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

gloverj

Hi,

I am 28 years old, I own a house for which I put down a 25% deposit. So now I'm thinking pensions good idea or not? I have £10440 in a cash ISA also. And I dont really know the best thing to do. Buy another house, invest in stock, pension etc etc?

I understand the value in a pension in terms of tax relief etc. What I cant work out is how any employer contributions fit in with these 'private pensions' or are pensions totally different if you do them through your employer.

Looking at my employer pension scheme it says I can put in a max of 4% per year which they will match. Am I limted to this? As looking at Martin's comments you can put in what you want? So therefore can you only put in what you want if you dont do it through an employer and if you dont use your employer you miss out on their 4% contribution.
Or would you run two pension schemes? One Private where you contribute what you want and one with your emplyer where they contrubte the same as you, 4%?

Hope someone can help, very confusing this pension lark!!!

dunstonh

I understand the value in a pension in terms of tax relief etc. What I cant work out is how any employer contributions fit in with these 'private pensions' or are pensions totally different if you do them through your employer.

A personal pension can receive employer contributions if your employer is willing to pay into them. However, if they dont then you just need to think of it as any other investment. The balance will be subject to investment returns and the more you pay into it, the higher the value will be.

Looking at my employer pension scheme it says I can put in a max of 4% per year which they will match. Am I limted to this?

No. You can go higher than that if you want.

As looking at Martin's comments you can put in what you want?

no. not quite. There a limits to how much tax relief you can get. There are relief's available to go higher than this but the typical annual maximum is £50,000 subject to you earning enough.

So therefore can you only put in what you want if you dont do it through an employer and if you dont use your employer you miss out on their 4% contribution.

You may be able to pay more into your employers one but you must always take the maximum "free money" from the employer. Even if the employers pension scheme isnt the best going as nothing beats free money. If you want to pay more and the employers scheme isnt great then you can do that into your own scheme.

attila_

Hi,

I've read the mse guide and quite a bit of this forum thread and understand that I need either a Personal or Stakeholder Pension, but cannot tell the difference between the two or which I should choose.

I'd like to contribute around £200/month, which from what I understand equates to £240/month with tax avoidance? My employer may be able to contribute up to 5% (so around £120 or so) but this is not confirmed so there is a big possibility that they may contribute nothing.


My questions are: is there such a variation in deals around and commissions/annual charges that it makes it worth getting advice from IFA? Could I just shop around not completely understanding all the detail?

My issue is that I'm lost at the charges/commission and how it's accumalated (i.e. what interest is paid and how this is affected) and also how do I get the money at 60 which is when I plan to retire, i.e. what will I get monthly back?

So many silly questions, sorry.

dunstonh

My questions are: is there such a variation in deals around and commissions/annual charges that it makes it worth getting advice from IFA? Could I just shop around not completely understanding all the detail?

On your age, and contribution, an IFA can provide advice, take a fee for doing so and still come in cheaper than a nil commission stakeholder pension. So, if you dont know what you are doing, then not only do you risk making a mistake, it could cost you more even if you get it right.

what interest is paid and how this is affected

Interest is not paid on pensions.

also how do I get the money at 60 which is when I plan to retire, i.e. what will I get monthly back?

What makes you think you are going to be able to afford to retire at 60 on a net contribution of £200?

IFAs are there to go through all the issues and explain it to you. Not just set up the pension itself.

attila_

Thanks dunstonh, I was hoping you'd come to my rescue!

So I think an IFA it is then. I'd like to retire at 60 (ish) though I know I need to increase the contribution percentage every year. £200 is what I'd like to start off with (which currently is around 11% of what I earn).

Thanks again

Trickytree85

I am 26 and have just started the process of setting up a private pension. I am a self employed IT contactor so a private pension is my only option.
Can anyone give any advice on the typical fees for IFA's? Specifically, what is the 'going rate'? The IFA I am currently speaking to charges £750 to set up a Pension and a 0.5% annual active management fee of the fund. Is this a typical charge or are there other IFA's that offer far better value for money?

Thanks
Richard.

TheLearner2008

Trickytree85 wrote: »

I am 26 and have just started the process of setting up a private pension. I am a self employed IT contactor so a private pension is my only option.
Can anyone give any advice on the typical fees for IFA's? Specifically, what is the 'going rate'? The IFA I am currently speaking to charges £750 to set up a Pension and a 0.5% annual active management fee of the fund. Is this a typical charge or are there other IFA's that offer far better value for money?

Thanks
Richard.

I would rather setup a pension using the guidedence on this website then you don't have to pay IFA. The usual fee is about 1%.

JoeCrystal

Well, when I set up my Personal Pension with lump sum and monthly payment with an IFA on one off basis. I paid £300 fees and 1% commission (sufficient to cover the costs of maintaining my file and meeting any ongoing regulatory requirements... hmm...). The Plan's Annual Management Charges are 0.55% for Single Payment and 0.7% for Regular Payment [My funds charges are between 0.7% to 1.573%]. Of course, my pension will not be under regular review by an IFA so I am not sure how that affect the charges. Alas, I am not sure how good these are compared to other pension transactions with IFAs.

dunstonh

I would rather setup a pension using the guidedence on this website then you don't have to pay IFA. The usual fee is about 1%.

The guidance on this website is obsolete and inaccurate (e.g. the "Norwich Union" product in the article was withdrawn from sale over 3 years ago and replaced with a more expensive one. For a 30 year old with a decent contribution, a fee of around £1000 on a personal pension can come in cheaper than a nil commission stakeholder pension bought the way the article mentions.

The IFA I am currently speaking to charges £750 to set up a Pension and a 0.5% annual active management fee of the fund. Is this a typical charge or are there other IFA's that offer far better value for money?

£500-£1000 is a good range. Servicing, if you want it (typically more suited to larger fund values) is usually around 0.5%-1% p.a.

fairleads

TheLearner2008 wrote: »

How can I trust me financial advisor? I asked him to move my pension money to more aggressive funds and he suggested this portfolio. I have no knowledge about any of this type of stuff, can I just trust him? I am 29 years old and will only retire at 65.

AXA Property P

20%

AXA UK Equity P

15%

AXA Rosenberg European P

15%

AXA Rosenberg American P

15%

AXA Overseas P

15%

AXA Rosenberg Japan P

5%

AXA Rosenberg Asia Pacific Ex Japan P

15%

Suggest you start doing a bit of research. First place to start would be Trustnet. Use the info on their web to compare the past performance of the Axa funds with similar funds managed by Trustnet's Alpha managers.