Please help i need pension advice.

simonski70

I have just turned 40 and i really need to start up a pension plan but you hear so many bad things about them i dont where to start.I live in a council house and we wouldnt be able to get a mortgage. My wife and i both work so we can afford to put some money away for the future but dont know where.

Shimrod

Do either of your employers offer a pension scheme? If so, do they make a contribution to the pension? If so, that is most likely the best place to have your pension. How much can you afford to put away? A rule of thumb is 'half your age' when you start a pension, so for you that would be 20% - however that's supposed to give a pension roughly equivalent of 2/3rds of you salary - you may decide you can get along with less than that as a top up to the state pension. Have a read of the 'what's you number' thread for some thoughts on this (it's in the pensions forum - look for posts by Gatser).

dunstonh

you hear so many bad things about them i dont where to start

There are actually very few bad things told about them. There is a lot of misinformation out there and the media are very poor at reporting issues on pensions (i.e. not saying what type of pension has an issue but giving impression all pensions do).

My wife and i both work so we can afford to put some money away for the future but dont know where.

There may have to be a dose of realism here. You are 40 years old and have no pension. Does that include your wife? You have left it very very late. Not end of world late but you will have to accept its going to be a heck of a lot more expensive than a 20 year old would be looking to pay.

What sort of income are you looking for in retirement? What sort of amount were you looking to pay each month?

bendix

Shimrod wrote: »

Do either of your employers offer a pension scheme? If so, do they make a contribution to the pension? If so, that is most likely the best place to have your pension. How much can you afford to put away? A rule of thumb is 'half your age' when you start a pension, so for you that would be 20% - however that's supposed to give a pension roughly equivalent of 2/3rds of you salary - you may decide you can get along with less than that as a top up to the state pension. Have a read of the 'what's you number' thread for some thoughts on this (it's in the pensions forum - look for posts by Gatser).

The half your age guideline is inappropriate in this case. It works if you start much earlier (eg 12% at 24) but given the OP has got to 40 or so with no contributions, he'd need to be more aggressive to catch up for the lost years.

CLAPTON

whats your income
whats your wifes income
what sort of income would you 'need' in retirement
when you you 'want' to retire

why can't you get a mortgage?

marvin

I am 48 (49 next month) still don't have a pension but then I spent 20 years on benefit as a carer therefore starting a pension was not an option for me at all until I started working again 6 years or so ago.

I took the decision, as not being able to do both, that buying my council house and having that paid off before I was 65 was the best investment for me as it gave me a secure home and the extra it cost me in interest (at the time obviously rates have dropped a bit since then) over the rent was about what I would have put into a pension.

Since the drop in rates I have been aggressively buying shares in the company I work for (FTSE 100 company) via a share purchase plan due (not share save as the share purchase plan gives shares now, dividends now and has more tax benefits than the share save. It also has a special offer going at present which means a 20% reduction in the price of the shares so this is special to my circumstances and others may vary and a personal decision would be required.) to a special offer on that and when that ends I will then look again if it is worth me doing a pension through the company as they will give me 6% and will take it out before tax and NI so I can contribute more without it costing me more.

I am not suggesting you follow my route just giving the benefit of what the decisions I took faced with a similar problem. Just remember one thing when it is in the pension pot it is dead money until you retire so only do it if your finances are rock solid and you will not need to call on the money ever, do not make it your only savings make sure you have rainey day money first.

jamesd

Are you seriously not in the company pension scheme when they add 6%? If not, get in now with enough paid in to get all of that 6%. It's one of the best ways to make money going and should be your first priority for retirement income planning.

Once you get unrestricted control of the shares in your employer, the first thing you should look to do is sell them and buy something else instead. This is because at present both your income and your investments are linked to a single company, leaving you very exposed if it has difficulties. If you want to know why, just look at the employees of the nice safe banks, many of whom who lost all or almost all of their employee share plan money.

dunstonh

I am not suggesting you follow my route

Good as your option is highly flawed.

You have chosen to disregard "free money" and go with a worse option.

You have chosen to go with an option that has a 20% reduction in share price but are throwing away what is effectively a 60% reduction if you bought the same shares in works pension.

marvin

dunstonh wrote: »

Good as your option is highly flawed.

You have chosen to disregard "free money" and go with a worse option.

You have chosen to go with an option that has a 20% reduction in share price but are throwing away what is effectively a 60% reduction if you bought the same shares in works pension.

You obviously missed the bit about needing to build the rainey day money and only lock money away you can afford to I cannot afford to. You see I was on benefits for 20 years I have little capital base and I put everything I can into building what others have spent 20 years building.

And BTW 20% in extra shares which gives 20% more dividend and saves 33% roughly in tax so where is your 60% benefit now?

You also make assumptions that you have no right to, the only pension available to me is a stakeholder based on a certain insurence comapnies products and there is no option on that to have a self invested pension. So how do I buy these shares via the way you indicate?

marvin

jamesd wrote: »

Are you seriously not in the company pension scheme when they add 6%? If not, get in now with enough paid in to get all of that 6%. It's one of the best ways to make money going and should be your first priority for retirement income planning.

Once you get unrestricted control of the shares in your employer, the first thing you should look to do is sell them and buy something else instead. This is because at present both your income and your investments are linked to a single company, leaving you very exposed if it has difficulties. If you want to know why, just look at the employees of the nice safe banks, many of whom who lost all or almost all of their employee share plan money.

There seems to be selective reading going on here.

This maybe my fault but no I am not only invested in one share as a savings module so no I will not be taking your poor advice to sell regardless this may not be the best advice it depends on the share price at the time of selling (if that time was now I would be selling as the share price is at a rediculous high right now). I am building a varied basket of shares which is my rainey day money. I have bought a mixture of quality dividend paying shares and shares that were quility that have fallen on hard times and some growth shares. My current average growth PA at the mo is between 10 and 11% my yield from dividends against the amount I have invested last year is 2 1/2%.

Looking at the potential returns of the pension vs buying the house that I was paying rent for buying the house came out tops because if rents stayed as they are (nerver an increase in 20 years) then it would pay me £400 per month where as putting the most I could into a pension would only pay £150 (on moderate growth forcast prior to the current financial crisis). I could not at the time afford both I will look at it again soon as I have some inheritence money coming and may well use that if it makes financial sense to me to do so.

Putting money late into a poor pension product may not be the best for each situation the individual situation needs careful looking at as does what is on offer. If I had taken out the pension instead of buying the house right now even with the 6% with the drop in share values across the market I would be losing money. If I do not invest into the company arranged stakeholder I cannot get the 6% it is all relative.

dunstonh

And BTW 20% in extra shares which gives 20% more dividend and saves 33% roughly in tax so where is your 60% benefit now?

Actually, I understated the pension benefit. its better than 60%.

The free money in the pension doubles what you pay into it and you get tax relief on your bit as well. The free money benefits from dividends as well as being tax free.

Ignoring the other points, the pension wipes the floor with the SAYE. Not saying the SAYE is bad as I made a fortune on those in the past and they are very beneficial. However, they cannot make up for free money in the pension.

the only pension available to me is a stakeholder based on a certain insurence comapnies products and there is no option on that to have a self invested pension. So how do I buy these shares via the way you indicate?

Periodically transfer the pension value into a SIPP if you want different investments. Although the alternative investments would have to be stonking to compare with the 100% overnight gain on the group stakeholder.