Had A Presentation At Work About Pensions. Claims I Would Have A Fund Of £1m By 60

ChrisUK86_2

Hi,

I have been invited by my company to join their company pension scheme. I'm 22 years old and I know that I need to start investing in a pension now but a lot it has gone over my head.

Basically the firm I work for has chosen ECS Financial Services to deal with company pensions. In turn ECS Financial Services use Standard Life for their pensions.

From talking to the person working for ECS on my current wage Of £22,000 a year if I pay it 5.00% of my salary per month (91.67) the company will pay 4.5% of my salary a month(82.50) into the fund as well.

Which seems pretty fair to me. The man said that if all goes well by the time i'm 60 i could have a fund of £956,000 which could be used to have a taxable pension of 68,700 a year. Or get a tax free lump sum of 239,000 and a taxable pension of 51,500 a year....

I also get life insurance of 4 * my salary if i die.
This sounds to good to be true...

I have 30 days to get out of it with no questions asked...

Current the money i will be using to pay for the pension is what I used to put in my Barclays Standard ISA which I have just started to use. (Currently only invested £400 into it)

Should I take up this pension or is their a better alternative ?

Sorry this is all really new to me

McKneff

Its a no brainer really, if the company is contributing to your pension they are giving you free money for doing noting at all and free life insurance to boot. Yes, youre young but now is the time to start. Once this starts going out of your salary you dont even think about it let alone miss it. Grab it with both hands and say thank you very much.

You'd be mad not to.

Naughty_Sausage

i agree with the previous poster 100% but remember the presenters words 'if all goes well'. these things are not guaranteed.

ChrisUK86_2

Yeah, I heard the guy gets £400 per persons he signs up so thought they might have been leading me up a blind ally to get the commission .

Know I need to get my head around where to invest these funds!

bumpoowee

I'm very sceptical of those figures. 10% of £22k for 40 years is about £80k. You'd have to make some very good investments to turn that £80k into £1 million.

But its always a good idea to contribute to a pension to make sure you get the free contribution from the company.

ChrisUK86_2

Yeah, he said that was a growth rate of 9% per year if all goes well. He told me sometimes it goes up and sometimes it even goes negative but for instance this year it was 20%....

bumpoowee

ChrisUK86 wrote: »

Yeah, he said that was a growth rate of 9% per year if all goes well. He told me sometimes it goes up and sometimes it even goes negative but for instance this year it was 20%....

lol I'm in a money purchase scheme too and have been for nearly 4 years and it's currently worth less than what I've paid into it! I'd make sure you research his claims about growth as they sound like BS. Also I'm betting that £1m is without taking inflation into account.

But again just to re-iterate it is worth contributing to the pension in any case as it's tax free + if you don't you lose 4.5% of your salary which you can never get back.

ChrisUK86_2

Well he said their are 3 options I can take. A cash fund... so nothing really happens to my money e.g. I don't really lose anything.

A medium risk fund which he recommend and a higher risk fund which could earn my quite a bit of cash but also lose me quite a bit as well.

He did take inflation into account and said in real terms from what I can remember it would be like having a salary of £33,000 a year on inflation of 3.5% i think...

endure

bumpoowee wrote: »

I'm very sceptical of those figures. 10% of £22k for 40 years is about £80k. You'd have to make some very good investments to turn that £80k into £1 million.

But its always a good idea to contribute to a pension to make sure you get the free contribution from the company.

Compound interest is your friend.

ChrisUK86_2

endure wrote: »

Compound interest is your friend.

What is this? Sorry I just feel so out of my depth with this, its horrible

endure

Here's a compound interest calculator to play with:

http://www.moneychimp.com/calculator/compound_interest_calculator.htm