New to Pensions advice needed

edmond

I have been looking through MSE and Cavendish online.
I have a friend who is a IFA but is about a useful as England at the World cup.
I earn 27k per year I would be looking to pay in £100-£150 per month
I am not a big risk taker, and have noticed on a number of pension forms how much to do want to invest?
Is there a norm on this or is everyone different?

Sorry to sound thick but on this subject I am.

dunstonh

We are not able to give advice on the forum. Pensions are regulated and we would be in breach of the rules (both site and FSA) if we were to give advice without meeting FSA requirements.

We can discuss and give opinions though and maybe that will help you find your answer.

I have a friend who is a IFA but is about a useful as England at the World cup.

Perhaps he doesnt do retirement planning. I know some that have pulled out the lower end of pension contributions and many would see £100-£150pm with no lump sum as lower end.

Sometimes I will respond with generics only with friends asking questions unless they are asking me to do the transaction. There are many different ways to invest for retirement and friends tend to want a quick and simple answer to a complicated question. Unless they are willing to discuss it properly, I will go for a change of subject.

I earn 27k per year I would be looking to pay in £100-£150 per month

£2700 gross p.a. would be a good starting point. However, it depends on how old you are, what other provision you have, how much you want in retirement and how much risk you are willing to take with your investment and therefore what the likely potential returns are going to be.

I am not a big risk taker, and have noticed on a number of pension forms how much to do want to invest?

Not sure what you are exactly referring to there as I think you are missing a word or two. However, I assume you are referring to where you invest. A pension is just a tax wrapper. It doesnt make money. It is just a product which has to meet certain tax rules and defined maturity process.

Where you invest the money is the biggest part of any investment yet with pensions it's the bit that most tend to ignore. Im afraid that "not a big risk taker" doesnt mean anything when read like that. Risk needs to be assessed in context with your situation and with an understanding of what you are comparing it with.

Is there a norm on this or is everyone different?

There is a norm and this is people invest in old fashioned pensions into a single investment fund which is usually quite poor and then whinge about their pension performance. Do you want to be one of them or do you want it done correctly?

Sorry to sound thick but on this subject I am.

it isnt that difficult. You need to have an income in your retirement. To provide that income you need capital. If you look at 5% as the rate of return for stable income, you will need around £500,000 to provide a £25,000 income before tax. So, you need to invest to build up that £500k. You can use pensions or ISAs or more often a combination of the two. With post 6th April 2006 rules, ISAs are usually better for basic rate taxpayers.

If you are aged 30 and expect a 7% return and want to finish at age 65, then to get £500k you need to be putting away around £252.09pm.

edmond

i am 30
and i am looking at a stakeholder pension through cavendishonline
looking at the standard life forms part 6 of the form
your investment choice.
'there are four approcaches you can choose.
A invest all of your payments in the stakeholder with profits
A invest all of your payments in the stakeholder pension fund investment strategy
invest a percentage of your payments
make your own choice.

not to sure which is best for me.

dunstonh

i am looking at a stakeholder pension through cavendishonline

Well, its your money.

not to sure which is best for me.

with profits is obsolete now for most people. Pension fund strategies are for people that dont know what they are doing, which sounds like you. make your own choice is when you know what you are doing.

Make your own choice is what I would use but I know what I am doing. One of the strategies is probably best for you.

You need to think about this a bit more carefully than perhaps you have done.

1 - Why are you choosing a pension?
2 - Why are you choosing a stakeholder pension instead of a personal pension (inc SIPP)?
3 - Are you investing to save some money on charges or investing to make money?
4 - is the performance potential of the investment a priority or dont you really care about that?
5 - do you understand how the pension will pay benefits on maturity and the implications of this?

Retirement planning does not equal pension. Investing does not mean cheapest possible route. You could be saving yourself 0.5% a year in charges here but costing yourself 5% a year in potential performance differences and that assumes you get the right investment funds to match your risk profile. Something I am not confident you can do right now. You could also be choosing the wrong tax wrapper (ie pension).

edmond

1 - Why are you choosing a pension?
i need to have savings to fund my life once i retire.

2 - Why are you choosing a stakeholder pension instead of a personal pension (inc SIPP)?
i assume the investment of a stakeholder would have a better payoff if the investment that my money has been put into pays of.

3 - Are you investing to save some money on charges or investing to make money?
i am investing to have money for my futrure. like everyone i want have a lifestyle once i retire.

4 - is the performance potential of the investment a priority or dont you really care about that?
Performance is important but i dont want something that is to high risk

5 - do you understand how the pension will pay benefits on maturity and the implications of this?
no

dunstonh

1 - Why are you choosing a pension?
i need to have savings to fund my life once i retire.

So, you are looking at retirement planning. A pension is an option to consider but it is not the automatic option you should choose. Indeed, since 6th April 2006, it has come the lesser option for many people.

2 - Why are you choosing a stakeholder pension instead of a personal pension (inc SIPP)?
i assume the investment of a stakeholder would have a better payoff if the investment that my money has been put into pays of.

Statistically, stakeholder funds underperform the personal pension/SIPP funds in the same sectors. (reuters research).

3 - Are you investing to save some money on charges or investing to make money?
i am investing to have money for my futrure. like everyone i want have a lifestyle once i retire.

The point here is are you investing the money to be in the best areas, which may not be the cheapest but offer the best potential for growth. Or do you want to invest in any old area but as cheap as possible. Stakeholders generally match the latter.

4 - is the performance potential of the investment a priority or dont you really care about that?
Performance is important but i dont want something that is to high risk

Risk is a very important issue to consider. Most people going into stakeholders pick a single fund which is usually above their risk rating. The investment selection is poor and that reduces returns in the future.

5 - do you understand how the pension will pay benefits on maturity and the implications of this?
no

This is probably the most important thing when looking at which tax wrapper to invest in. Lets assume you have £100k in that pension. Are you aware that you cannot access that £100k as a lump sum and that the bulk of it will be used to purchase an annuity which is taxable income and could die with you leaving your spouse without a penny.

My rather long winded point is that you have jumped to "i need a pension" without knowing what a pension really is or if it is the best option. You have then jumped to picking a stakeholder without comparing personal pensions. You are not sure about investments yet that is the most important thing about investing and you arent sure how much you should be paying.

Its great you want to save money for retirement. Give yourself a big pat on the back for that. However, dont go blow it all on a substandard product with an inconvenient maturity process and invested in weak and undesirable areas.

Spend a bit more time on your research or get an IFA that is will do discuss things properly with you to guide you through it.

edmond

this is all very complicated,
after looking on these forums there seems to be a number of arguments on why you should or should not have a pension.
All i am looking for is to pay in a set ammount each month, i am not a high risk person, and then to have a nice return once i retire.
there must be a few products out there which match that spec.

Paul_Herring

Define "nice return." If you're after something around BOE base rate, then, for example, a savings account/cash ISA is relatively low risk. If you're after anything higher, then you're going to have to expose yourself to some risk. Some consider stocks & shares in their various flavours to be high risk in the short term, but lower risk over the long term, but this isn't guaranteed.

dunstonh

there must be a few products out there which match that spec.

ISAs
Stakeholder pension
Personal Pension

However, which is appropriate will depend on you and what you are looking for. You are talking about the ultimate long term investment here. You need to look at it as an investment. The fact you want to do it yourself means that you are doing all the research and you need to understand what, how and why these things do what they do.

If you are finding it too complicated, then get an IFA to do it.