putting aside £750 pm towards pension egg

dutchism1958

Morning All,

Just looking to share any top line tips/suggestions.
I am 52 and looking to retire in 10-11 years.Have 2 final salary non-contibutory company pension schemes which I will access when 65.
15K in GSK shares which offer up a healthy dividend every quarter.
I keep my ISA allowance maximised each tax year.
I have £750 that I am looking to save/invest every month over the next 10 years or so.
Not looking for high risk shares but willing to consider 25% loss.
Was looking at NSAI's,savings accounts.Any suggestions for my £750?
Thanks.Dutch.

Interestedparty

The first thing that hits me from the information you have given is that you are prepared to stand a loss on investments of up to 25% whilst the research you have conducted yourself is limited to Nat Savings and savings accounts.......are you sure you are prepared to feel comfortable with such a loss?

You are looking to retire in 10-11 years time at about age 63. You will not be drawing your final salary scheme pensions until age 65 so you need to ensure you have built up sufficient funds to see you through that 2 year period.

Options include personal pension (tax relief on contributions on the way in maybe particularly attractive if you are a 40% tax payer although care required on higher levels of salary)

Unit trust investments (allows you to make use of your annual capital gains allowance)

Deposit type of accounts (safe but unspectacular)

Even some into premium bonds if you must! (you might get lucky)

The monthly saving sounds great but don't forget that you can only save that amount whilst you are in full time employment so don't forget to consider what would happen if you became ill and your income dropped, be prepared to possibly cut your savings slightly to make sure your protection benefits allow your plans to happen!

dutchism1958

Thanks for taking the time to reply Interestedparty.
I understand your query regarding 25% loss & looking at low risk options,I hadn't made clear I was looking preferably at lower risk options but could afford to lose 25% without compromising my situation.
Also appreciate your comments re protecting my benefits should i fall ill or lose job.
Interested regarding your comments on Personal pensions.I am a 40% tax payer so this could be an option.Any idea when this is due??
once again, many thanks for your help interestedparty.
regards.Dutch.

jem16

dutchism1958 wrote: »

Interested regarding your comments on Personal pensions.I am a 40% tax payer so this could be an option.Any idea when this is due??

Tax relief has always been there for pension contributions payable at the rate you pay income tax. If you are a higher rate taxpayer you will receive 40% tax relief. This is particularly useful if you do not expect to pay higher rate tax in retirement as you will have a lower income - so 40% tax relief going in and only 20% tax payable in retirment.

JoeCrystal

One rule of thumb I often hear is the age divided by two to give percent of salary to be saved into Pension. (26%)

I wonder if you have thought of seeing several IFAs to ask about the choices?

Interestedparty

The tax relief for 40% tax payers is the norm and applies now. There have been some alterations to how it works recently but this only affects those currently earning over £130,000 per annum. If you are in this bracket you really need professional advice to look at how best to address the pension issue.

If you are just a "normal higher rate tax payer" then your pension contribution is made net of the standard rate of tax (20%) and the remainder is reclaimed by submission of the appropriate tax return to the Inland Revenue and is received through your tax coding.

The effect of the higher rate tax relief would mean that if you wanted to invest the whole of your £750 per month into a personal pension then you could have £1250 per month invested by the pension company. Over a 10 year period this would give an extra £60000 worth of investment into your pension plan from the tax relief.

This does, of course, assume that the higher rate tax relief will continue to apply for the whole of your pension plan which is not guaranteed to happen. It might make sense to start off at this level whilst the higher rate relief applies and regularly review matters depending on your personal circumstances and the tax legislation.

It is a case of looking at your individual circumstances and requirements and seeing what sort of balance to strike between the various options to suit your personal requirements. No 2 people's circumstances are the same and it is this sort of skill that an IFA will use to blend a plan together for you that is appropriate for your needs and is sufficiently flexible to adapt to changing times.

jamesd

You're a 40% tax payer? And near to age 55 as well, so you'll be able to get pension money soon. Easy first step is 100% of your higher rate income paid into a pension. Within the pension you can choose a range of investments of widely varying risk profiles.

I'm assuming that your income is not near 100k a year or between that and 160k a year, which would introduce a range of special considerations that generally strongly favour pension contributions at the early part of the range and may disfavour them near the end.

dutchism1958

My thanks to Jem16,Joe Crystal,Interested Party and Jamesd.

