Should I stay or should I go now......

snakey_2

Hello all

currently I am in company pension in which I have been since I started in September 2001. However as of last november I turned 23, and just lately I have been thinking whether to pull out. I am currently paying in 10% of my final salary each month....which worked out at £107.61. The good thing is that the company then contributes 5% themselves.....however being young I am thinking would the money be better off elsewhere....such as a savings account, or to invest it.....do you think its worth having a pension at all.....would you cancel your company pension and have a private pension paying a smaller amount.....your thoughts/suggestions are much appreciated.

YorkshireBoy

This is not advice... just some things for you to think about.

1/ You say "or to invest it". I don't think there's a better investment than a pension.

2/ Many company stakeholder schemes (is yours a stakeholder?) have T & C's which state that if you don't match the employers contribution then they won't pay into your pension at all.

3/ Rounding, I'd say the total monthly contribution to your fund is...

(107*1.2805)+(107/2) = £190.51 [more if you're contracted out of serps]

Note: the 1.2805 is your tax relief, and the 107/2 is the 5% your company pays

Now for someone aged 23 this is a FANTASTIC start to your retirement planning.

4/ Do you NEED the £107/month? Why not carry on paying and stop, or better still reduce the amount, when you start paying a mortgage. You may even find that, as your salary goes up and if you first-time-buy with a partner, you can afford to continue paying it.

5/ Benefits of company stakeholder - I think all stakeholders have a max 1% charge fee. My own company stakeholder has 0.95%. I can switch in and out of different funds as I wish, and allocate % to each of them. Advice is readily available as broker visits twice/year and we have been given direct contact telephone numbers/e-mail addresses for all brokers' staff.

6/ I've only been in my company stakeholder since July 2003, and my "managed" fund is growing at 15.96%. Now I know a lot of this is down to the stock market recovery following 3 bad years (although this didn't affect me as I was in a final salary scheme with my previous employer), but even so, you will not get a savings account that will pay anywhere near this % rate - in fact you'll be lucky if you get 5% after tax.

I hope this gives you something to think about. If you've any further questions, post back.

I'm sure if anything I've said is incorrect, someone will correct me (I'm not an expert, although this is the same advice I give my children).

HTH
YB

dunstonh

A personal contribution of 10% is about what you should be paying as a 20 year old. If you stopped paying that amount and put it off till later, you will find yourself needing 15-20%.

A pension is an investment. Its the ultimate long term investment but thats what it is for. At your age you should be able to afford the pension and a bit of savings too.

snakey_2

fair points.....thanks for your times......