Company Pension- Is it worth it?

WolverhamptonRover

I've finally decided that it might be worth starting a pension plan and have enquired at the company i work for about their plan.

I have been told that they will take 4% of my monthly salary befor tax and also pay in 8% on top

This sounds like a good plan to me but obviously the money will be locked away for a long time and i will have no access to it.

The question is, is this a good plan or would i be better off taking the 4% (about £100) and topping up my ISA with this money

Sorry if this question has been asked before and done to death!

Thanks in advance

:beer:

Harry_Powell

Depends whether you're strong willed enough not to touch the money in the ISA once it builds up. You are also losing £200 per month that your employer would have contributed. I'd happily lose some control of my retirement savings for an instant return of 200%.

dunstonh

The question is, is this a good plan or would i be better off taking the 4% (about £100) and topping up my ISA with this money

It wont be 4% you take off. The 4% going into the pension is gross. So,if you say that the amount you pay into the pension is £100. Then if you pay into an ISA, you would have to pay £80 because you dont get tax relief on the ISA contribution.

So, straight away the pension is £20pm up on the ISA.

Then the employer pays in 8%. So, that would mean they are adding £200.

So, if you want to pay into an ISA, only £80pm would be going in compared to £300pm on the pension for exactly the same cost.

Its an absolute no brainer to be in this pension plan.

WolverhamptonRover

Thanks for this . I think you have confirmed what i was already thinking. I've always been put off by the fact you can't get at your money when you may need it, but with the company also paying in to the scheme it some what easies the pain!

Just got to sign the paperwork and post it now!

Harry_Powell

WolverhamptonRover wrote: »

I've always been put off by the fact you can't get at your money when you may need it.

When would you need it?

molerat

Harry_Powell wrote: »

When would you need it?

When you are old and grey usually. :rolleyes:

£300 invested for only £80 cost to you. Even if the funds perform at half the rate of the ISA (which is highly unlikely over the long term that these funds are invested) you are still quids in. It is money for nothing.

Harry_Powell

molerat wrote: »

When you are old and grey usually. :rolleyes:

Exactly. :rolleyes:

The point I was trying to make is that the OP says he is wary of pensions because "you can't get at your money when you may need it" but as the money is for retirement and you can access it from age 55, then clearly you can get at the money when you need it (unless you wish to retire before age 55, but I doubt many of us starting out with pensions right now will be able to do this).

EdInvestor

Harry_Powell wrote: »

Exactly. :rolleyes:

The point I was trying to make is that the OP says he is wary of pensions because "you can't get at your money when you may need it" but as the money is for retirement and you can access it from age 55, then clearly you can get at the money when you need it

You can only access 25% of the capital saved.The other 75% must be used to provide an income.You can never access this amount and many people who lose the early death gamble effectively hand over a large pot to the insurance company.

This is what annoys people.A so called 'guaranteed income for life' (and it's an expensive guarantee) is actually a gamble on longevity.

Insurance companies, like bookies, are not famous for structuring their products/odds so that they lose out.

If there is a sufficiently large free money incentive as in this case, the problem can be overlooked.But when people are investing their own money don't expect the smart ones to be beguiled by the benefits of a pension.Most of them are illusory.

Harry_Powell

EdInvestor wrote: »

You can only access 25% of the capital saved.The other 75% must be used to provide an income.You can never access this amount and many people who lose the early death gamble effectively hand over a large pot to the insurance company.

This is what annoys people.A so called 'guaranteed income for life' (and it's an expensive guarantee) is actually a gamble on longevity.

Insurance companies, like bookies, are not famous for structuring their products/odds so that they lose out.

If there is a sufficiently large free money incentive as in this case, the problem can be overlooked.But when people are investing their own money don't expect the smart ones to be beguiled by the benefits of a pension.Most of them are illusory.

So are you saying the OP shouldn't start a pension?

EdInvestor

Harry_Powell wrote: »

So are you saying the OP shouldn't start a pension?

EdInvestor wrote: »

If there is a sufficiently large free money incentive as in this case, the problem can be overlooked.

As above..........................

Harry_Powell

EdInvestor wrote: »

As above..........................

um.. sorry

Is that a "yes, he should start a pension" or "no, he shouldn't"?