I'll reply in that sequence.
Yes Jem16,the 40% tax relief is on my radar.
I have been disappointed with the 3 IFA's I have used so far Joe Crystal.I know there are good ones out there but haven't met them yet!
£750 would be about 25% of my net monthly salary so your quote is correct!
Interested party, no I'm not in the 100K bracket unfortunately:(,but am higher rate tax payer.Understand your calculations of saving the 60K over 10 years in a pension,partly contributed by pension company.So start at £750 pm and review regularly.
Finally Jamesd,yes 40% tax payer.so put my higher rate income into a pension is similar to what you are all saying so thanks for the consistency...you all give me more confidence than IFA's used so far.
Advice received so far from IFA's has been to leave my non-contributory final salary pensions alone.Then supplement this with S&S ISA's rather than a personal pension.My feeling was a personal pension would be better,especially as I already have S&S ISA's with HL?.
3 questions to finish with!!
1.Would i be better off putting future money into a Personal Pension rather than my full allowance into S&S ISA's?.
2.Do you know of any better rated Personal Pension companies?
3.Names of any good IFA's.Have used MSE recommended searches & haven't been good experience.
Appreciate Q3 is a sensitive one & probably impossible to answer.
Once again,my thanks to you all for replying,it is appreciated.Gary.:T

jem16

dutchism1958 wrote: »

Advice received so far from IFA's has been to leave my non-contributory final salary pensions alone.Then supplement this with S&S ISA's rather than a personal pension.My feeling was a personal pension would be better,especially as I already have S&S ISA's with HL?.

Perhaps the IFA has also been looking at the bigger picture of your income in retirement?

How much pension income do you expect to receive from the two final salary pensions? If that plus the personal pension income pushes you back into the higher rate tax in retirement you are not really gaining anything. Other bit to look at is the age realted personal tax allowance - over £22,900 of taxable income and you pay more tax.

Interestedparty

In answer to your questions

1 It's very difficult to say which you would be better off with because each have their own significant advantages (i.e. higher rate tax releif on pensions for the time being, total control of the ISA in terms of when and how you draw it) but they both have their own disadvantages (with pension the strict regulations of how the money is extracted from the pension, with the ISA the lack of tax relief meaning there is less overall money in the pot). Some people prefer the ISA because they can do exactly what they want with the fund when they want whilst others prefer the pension because the size of the pot at retirement will be larger due to the tax relief that has been added to it. I think many IFA's will be looking at the keeping your options open route with the ISA in that there is nothing to stop you contributing to the ISA for a number of years and then at retirement making a single contribution to a pension plan and gaining the tax relief at hat time in a lump sum (subject to it still being available at that time).
If you are looking at the amount of income tax you pay then certainly whilst the higher rate releif still applies the pension route far outweighs the ISA whilst you are paying money in but of course in retirement any pension income is taxable and as has been previously stated can affect your age related allowance any income or capital drawn from the ISA can be drawn without tax implications.

2 There are a number of good pension companies with a reasonable level of charges but to me the more important things is the funds in which the contributions are invested. It is important to make sure your funds are properly diversified across a range of investment sectors and regions to obtain better returns.
3 How can I possibly answer that one !!

dutchism1958

Good Morning Jem16 & Interestedparty,

Thanks for your replies.

The status of my two final salary pensions at normal retirement age are as follows:

2007-2008 data

Pension 1

1,£14,700 or £9600 + cash lump sum of £64000.

Pension 2:

2.These are the deferred benefits after leaving the company plan in 2003.

Gross Min. Pension £1026
Excess over GMP £8730
Total £9700 pa

Estimated benefit options at normal retirement age based on an assumed rate of 3% a year(compound)on retail price index:

Option1:

Estimated main plan pension of £18000 per year
Plus Pension commencemt lump sum(transfer in) £ 2000
Plus Pension commencement lump sum(AVC) 9000

Option 2:

Estimated reduced main plan pension of £16600 a year
Plus PC lump sum(main plan) £22300
Plus PC lump sum(transfer in) £2000
Plus PC Lump Sum AVC £9000

I am awaiting the latest batch of figures Jem16.
Interestedparty,your advice on ISA's possibly being the best way forward in the interim period to keep my options open is what most are saying so that may be the way I will go initially.

On another matter I have £11K worth of GlaxoSmithKline shares which are bringing in dividends of about 9% & have considered buying more.

My S&S ISA's are with Hargreaves Landown in an Invesco Perpetual Income Fund for the long-term.

Thanks once again for your advice...it has helped enormously.It is for me to read up more on what you chaps are so knowledgeable about
By the way interested party - i didn't expect you to answer Q3,it was for the others - in hindsight would have been better not to ask it at all - .
Many thanks.Gary - have a good weekend!:beer: