Need a Pension - Any Advice?

Sarah28_2

Hi, I'm kinda new to all this but wondered if anybody could offer some advice?

I'm 28 years old and in full time employment earning £18,000 p.a.

The company I work for do not have a pension scheme, and as I intend to stay there for some time, I guess I should really be thinking about setting up a pension through somebody else.

Only problem is, I have no idea where I should begin with this....I won't be able to afford to put a great deal into it each month so is there a particular type of pension I should be looking for?

Sorry to be so vague, but if anybody has any advice to offer, I would be very grateful!

Thank you..

jamesd

Good to read that you're starting retirement planning now. Today the best "pension" for a person paying basic rate tax without a work pension scheme that the employer will contribute to is usually an equity ISA, not a classic pension.

This is because the ISA gives more flexibility of investment choices at lower cost and still lets you shift the money into a traditional pension in the future if that looks appropriate. By contrast, a pension doesn't let you use the money for anything else and forces you to buy an annuity - a regular payment plan - whether you want to or not.

So, the prescription for you at present is to learn more about ISAs and about fund selection and "asset allocation", sometimes called "sector allocation". You can read quite a bit about those topics if you search the board here.

Asset/sector allocation basically means buying funds that cover different parts of the market: different industries, different countries, different levels of risk. Then you periodically adjust the balance to even them out at your preferred mix. The reallocation evening out tends to take profit from temporarily high parts and lock them in with buys in temporarily low parts. Then the next cycle the high fall, the low rise and you've avoided some loss and bought in to the new high while the prices were low.

Risk in a well-established stock market has two components: the chance of failure of the firm itself - like Enron - and the volatility, the chance that when you need to sell the market will be in a low value time. With a young start the second type of risk doesn't really affect you but when you get within a few years of retiring you would start to consider whether you should switch to low risk investment types, like bonds.

EdInvestor

Always open your ISA through a discount broker which will rebate the initial charges.

You can put a wide range of different investments in an ISA - from direct holdings of shares and gilts to funds investing in shares, bonds, property and commodities.

Have a look at these two discount sites for an idea of what's available to invest in:

https://www.selftrade.co.uk
https://www.hargreaveslansdown.co.uk

dunstonh

Always open your ISA through a discount broker which will rebate the initial charges.

But if you dont know where and how to invest, the small amount saved in charges could easily be lost by poor investing. Good advice on invest funds is worth every penny.

EdInvestor

Doing your own research is worth a lot more than pennies, when you look at the charges you have to pay for advice.

It's not rocket science.

Check out the best funds here:

https://www.citywire.co.uk/Funds/Home.aspx

dunstonh

Doing your own research is worth a lot more than pennies, when you look at the charges you have to pay for advice.

Good advice can easily increase your returns.

It's not rocket science.

Check out the best funds here:

www.citywire.co.uk/Funds/Home.aspx

And what are the best funds? You have said many times that people should pick from the "top" funds. Well, that is past performance investing and where most people go wrong.

jamesd

EdInvestor, for a complete newcomer initial advice can be very helpful, particularly if the newcomer doesn't want to spend a huge amount of time learning.