Pension MoneySaving: Buy a different way to boost returns Article Discussion Area

dunstonh

Hope this is the correct place to post this.

Ideally, it would have been better on its own thread as your questions have nothing to do with the subject covered on this thread.

Anyone know this.

yes. However, it is not very often used because most people exceed the minimum lifetime allowance of 1%.

That means all your pensions (work and personal except state) would have to have had a value or calculated value of less than 1% of the lifetime allowance. That is £17,500 currently.

Also, even if you havent used any of your lifetime allowance and put £3600 in, you will pay tax on the 75% that is taken back as a lump sum as a way to recover the tax relief on the contribution.

That said, retired people utilising pensions to boost their income is quite common as the net effect can provide as much as 10% income which is obviously not available on savings accounts right now and that can help reduce capital erosion for people reliant on savings.

Iwantoknow

I took the buy-out from Chrsysler 2/4/2008 after 11years. I got a pension,but how safe is it? And is it possibe to pull it down now?

as23norm

I have to make a decision about the frozen pensions I forgot about - apparently as I am over 50 I could be claiming 25% tax free cash lump sum from all of them Total Value is less than 50,000 - What do I do? Should I lump them all together? Should I get 1 company to reinvest? Help Please

jamesd

as23norm, start a topic of your own and say how much is in each and whether they are final salary work schemes or what other type they are. Also say whether you need the money and whether you'll be over 55 in April 2010, when the age increases from 50 to 55.

paulbrannan

hi,

hoping someone with a bit of knowledge can help me.
I'm 35 years old and as I have worked overseas for many years I currently have no pension apart from the basic state one.

I'm considering paying into a private pension plan, roughly 2-300/ month.
I'm also an agency worker and pay the basic rate of tax.

Could anyone advise me whether a personal pensions or a stakeholders pension would serve me better?

Thanks in advance

dunstonh

Could anyone advise me whether a personal pensions or a stakeholders pension would serve me better?

Depends on what your objectives are. Do you just want to pay into a pension and dont care about how its invested or do you want to take a greater interest in the investments and have a better selection?

Also depends on where and how you buy. At 35, many personal pensions will be cheaper than stakeholder pensions.

paulbrannan

Thanks for the fast reply.

I'm not overly concerned where it's invested as long as it's secure and I'm guaranteed my return regardless.
Would it be best to buy directly online?

dunstonh

I'm not overly concerned where it's invested as long as it's secure and I'm guaranteed my return regardless.

Such a thing doesnt exist. You are going to need to take some risk. If you use cash in a pension then you run with shortfall risk and inflation risk. If you run with equities then you have investment risk. If you went with cash you would probably have to at least double your contribution on the basis of assumption that returns would be lower.

At your age, a difference of 2% p.a. could nearly double the final pension pot. The investments are the most important bit.

paulbrannan

Hello,

sorry for not posting back earlier but I had brokle my arm and was in some pain.

I guess my comment was a little naive. When you say I would have to double my contribution, do you mean my initial £2-300/ month?

Re. personal pensions , where would be a good place to start?

Thanks

jamesd

Yes, at least doubling the monthly contribution. The problem is the low return above inflation that you get from savings accounts or government bonds (gilts). Those are so poor that it takes a lot more money to reach any given target income level compared to using funds that invest in shares and corporate (company) bonds. As well as the greater returns (average growth/interest rate) you get variation in capital value as an undesirable side effect. An inevitable one because you only get paid more because you're taking extra up and down in value risk. As dunstonh mentioned, even a couple of percent of difference in annual return can double your final pension pot size as it compounds over the years. Losing that is a huge hit and extra cost to you.

unbiased.co.uk and unchecking any option to show only those who pay to be there would be a good place to start, since it seems likely that you'll need advice on how and where to invest the money.

In theory you're quite young and should be willing to take quite a lot of risk - at least 6-8 on a scale where cash in a savings account is 1 and single country emerging markets funds are 9-10. This is the average across all of the investments and does not mean that you would have no single country emerging markets funds, just that if you did have some they would be balanced out with others of lower risk. Mixing risk levels and keeping the proportions the same as originally targeted, by annual rebalancing, is a technique that improves overall results.