Pensions - stick or twist?

dizzie

Hi,

Just wondering if anyone could give their opinion on what I should do pension wise. Here are my circumstances:

Age 40 this year, self employed, higher rate taxpayer (by about £8k per year on average); stakeholder pension with Standard Life worth about £28k at the mo - started paying £200/month gross but for last 2 years have been paying in £500/month gross (includes tax relief). Prior to that, had PP with Lincoln which was pretty naff - at last count there was only about £7k in that (and from memory, it had a lot of exposure to Japan, so I guess value will have plummeted).

Would really like to get motoring on the pension front so want to try to double pension contributions, or at the very least pay all of my HRT earnings into one. Is it sensible to just keep putting this into my stakeholder? Would really like to be savvy enough to understand investments well and do a SIPPs but don't feel confident enough yet. Think I'll probably need spend at least a year or two swatting up on investment strategies before I take a plunge into SIPPS and I'm not sure what the best way is to learn about such things.

So my question is, should I stick with the stakeholder set up by by financial adviser about 5 or 6 years ago...or should I pull my finger out and get clued up on investment strategies (and if so, how long did it take other people (not people in the financial industry) to acquire such knowledge and how did you go about it?)

Thanks for any thoughts on this

dunstonh

Age 40 this year, self employed, higher rate taxpayer (by about £8k per year on average); stakeholder pension with Standard Life worth about £28k at the mo

So, your planning is a little behind.

started paying £200/month gross but for last 2 years have been paying in £500/month gross (includes tax relief).

Thats more like it for a self employed person.

Prior to that, had PP with Lincoln which was pretty naff - at last count there was only about £7k in that (and from memory, it had a lot of exposure to Japan, so I guess value will have plummeted).

Japan hasnt dropped that much. You hear the bad days but not the recovery days on the news.

Is it sensible to just keep putting this into my stakeholder?

Not likely to be as your contribution levels will see personal pensions as being the cheaper option. Plus, you need to decide if the basic investment options of a stakeholder are really what you are after (they maybe and if they are then they are still available in personal pensions but cheaper than stakeholder).

So my question is, should I stick with the stakeholder set up by by financial adviser about 5 or 6 years ago...or should I pull my finger out and get clued up on investment strategies (and if so, how long did it take other people (not people in the financial industry) to acquire such knowledge and how did you go about it?)

I dont think it matters if you are in the financial industry or not. I think it still takes about 2 years to understand the basics even if you are in the industry. Outside of the industry will take longer as you are not doing it every day. I don't think you really start to learn until you have been through at least one market crash or full economic cycle.

Loughton_Monkey

By far the most important point, I would suggest, is that you invest pretty hard - in order to eliminate paying 40% tax for as long as you can. It is extremely tax efficient.

The key things, then, that will affect your pension at retirement will be the fund choices you make. After that, it will be the charges applied to the funds. Stakeholders are limited by law as to what they can charge. IFA's these days tend to tell you that they can find even lower charges from non stakeholder plans. Maybe you should investigate that, but you will be charged for advice.

As a benchmark, at age 40, I had almost 3 times my salary locked up in pensions. By the age of 56, I was able to retire very comfortably - albeit that the pensions alone only cover about 60% of my future spending. The other comes from other investments.

Loughton_Monkey

dunstonh wrote: »

Japan hasnt dropped that much. You hear the bad days but not the recovery days on the news....

True.

Japan was very lacklustre for the last 5/10 years.

I happened to buy £6K of Aberdeen Japan Accumulation on 6th August 2010. As of last night, it stands at £6,479.14 - some 8% up.

That's not too bad considering. As a benchmark, Newton Asian income (with virtually no Japan exposure) has produced 12.64% growth over the same period.

dizzie

Thanks for the replies so far - they're very helpful

Yes, I realise that I am behind target....my income has only risen substantially in the last 3 years and put me in a HRT bracket. Before that was working only part-time (due to young children) and financially supporting hubby's business too, so didn't have much to spare for pensions. That said, we are almost mortgage free now and what little is left is on a tracker (paying 1% mortgage interest at current BoE rates)

...Ha, ha, I shall be anticipating working well into my mid-sixties at least, if my health remains good.

Will have a look at Personal pensions and once set up, will transfer all of the other stuff over in time.

Many thanks again.