pension numptie

danwillis

Hi all,

First post so excuse my very limited financial knowledge.

In a nutshell, I'm 30, have no pension, work on a contract basis, and have realised I need to get my act together and start preparing for my retirement.

My earnings fluctuate, and as I only intend to contribute about £100 per month to a pension for now but more quite soon, I need something flexible. I also could well go back into permanent employment, so pension would need to accommodate this. And because I'm just starting out I'm prepared to take a bit more risks with the funds the pension money is invested in.

But I'm flummoxed. Do I need a personal or stakeholder pension, should I take out one myself through company like Cavendish or see an IFA? If I see an IFA do I pay them a fee or let them charge me in commission? And I haven't got a clue when it comes to which funds to invest in.

Are there some easy answers to my questions or am I simply at the beginning of a very long and complicated journey to having to find the right pension?

Any help much appreciated!

dunstonh

Do I need a personal or stakeholder pension

What sort of investment do you want? A fully diversified portfolio with greater potential or a more limited investment which may be cheaper but may not grow as much.

should I take out one myself through company like Cavendish or see an IFA?

At least you eliminated the banks and tied salesforces. You use Cavendish if you know what you want and how you want it invested and who you are going to do it with. You use an IFA if you dont.

If I see an IFA do I pay them a fee or let them charge me in commission?

A small amount like £100pm is probably better on commission basis as the fee is going to be higher than the commission and it would take a good long time to end up financially better off than on fee basis.

And I haven't got a clue when it comes to which funds to invest in.

..or product, or provider at the moment either.

Are there some easy answers to my questions or am I simply at the beginning of a very long and complicated journey to having to find the right pension?

The easy answer is to pick a provider and pick a fund. Thats how simple it can be. However, that isnt the best way and unlikely to give you the best returns. There is no one best option. Different providers have options, features, terms and funds which can suit one individual but not another. The job of the IFA is to match the right one with you. If you know what you want then there is little point getting advice and may as well go with Cavendish.

There is also the issue of Equity ISA vs pension which we often discuss in here but just for the moment, I am ignoring that as not to confuse the issue more.

danwillis

Thanks for that, dunstonh.
In answer to your question; no, i don't plan to develop a fully diversified portfolio at the moment. I intend to spread things between property, an isa, pension for now and maybe consider some other medium term investments later on.
The £100pm pension contributions would more than likely increase after six months.

dunstonh

The pension is just a tax wrapper. You then choose your investments within it. That becomes your pension portfolio. It is an investment and should be treated as such. So, with that in mind, do you intend to treat it as an investment or do you intend to just treat it as a bill where money goes to an insurance company and you dont care what it does?

That may sound like a funny way to word it but that basically covers the two different types of people who pay into pensions. Those that are in control of their pension, either themselves or with an active IFA, nearly always do better than those that treat it as a monthly payment and havent got a clue what its doing. However, the latter outnumber the former.

If you can say you intend to actively invest it, it would be a different type of product and investment that is needed to the one where you would leave it and hope for the best. You need to be honest with yourself here. Pick the product for the active investor and it could cost you a lot more in the long run if you arent active. Pick the product for the inactive investor when you are really an active investor and you will almost certainly end up disappointed with the returns.

EdInvestor

What's your situation with the 2 state pensions? Are you fully up to date with contributions there?

Are you a basic rate taxpayer?

nelliebag

lovely word - numptie.