31 & no pension…. eek – Martin has panicked me into action

ttfx

I am 31 year old and have no pension…. eek – Martin has panicked me into action:money: – I am going to get one this week…. No I am really….
But I do have 5 years of Min cash ISAs – though I did want to put this towards a house deposit.
I can afford to contribute £250 - £300 per month and have a lump sum of £3000 to start the fund.
Should I go for the SIPS or stake holder pension option – or just get mini/max ISAs every year until I am 60?
I am fairly financially aware – in that I always have my cash in the best rate accounts – and I like to follow the stockmarket….

Any suggestions?
Tim

dunstonh

I think you need to consider your options a bit more. Jumping in like this without knowing what you are doing could cost you more in the long term.

You are right to consider your retirement planning. You are already 10 years behind the ideal starting point (about £20,000) but that is not a disaster.

Lets look at some of your comments.

But I do have 5 years of Min cash ISAs – though I did want to put this towards a house deposit.

And that shouldnt change.

I can afford to contribute £250 - £300 per month and have a lump sum of £3000 to start the fund.

£250-£300 is a good contribution but it shouldnt be at the expense of your short term savings. Make sure you are still building that up.

Should I go for the SIPS or stake holder pension option – or just get mini/max ISAs every year until I am 60?

The options on the retirement planning front are stakeholder pension, personal pension, SIPP and equity ISA. Each option has its pros and cons. The most expensive option is the SIPP but its the best option for the active investor. Personal pensions offer most of the major funds from the big fund houses as well as being able to access the cheaper in-house stakeholder funds. Some Personal pensions are cheaper than stakeholders. Stakeholder pensions offer a defined charging method but the fund ranges are usually quite limited. Equity ISAs dont get tax relief on contributions but you retain access to capital and you get to choose if you want to pay the money into a pension later on (or not). Fixing your money into a contract that is going to be in place for the next 30-40 years is not ideal and the ISAs are better on that front.

You probably also want to forget about age 60. Unless you are looking to increase your contribution somewhat or have other means, you are looking at a pot of around £400,000-£500,000 needed at age 60. As you dont have a house yet that may well be a struggle for you.

I am fairly financially aware – in that I always have my cash in the best rate accounts – and I like to follow the stockmarket….

Thats good. A investment novice taking no interest should probably look to a stakeholder pension. Someone that takes a periodic review on their investments should look towards a personal pension. Someone that takes frequent reviews on their investments and is more hands on should look towards a full or hybrid SIPP or a fund supermarket personal pension. Someone that wants to retain absolute control should look towards an equity ISA with a fund supermarket.

ttfx

Thank you dunstonh for taking the time to answer my query
I know you’re probably right about retiring at 60 unfortunately….. my hope is that house prices fall in the next year or two…..!
It’s good to know that I am £20,000 behind so at least over time I can look to top this up.
Martin mentions in his pensions section http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1152282731,59256, about using a ‘discount broker’ to boost returns – so I am going to investigate this. In terms of provider who’s good? Standard life, Norwich union, Scottish widows? Or some one else?

Thank you again
Tim

dunstonh

In terms of provider who’s good?

There is no one good provider. Each has its merits (or not) often reflected in the fund range they have available. Some of the insurers are better at lower risk investment funds and others are better in the medium risk field. None of them really have any medium/high - high risk funds of note. At least not on internal funds. Personal pensions offering a decent external range of funds but access to the stakeholder funds would make up for that.

You need to decide how you want your retirement portfolio to be invested. Once you know that, then you can look at which providers offer the investments you want. As you intend to go DIY, this is very important as it will also impact on the decision to go with stakeholder, personal pension or SIPP.

Remember this is an investment. You need to treat it as one. Saving 0.3% p.a. but investing badly will cost you far more than the 0.3% saved.

Paul_Herring

DH wrote:

you are looking at a pot of around £400,000-£500,000 needed at age 60.

I keep seeing this number (or ones like it) I'm assuming this is in today's money - the actual number will be higher when aged 60 (ro whenever) due to things like inflation (and possibly lower annuity returns - is that the right term?)?

dunstonh

Yes, that value is in todays money. No doubt it will be closer to 1.5 million in 30 years time.

ReportInvestor

The government should write to all graduates telling them that they will need to create a cool £million pension fund as part of its financial education drive.

As if :rotfl: :rolleyes:

dunstonh

If you take inflation at 2.5% p.a. and look at a 30 year term, then £500,000 equates to £1,048,784.

To save monthly to achieve that over 30 years it would take a monthly contribution of £854.69 if 7% p.a. return is achieved.

That looks scary but that assumes you start at £854 and end at £854. In reality you wouldnt do that. You would start with a lower figure and with index linking you would end up paying more at the end.

However, anyone not index linking their retirement contributions needs to seriously consider what they are [not] doing.

ttfx

Is there a website table of ‘best performing’ stake holder pension out there?
Or is it impossible to compare owing to the different fund combinations people my select.
I have also heard that Stakholders are a 2nd class form of pension – with the providers not really caring about them as there less lucrative for them…..

I was looking at SIPP’s with Hargreaves Lansdown – but the adviser at Lloyds tsb – who obviously only wants to flog Lloyds products – said well if you think you can out perform professional investors, who do this day in day out and have all the financial information there then go for the SIPP – but it will cost £50+ per month and is only really for people who have BIG pension pots….

Is this true/part true?

dunstonh

Is there a website table of ‘best performing’ stake holder pension out there?

There is no such thing.

Or is it impossible to compare owing to the different fund combinations people my select.

Correct.

I have also heard that Stakholders are a 2nd class form of pension – with the providers not really caring about them as there less lucrative for them…..

Mostly correct. Certain people are better off with a stakeholder. Mostly low risk investors.

I was looking at SIPP’s with Hargreaves Lansdown – but the adviser at Lloyds tsb – who obviously only wants to flog Lloyds products – said well if you think you can out perform professional investors, who do this day in day out and have all the financial information there then go for the SIPP – but it will cost £50+ per month and is only really for people who have BIG pension pots….

Ignore the LTSB sales rep. The response is flawed as there is no difference between investing in funds with the cut down Scottish Widows product and a SIPP investing in funds. A fund is a fund is a fund. The charges will differ and the goals of individual funds will differ but apart from that, its still a fund (i think you get the point )

You should never seek advice from tied agents. They are going to try and sell your own product and whilst some of them have links to brand name insurers like LTSB with Scottish Widows or some of the others with Legal & General, these are not the full retail products of those insurers and are more expensive than the full retail version. Plus tied agents are not allowed to recommend investment funds. They will attempt to work out your risk profile and present the individual funds in that risk profile for you to pick. That differs from IFAs who have to recommend an investment portfolio based.

ttfx

I think I need a ‘truly truly’ independent adviser – where/how do I find one?
The cost of advice…… I appreciate I’ve got to pay – what will the damage be?