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Pension Review & Advice

Daft_Pegasus
Posts: 189 Forumite
I’m looking to review my current pension arrangements and am hoping that some of the experts on here would give me some advice.
I’m 37 years old and all my pensions are set to mature at 55. Whilst I don’t believe I will retire at that age I’d like to know I have an income stream, if necessary, so that I can either work part time or change to a job for the enjoyment of work and not the salary.
I’d like to get about £2k a month when my pension matures.
Currently I have 4 pensions, 1 private one started many years ago and 3 stakeholder pensions from the last three employers.
I’m tempted to combine the first two stakeholder pensions into the current active one but I suspect that it will make no difference overall and therefore maybe it’s sensible to have the risk spread amongst different companies. I’ve spoken to an advisor in the past about transferring the private pension into a stakeholder but been told that the fees would make that a bad idea financially.
So I have about 18 years to get my pension pot from its current £60k value up to where I want/need to be. My first question then is how much does my pot need to be at in order to achieve my goal?
Would anyone recommend combining the stakeholder plans? Apart from easier management of them, are their any benefits? Would the money currently being put into my private pension be better put into the active stakeholder pension?
I’m 37 years old and all my pensions are set to mature at 55. Whilst I don’t believe I will retire at that age I’d like to know I have an income stream, if necessary, so that I can either work part time or change to a job for the enjoyment of work and not the salary.
I’d like to get about £2k a month when my pension matures.
Currently I have 4 pensions, 1 private one started many years ago and 3 stakeholder pensions from the last three employers.
- The fund valuation of the private pension is £30,400 and I’m contributing £100 a month to it.
- The first stakeholder pension has a fund valuation of £2400 and no current contributions
- The second stakeholder pension has a fund valuation of £11800 and no current contributions
- The third stakeholder pension has a fund valuation of £6100 and contributions of £410 per month going in
I’m tempted to combine the first two stakeholder pensions into the current active one but I suspect that it will make no difference overall and therefore maybe it’s sensible to have the risk spread amongst different companies. I’ve spoken to an advisor in the past about transferring the private pension into a stakeholder but been told that the fees would make that a bad idea financially.
So I have about 18 years to get my pension pot from its current £60k value up to where I want/need to be. My first question then is how much does my pot need to be at in order to achieve my goal?
Would anyone recommend combining the stakeholder plans? Apart from easier management of them, are their any benefits? Would the money currently being put into my private pension be better put into the active stakeholder pension?
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Comments
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You can work out the size of pension pot you might need by going to the pension annuities section and playing around with the figures:
https://www.fsa.gov.uk/tables
Suggest you give us more details of the pensions - provider, what the money is invested in, charges.
Are you getting any contributions from your employer?Trying to keep it simple...0 -
Daft_Pegasus wrote: »I’d like to get about £2k a month when my pension matures.
My first question then is how much does my pot need to be at in order to achieve my goal?
Assuming that £24,000 per annum net is about £30,000 gross. Also assume that you want it to be in today's money.
I would guess that a fund of £600,000 (today's money) would be required to have that pension from age 55.
Assuming growth = inflation over the long term, you need to put away over the next 18 years £540,000 in today's money.
This is £30,000 per annum gross, or £2,500 per month.
This should increase by inflation each year to maintain the real value.
If growth > inflation, then the amount needed could come down to maybe £1,500 per month, but it is still a fair amount of money to contribute.0 -
I’ve spoken to an advisor in the past about transferring the private pension into a stakeholder but been told that the fees would make that a bad idea financially.
If it was an FA then the FA probably doenst hold authorisation to do pension transfers. Most don't (and those that do really ought not to in my opinion). So, being told not to do it may have been down to lack of authorisation rather than them saying they cant do it. If it was an IFA, they would normally do a cost analysis and tell/show you why it isnt.My first question then is how much does my pot need to be at in order to achieve my goal?
Your state pension age is 67 as well. So, you need to be prepared to fund that gap.Would anyone recommend combining the stakeholder plans?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.0 -
Thanks for the feedback - a lot to take in and I can see already that my hope of 2k a month is unlikely to be realised.
In terms of the details requested by Ed it might take me a little time to go through all the literature and get the information but I'll start with the private pension. It was started with Allied Dunbar who have subsequently been taken over by Zurich and the funds are split as follows:
70% Managed Fund
15% Far East
15% European
They have bee like that since it started about 17 years ago - hence one of the reason for my current pension review.
My employer does contribute to my stakeholder pension - that's included in the £410 per month current contribution.0 -
Daft_Pegasus wrote: »
So I have about 18 years to get my pension pot from its current £60k value up to where I want/need to be. My first question then is how much does my pot need to be at in order to achieve my goal?
According to my calcuations, your pot is currently at 50k, not 60k as you wrote.
You're going to need to increase your contributions significantly to get close to your target. I see you are overpaying your mortgage - given the power of compound returns on your pension and the low interest rate on your mortgage, wouldnt it make sense to over pay into your pension and have the money working there for 18 years instead? Your mortgage balance is negligible and will go down in real terms over the years too.0 -
The first stakeholder pension is held with Clerical Medical and is split as follows:
50% Balanced Managed Fund
25% Adventurous Managed Fund
25% UK Equity Tracker Fund0 -
The second stakeholder pension is held with Norwich Union and is split as follows:
30% US Equity S2
35% Index Tracking S2
35% Property S20 -
The third/current stakeholder pension is with Scottish Widows and is split as follows:
30% All Share Tracker
20% Property
20% Environmental
15% Global Equity
15% SW Merrill Lynch Mgt0 -
According to my calcuations, your pot is currently at 50k, not 60k as you wrote.
You're going to need to increase your contributions significantly to get close to your target. I see you are overpaying your mortgage - given the power of compound returns on your pension and the low interest rate on your mortgage, wouldnt it make sense to over pay into your pension and have the money working there for 18 years instead? Your mortgage balance is negligible and will go down in real terms over the years too.
We are overpaying the mortgage as a priority over a pension and have been for some years. As you say it's now at a very manageable level and maybe we do need to look else where rather than overpay the mortgage. I do think it's easier to pay off the mortgage than into a pension fund. You can see your debt decrease with a mortgage whilst the pension funds are less tangible and despite being paid into have decreased in recent times.0 -
In terms of charges it is as follows:
Clerical Medical Pension 1%
Norwich Union 0.8%
Scottish Widows 0.5%
so I guess it's a good idea to consolidate the old stakeholder plans into the current one?
I don't understand the charges on the Private pension so I'll list when they've written:
"Charges
Percentage of investment contribution allocated to Funds: 35% for 30 months then 105% for the rest of the contribution Payment Term
Annual Charge: currently of 1%, will be reinvested for the contribution shown during the Contribution Payment Term
Expense Deduction : for 1997, £3.69 per month"0
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