Long term savings/pension plan.

Smithmeister

Hi Guys/Gals,

To give you an idea of my dilemma, my wife(34) has no pension plan. Her work does not offer a works pension only the stakeholders pension. Recently we have been putting £100 away per month into our ISA(Nationwide) and will continue to do this,so far we have £1000 put away.

The idea is that instead of a pension we will (hopefully) have a cash pot of £36,000 come her retirement date minus any interest payments. I(32) have a works pension and have been paying into that since i was 24. This,hopefully, will give us a weekly income and the savings will also give a reasonable weekly income.

As this is a long term plan am i better sticking with ISA's, given the fact that we are looking for a 'safe' option, or invest somewhere else?

Advice appreciated

Smithmeister

dunstonh

£36000 will provide an income of around £1080 a year in retirement. You can consider that real terms given that savings more or less keeps in line with inflation. Use of savings for a 33 year term means its liable to shortfall risk and inflation risk. So, its not a risk free option.

You need to be filling her pension up to give her closer to 10k income (including state) to get the best tax efficiency. A pension would wipe the floor wish a cash savings account for that due to tax relief in the way in, tax free growth and on retirement the income would be tax free too as its below the personal allowance.

From 2012 all employers will have to pay into a pension scheme. It will no longer be optional. Employees will also be auto-enrolled into it as well with a 5% contribution being deducted from their pay.

Robert_Sterling_3

dunstonh wrote: »

From 2012 all employers will have to pay into a pension scheme. It will no longer be optional. Employees will also be auto-enrolled into it as well with a 5% contribution being deducted from their pay.

Very interesting. I had not come across this fact before.

dunstonh

Robert_Sterling wrote: »

Very interesting. I had not come across this fact before.

Look up National Pension Savings Scheme (NPSS) or Personal Accounts. The legislation is already getting into place to allow it.

A lot of employers dont realise its coming either. It will also be right down to the smallest firms as well.

Smithmeister

Thanks dunstoh,

I too was unaware that this would be a must come 2012. I was thinking along the line of not being forced into buying an annuity and that all the money would be ours rather than being made otherwise.
Perhaps the idea is then too put away until 2012 then look at transferring to a personal pension.

dunstonh

I was thinking along the line of not being forced into buying an annuity and that all the money would be ours rather than being made otherwise.

You dont have to buy an annuity until 75. Although that is a bit of a pain, it is worth noting that nothing else beats a pension when it comes to the provision of income. Not ISA, bond or unwrapped. It may not be good for capital provision but income its top.