New pensions saver... maybe!

Ic3Knight

Hi all,

So, backgraound - I'm 28 and working full time, looking to put some money away for the future. I was working for a university and paying into the university superanuation scheme, although I only worked there for 18 months. Now I'm working for a small company and have been offered contributions into a pension from the company, but I have to set the pension scheme up myself.

My basic question is, "where do I start"? I've been flicking through the forums and articles on this site, but to be fair I'd be 65 before I could find the time to read all of it!

There seems to be a debate between ISAs and pensions - although the overriding theme seems to be "take the free money", which is what I intend to do! But how do I maximise the effectiveness of the money coming in? (I'm not sure I even have to match the contribution from my employer - they have said that I don't have to from their point of view, but will I have to from a "pensions rules" standpoint?

Anyway, if anyone could point me in the right direction to get started (even if it's just suggested reading materials) that'd be great. The company have indicated that they will contribute from this month if I get something in place in time...

Thanks in advance for any help!

Ic3Knight

EdInvestor

You could try opening a SIPP with a discount broker such as https://www.h-l.co.uk

That gives you max flexibility as far as future jobs go and access to the best funds -along with a much broader range of investment opportunities.

You can manage the account online, much less bureaucratic than the usual pension.

Ic3Knight

Thanks for the suggestion, with a SIPP, how do you decide where to invest?

There seem to be so many options (10 seconds looking on the website you suggested indicates they have more than 2000 investment options!). I have to say as an investment newcomer, it's fairly overwhelming! Is there any easy advice on the web about how to chose things (not what to chose, I guess that's difficult to advise on!)

Cheers!

While I'm here - I'm married and my wife is just starting out as self employed, but not earning enough to pay into a pension (although she is paying NICs for state pension), do I have to do anything special to ensure that she would recieve something useful and sensible if I should die?

Thanks again!

Ic3Knight

dunstonh

Thanks for the suggestion, with a SIPP, how do you decide where to invest?

SIPPs are an experienced investor product and if you are using funds they are also the most expensive product.

It is not at all suitable for novice that doesnt understand investing. You would just become an expensive folly.

Ic3Knight

Dunstonh wrote:

SIPPs are an experienced investor product and if you are using funds they are also the most expensive product.

It is not at all suitable for novice that doesnt understand investing. You would just become an expensive folly.

Thanks for the info, what would you suggest I look at instead? Whilst I obviously want to maximise the potential for my pension savings, I am not an experienced investor (as you rightly noted!) and I almost want a "fire and forget" solution (although again, I want to understand where my money's going so that I can make modest "educated" decisions on it as necessary in the future).

Thanks in advance for the help!

Ic3Knight

bendix

dunstonh is right to challenge Ed's advice to go with a SIPP. By your own admission you are not an experienced investor - in that regard a SIPP is the last thing you should be looking at.

A pension is not rocket science - it's just a set of managed funds, or even one managed funds - wrapped up in a tax effective (albeit restrictive) wrapper.

Don't bamboozle yourself with masses of reading matter. Go to the websites of key personal pension plan providers such as any big financial services provider such as Scottish Widows, Winterthur, Aviva etc and download their brochures. They will explain the fundamental principles. Then it's just a case of deciding what sort of fund you want your pension money invested in . . and that depends on your personal attributes and attitudes to risk.

At your age, you can take some risks and be aggressive.

Whatever you do, stay interested. Get invested NOW, and then pick it up as you go.

The important decision is the one to get started.

EdInvestor

Ic3Knight wrote: »

Thanks for the suggestion, with a SIPP, how do you decide where to invest?

There seem to be so many options (10 seconds looking on the website you suggested indicates they have more than 2000 investment options!). I have to say as an investment newcomer, it's fairly overwhelming!

A goodish personal pension as recommended in following posts will typically offer 100 or so choices (and charge you more for the same quality external funds than the a low cost SIPP,though it's own bog standard funds will be cheaper).There is no avoiding understanding the basics of investment - asset allocation, sector diversification, your risk profile these days, I'm afraid, unless you weant to leave the money in cash, which you can do in a SIPP.

While I'm here - I'm married and my wife is just starting out as self employed, but not earning enough to pay into a pension (although she is paying NICs for state pension), do I have to do anything special to ensure that she would recieve something useful and sensible if I should die?

Nominate her as the beneficiary of your pension fund.Also provide some life cover?

dunstonh

A goodish personal pension as recommended in following posts will typically offer 100 or so choices (and charge you more for the same quality external funds than the a low cost SIPP,though it's own bog standard funds will be cheaper).

A good personal pension bought on the same distribution channel basis will typically offer external funds cheaper than buying the unit trust version via a SIPP. This has been shown in past posts.

There is no avoiding understanding the basics of investment ....<snip>

There is. You can stick it in a balanced managed or cautious managed fund or a lifestyle strategy. It's wont be likely to be the best option but its better than doing DIY and making a pigs ear of it.

adrian_bond

Also,

before staring a pension, speak to an IFA. you can find one near you on unbiased.co.uk. they will start the best pension package for you and your circumstances as well as managing fund allocation and keeping you updated on the funds progression etc. you can opt for pension / isa splits and many different types of investment choices depending on your rsik profiles and personal choices. Pensions are very complex as is investing so its worth paying an IFA (eihter commision or fee) who specialises in pensions as it will pay back bigtime over your lifetime. please dont use a banks product either (E.g. HSBC, NATWEST etc) as they are !!!!. My employer doesnt offer any contribution but does try to sell you its stakeholder pension through HSBC when you join. it has a choice of 3 investment options, all of which are rubbish. you may as well stuff your matress than use these as you have very little control or options as to where your money goes.

good luck and keep us posted as to what you decide to do!

DiggerUK

Ic3Knight,
Even though you could most likely cash in your 18 months in the Uni superann scheme I would advise you to leave it there.

This is to leave open the option to go back into the scheme should you ever return to Uni work. You have just left the best pension scheme going. Rules may change in the future preventing you taking up that option, but it would be foolish to close the option.

There are many dangers with a private personal pension.

Once your money is in the scheme you will not be able to get your hands on a penny for at least 27 years, and that is as rules stand.
If your circumstances change, and you need emergency funds, don't for a second imagine you can dip into your pension pot. You will be told it is not your money until you claim your pension.

Even then you will only be able to claim 25% as a cash sum, the rest you will have to put into another financial vehicle to draw down an unknown payment on your pension. In short you don't know what you will end up with.

Add to that the unknown value of your pension pot in 40 years, and you may consider that you are being asked to take a leap of faith that all will be well for you by the time you draw your state pension at 68.

Planning for a retirement war chest comes in many forms, a good savings regime gives you total control of your finances till retirement, and should be considered.

Best of fortune.

Ic3Knight

Thanks all for the input

DiggerUK wrote:

You have just left the best pension scheme going

And don't I know it (also, being as how we're a fairly small, close knit group here, I keep reminding the boss... especially about the 14% employers contribution!)

I'll think I'll start, as bendix suggested, by going over the brochures of some of the companies out there. I've been "casually" advised to look at standard life, with people suggesting they're a pretty stable organisation. Does that hold with peoples views here? Are there any companies who I should specifically avoid?

Finally (and I realise this may be a big "finally" and turn out not to be too final!), IFAs... is there a big benefit it going to see one?! I know there's an article on here about the possibility of buying the pension through a "discount broker" to avoid paying comission, is that generally thought of as a good idea for someone in my situation? I mean, do the potential savings make it a sensible option?

Thanks in advance for any further advice, and thanks again for the info given so far, it really helps getting a starting point!

Cheers

Ic3Knight