until July '09)

So you stopped buying until there was a chance for the sale discounts to end.

You should have been increasing your payments as far as you could while the prices were/are low. The time you should think about decreasing them or putting in cash is when prices are high and everyone is talking about the boom never ending.

So, kick yourself, resolve not to buy high and sell low and get back to buying.

The ISA route is probably best for you at the moment because you might have pressing need for access to the money for house purchase. Note that I'm assuming that the S&S ISA contributions aren't really intended for that, because it's too short a time horizon for really prudent use of stock markets. Those are more suited for mortgage overpayment money, so you can build up the investments until they can pay the mortgage off more cheaply than overpaying directly.

doire_2

Im actually using Streling at the moment and thats who invests for me.

I have lost around £500 in a few months and i frooze payments because i didn't wANt to keep loosing money - i have a lot to save for these days.

So the advice should be to keep putting money into the ISA?

dunstonh

So the advice should be to keep putting money into the ISA?

There is no advice here. The board is not regulated or authorised to give advice. Its just discussion.

Your "problem" is that you dont understand investments. You are making decisions without knowledge. Before you do anything you need to have a basic understanding of what you are doing. Otherwise, what are you going to do in the next stockmarket crash or period of decline? You are just going to repeat the process of buying when prices are high and stopping when prices are low. The opposite of what you should do.

You either need to spend some time to learn about it and get an adviser to do it and bury your head in the sand to some extent during periods like this. There is a good chance you need invest within your risk profile as well as currently it would appear you are investing above it.

doire_2

dunstonh wrote: »

There is no advice here. The board is not regulated or authorised to give advice. Its just discussion.

Your "problem" is that you dont understand investments. You are making decisions without knowledge. Before you do anything you need to have a basic understanding of what you are doing. Otherwise, what are you going to do in the next stockmarket crash or period of decline? You are just going to repeat the process of buying when prices are high and stopping when prices are low. The opposite of what you should do.

You either need to spend some time to learn about it and get an adviser to do it and bury your head in the sand to some extent during periods like this. There is a good chance you need invest within your risk profile as well as currently it would appear you are investing above it.

I have been to an independent advisor. He has setup a Direct Debit with Sterling. They invest for me.

Seeing the loss of around £500 in a few months gave me a fright. Particulary when i have so much to save for.

I now see that although i have lost this money i still have the shares which have been bought at a low price and which, hopefully, will rise in value in the long run.

dunstonh

Just remember that you average out these ups and downs and that there will always be zig zags in the value. That is how investments work.

You have paid an adviser to give you advice. That adviser is still getting paid so speak to them about this. If you dont think you have been given enough information to make an informed choice and you are not happy with the service then find another. Its just like any service you buy.

doire_2

Thanks dunstonh