18 Years Old, Looking To Start Pension Now

Kavanne

How much should I look to be paying in each month?

Ideally I'd like to retire around 50-55 years old with at least a personal pension of £10K a year. Which kind of pension would be best for this long term?

Is a pension really a good tax break? (I read some newspaper articles but they didn't make much sense to me!)

EdInvestor

Is a pension really a good tax break?

Not if you are a basic rate taxpayer with no free money coming into the pension from an employer.

Use your ISA allowance first - 3k for cash savings, 7k for investments. This is an annual "use it or lose it" allowance and is a much more flexible wrapper for a young person.You won't lose pensions tax relief if you wait until later when it's a better deal.

Midas

Have alook at the pensions calculator and play around with some different numbers.

http://www.pensioncalculator.org.uk/

It gives you a rough idea, but obviously it's not an exact science at it depends on investment performance. To retire at 55 I'd guess you'd need to pay in around £200 pm.

Bear in mind that if you do invest in a pension you will not be able to access any of the benefits until you are 55 (recently increased from 50, and could be changed again at some point before you reach 55).

As EdInvestor says it's good that your thinking about a pension but whether this is the right thing for you depends on your situation - e.g. do you have other savings or investments or own a property? Will your employer contribute to your pension, and how much?

AuntyJean

EdInvestor wrote:

Not if you are a basic rate taxpayer with no free money coming into the pension from an employer.

Use your ISA allowance first - 3k for cash savings, 7k for investments. This is an annual "use it or lose it" allowance and is a much more flexible wrapper for a young person.You won't lose pensions tax relief if you wait until later when it's a better deal.

I took out a cash ISA last year at £155 per month to cover the purchase of my mortgage which is interest only. I gained £8 in the year. Are ISA's worth it?

Kavanne

EdInvestor wrote:

Use your ISA allowance first - 3k for cash savings, 7k for investments. This is an annual "use it or lose it" allowance and is a much more flexible wrapper for a young person.You won't lose pensions tax relief if you wait until later when it's a better deal.

OK, thanks. Yeah, I've been using my ISA limit for the past 3 years, so I will just continue to do that and look on that as my nest egg! Thanks!

EdInvestor

AuntyJean wrote:

I took out a cash ISA last year at £155 per month to cover the purchase of my mortgage which is interest only. I gained £8 in the year. Are ISA's worth it?

Which account as this and what interest rate was it paying?

An ISA is just a tax wrapper, it's what's inside it that may or may not be good value.

Most people use an investment product ( which invests in the stockmarket) to pay off a mortgage, rather than cash savings, as using the latter would cost much the same as a repayment mortgage.

dunstonh

I took out a cash ISA last year at £155 per month to cover the purchase of my mortgage which is interest only. I gained £8 in the year. Are ISA's worth it?

A cash ISA is really a waste of money for pension planning. When we refer to ISAs instead of pensions, we are referring to equity ISAs which invest in exactly the same places as a pension.

AuntyJean

Sterling Fidelity Managed International
Sterling Schroder Gilt & Fixed Interest
Sterling Schroder UK Mid 250
+ one other I can't remember

EdInvestor

AuntyJean wrote:

Sterling Fidelity Managed International
Sterling Schroder Gilt & Fixed Interest
Sterling Schroder UK Mid 250
+ one other I can't remember

If your "cash ISA" has these in it, it's not a cash ISA at all - it's a stocks and shares ISA.

Are you aware that a chunk of your money is invested in the stockmarket?

AuntyJean

I wouldn't know one from the other I'm afraid. I simply asked my financial advisor (through work) to arrange for me to have enough to cover a £30k mortgage repayment in 10 years time (that was a year ago).

dunstonh

The way you have listed the funds doesnt suggest ISA. ISAs invest directly into the unit trust funds and wouldnt say "Sterling xxxxx". The life funds would have "Sterling xxxx" though and that suggests this could be an endowment or MIP rather than an ISA. Or it could just be the way you have typed them

Sterling can be an expensive provider. They have a couple of features which some could find desirable and worth the extra cost. On standard terms, they are not too bad but the adviser (tied or independent) can build in extra charges if they want. It doesnt mean your adviser has. It is just something to be wary about.

I would suggest you get an IFA (different adviser) to give these a review as a 10 year term needs as low charges as possible. You also don't appear to know what you have and the information you type suggests it may not even be close to what you think it is. A review may find nothing wrong and then at least you have peace of mind. However, there are some things there which have the potential to be awful for you.