salary, bonus or pension

sured

hi, i'm just looking for a bit of guidance.

my husband has just accepted a new job,
current salary: £32000
new salary: £35000 or £38500
annual bonus: £7000 to £12000 depending on results

my husband currently pay about £150 month into private pension, he is 40

the new company do not have a company pension, but his new employer has said they will happily open a stakeholder plan for him in which they could put £3500 of his salary and/or all of his bonus. the company say this will save him tax etc. but the choice is his, they have also said they have an advisor who will help him.

i understand that the contributions he will be making would be subject to 40% tax, so this should save us some money.

we also need to relocate, once we have sold our house, so we will have the expense of that, and having looked at property in that area i think we are going to have to spend more on the house to get the one we would want.

any help is greatly appreciated
thanks
sue

anniecave

A couple of starters.....

I guess one issue here is whether you'll be needing he money for the relocation. Money in a pension can't be taken out, so I would assume it would be best for him not to put lots of money in the pension unless he's sure you both won't be needing it. So for example he may want to pay in an amount per month, but keep the bonus for the house move for example.

Do stakeholders have max limits that can be put in per year? I believe the tax rules have recently changed so I believe they are more flexible now so once the relocation has been paid for, he could pay in more later to the pension anyway.

Stakeholder (and every other) pensions vary with regard to charges, what the money is invested in, amount of risk etc etc so I guess that would be some questions for the company financial advisor.

I'm sure others here may be able to think of things I'm missing here

dunstonh

Stakeholder pensions are generally poor value investment vehicles. They served their purpose in 2001 and have been progressively becoming obsolete. It is expected that they will become totally obsolete in 2012 with the introduction of the NPSS.

Modern personal pensions offer better value and better investment funds. For the experienced individual or those getting proper investment advice, SIPPS or fund supermarket (hybrid SIPPs) are the best option. All of these pension options will take employer contributions.

This is an investment towards your retirement. Treat it as an investment and not just a pension. A 2% a year difference in performance for someone in their 20s until retirement could result in as much as double the pension for the same contribution. Yet many take no interest in the investment side and often end up in poor quality investments on the assumption that its a pension and they are all much the same. An incorrect assumption of course.