Is it a good time to start a pension?

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
7 replies 978 views
avantraavantra Forumite
1.3K Posts
Part of the Furniture 1,000 Posts Photogenic Combo Breaker
✭✭✭
Up to November I was a self employ and saved for 10 years in cash ISA's and index linked certs, I am in full employment now and it's my first company pension. (I am 38).

The company have a stakeholder pension with Aegon Scottish Equitable with up to 5% employer contribution. I can easily afford this and do intend to fill my ISA sock in April.

I am looking at the funds collections in SE web site and I am not sure. I don't mind up to 50% risk and the rest balanced or defensive. With the markets on the skids is this a good idea to send my £100 +£100 / month to SE? or continue with my ISA filling.
Five exclamation marks the sure sign of an insane mind!!!!!

Terry Pratchett.

Replies

  • Why wouldn't you take advantage of the 5% being offered by your employer?

    Many people also think that now is a good time to start investing in the market - provided you are in it for the long term. As you have around 20 years before retirement I'd say that's long enough to ride out the inevitable peaks and troughs.
  • dunstonhdunstonh Forumite
    106.7K Posts
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    ✭✭✭✭✭✭
    I am looking at the funds collections in SE web site and I am not sure.

    They have a very good stakeholder range and some of their internal funds are very good value for the performance.
    With the markets on the skids is this a good idea to send my £100 +£100 / month to SE?

    You posted this at the end of January when the markets were 15% higher than they were in October. A 15% gain in 3 months is not what you call on the skids. The markets are volatile but that is not the same thing.

    Also, the range of funds includes non stockmarket funds as well good international coverage so you can build a good spread.

    Nothing will come close to making up that free money from the employer. Only a fool would turn it down.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Hi all,
    my employer wants to start stakeholder pension for our company with Scottish Equitable. The company will pay something around £100 initially and nothing more. Is now a good time to join a pension scheme or it is better to make my own provisions like paying mortgage or personal investment or savings (whatever). The question is: does it make sense to join stakeholder pension now, if employer will not contribute?
  • dunstonhdunstonh Forumite
    106.7K Posts
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    ✭✭✭✭✭✭
    Is now a good time to join a pension scheme

    There is no such thing as a good or bad time. Its always good to prepare for your retirement.
    or it is better to make my own provisions like paying mortgage or personal investment or savings (whatever).

    A pension is a tax wrapper for your personal investments. So, it would depend on what your requirements are now and in the future as to which tax wrapper is best.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • dosh37dosh37 Forumite
    207 Posts
    Part of the Furniture 100 Posts Combo Breaker
    ✭✭
    I started paying into an L&G private pension 3 years ago when I became self-employed.
    My statement arrived yesterday. It makes grim reading.
    Over the three years, the fund value is now worth 27% less than the money I paid in!
    I would have been far better off if I had taken the money as salary or dividends, taken the 20% income tax hit and put the money in a long term fixed rate savings account.
    My calculations show that, assuming an interest rate of 5% over the last 3 years, I would have only lost about 7% of the gross amount to tax.
  • AegisAegis Forumite
    5.5K Posts
    Part of the Furniture 1,000 Posts
    ✭✭✭✭
    dosh37 wrote: »
    I started paying into an L&G private pension 3 years ago when I became self-employed.
    My statement arrived yesterday. It makes grim reading.
    Over the three years, the fund value is now worth 27% less than the money I paid in!
    I would have been far better off if I had taken the money as salary or dividends, taken the 20% income tax hit and put the money in a long term fixed rate savings account.
    My calculations show that, assuming an interest rate of 5% over the last 3 years, I would have only lost about 7% of the gross amount to tax.
    Take account of inflation in that figure and work out how much your cash pot would have actually grown by in that time. Then consider the fact that pensions are long term investments, and the fact that the markets are down in the short term means that you are purchasing more units of your investments each month for the same cost. When the market rises again, it will increase the value of your pension with it, and you will probably find that 10 years from now your investment is worth a lot more than if you'd kept it in cash.

    Taking a short-term view of a long-term investment will at times look dire, but that's just the way the world of investment is. My pension is doing much the same at the moment, but I'm keeping up with my deposits because everything is currently much cheaper than it was a couple of years ago, so I'm maximising my long-term value.
    I am an Independent Financial Adviser
    Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.
  • dunstonhdunstonh Forumite
    106.7K Posts
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    ✭✭✭✭✭✭
    I started paying into an L&G private pension 3 years ago when I became self-employed.
    My statement arrived yesterday. It makes grim reading.

    I can imagine. 3 years of contributions is not a lot and it take a long time for the values to rise.
    Over the three years, the fund value is now worth 27% less than the money I paid in!

    Sounds about right for a medium/high investment spread.
    I would have been far better off if I had taken the money as salary or dividends, taken the 20% income tax hit and put the money in a long term fixed rate savings account.

    No you wouldnt. Investments zig zag in value. You dont measure the investment after a drop and assume that is the norm. Just as you dont measure it at the peak and assume that is the norm either. There always has been and always will be short term periods when investments are worse than cash. That is why investing is for the long term and not the short term.

    Also, dont mix up pension with cash. Pension is a tax wrapper. Cash is an asset class. You can put cash in a pension but you cannot put pension into cash. If you have chosen medium/high risk assets to put into your pension then you should expect medium/high risk volatility in the short term.

    Another way of looking at short terms is money you paid in November is up around 12%. If you used cash in November you would be up under 1%. So, in that period investments were better. Its just another part of the zig zag that you see in the returns.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
This discussion has been closed.
Latest MSE News and Guides

A guide to council tax bands

Lower your band & save £1,000s

MSE Guides

Cinema MoneySaving tips & tricks

Including year's 2for1 movies for £1

MSE Deals