To pension or not to pension? (comments appreciated)

jamesd

Dave101t wrote: »

exactly. pensions are complicated. which is why the government is setting up a national compulsory company pension scheme. Let them deal with it.

The important things about pensions are the investments you choose, the amount of money you put in and the costs. The NEST scheme that can be used with that will have very limited choices, sufficient money options and higher costs than competitive alternatives. It also has a ban on transferring money out to something better once it's been paid in. NEST isn't something that most employees should want their employer to use, it's a product for employers who don't care about their employees and don't mind their employees knowing it.

Fortunately there will be other options that should easily beat NEST. There already are some.

Dave101t wrote: »

what do you think happens to those with no pension? the same thing that happens to those with no job...they get money regardless.

Yes, they get some. Benefits pay a single person much less than minimum wage but it's better than starving. Not the sort of thing you want to plan to live on for 25 years, though.

gadgetmind

12tonelizzie wrote: »

How do I work out my taxable income for the current year when I haven't earned it yet?

Wait until near the end of the tax year and then pay in a lump sum. Of course, you can be paying £240pcm regardless as you can put this in even if earning nothing.

Regards fund costs, between the fees you see and the ones you don't, you're paying a manager 1.5%-2% pa for investing your money for you. If you want to avoid this, use trackers, ETFs, direct share holdings or a bewildering number of other investment vehicles.

Regards pensions being complex, it looks to me like your situation is one of the more simple ones!

dunstonh

You're right. I'm not comparing like for like. I'm comparing ISAs, which are fairly simple, with pensions, which are extremely complicated and intimidating. Just look at the limits on what you can pay in. For an ISA, there are 2 numbers (total £10680, cash £5340) which it takes 5 seconds to google. For pensions there's a list of conditions, just one of which revolves around 'taxable income'. How do I work out my taxable income for the current year when I haven't earned it yet?

You are comparing two tax wrappers. There are something like 13 tax wrappers in the UK. Some are more complicated than others. You can make ISAs more complicated as well. For example, you can pay more than £10,680 into an ISA in some cases. Or you can divert the charges on an ISA to an unwrapped general investment account. I bet you haven't come across those things. The point is that you can either keep it simple or you can make it more complicated.

How do I work out my taxable income for the current year when I haven't earned it yet?

Either pay £3600 in initially and wait until later in the tax year to do the rest or wait until the end of the tax year. However, there are very few people in employment/self employed that maximise their pension contributions each year. So, it isnt a big issue.

NEST? I'd never even heard of this new complication!

You seem to have come into this with a pre judged view that pensions are complicated and ISAs are not. Park that to one side. Think of NEST as a product provider. After all, that is effectively what it is. How many different types of ISA are there? How many different providers?

hugheskevi

Hang on. I asked if I could shift £40k into a pension on retirement. Surely I can't, if my taxable income (that's my net profits?) is less than £40k. I'm lump 'rich' but earnings poor, so if I'm going to go down the pension route, I'd better get cracking soon on the £2880 p.a. lark.

Yes, that is the caveat about making sure you have enough earnings (or their equivalent) toward the end of your life to feed money across into the pension.

In most cases, it works nicely that if you have a low income and can't feed much in each year then you don't have such a large pot to feed in, whereas if you have a big income you are more likely to have enough room to feed in a big pot. More problematic if income falls in later years, but hopefully that has been taken account of in plans.

So no need to move it all across in a single year, it can be spread out over the last 5-10 years as required.

jamesd

12tonelizzie wrote: »

"0% for cash and funds that pay renewal commission" ... I've been sticking the the "more than 2,100" funds and thinking my ISA was "FREE" and "0%". What small print didn't I read?

"Renewal commission" is another name for the IFA 0.5%, in general.

I didn't see where HL mentioned the platform part so I checked with them. They bundle it in under the renewal commission wording, they say because they don't negotiate the payments as individual IFA and platform amounts but as a combined payment from the fund management company. In the SIPP the commission is mentioned in paragraph A12.

I can see their logic but it does make it harder for people who don't know about it to recognise what HL is getting paid.

HL doesn't say what they get paid for each fund.

0% is the initial charge for buying an investment and it's normal for platforms to discount all or almost all of that for funds.

12tonelizzie wrote: »

But those charges are intrinsic to pooled investments, right? No bearing on the issue of ISA v. pension v. neither-ISA-nor-pension.

No difference, except that HL rebate part of the commission for the ISA and not for the SIPP.

jem16

12tonelizzie wrote: »

I've been sticking the the "more than 2,100" funds and thinking my ISA was "FREE" and "0%". What small print didn't I read?

Hopefully not the bit where it gives you the amc for each fund you are using in your ISA?

HL is a bundled paltform - in other words the amc includes different charges to different people but it's all bundled into one charge. For a retail fund with a typical amc of 1.5%, that's 0.7% to the fund manager, 0.5% to the IFA and 0.3% to the platform. In HL's case they are both the IFA and the platform so they get both the 0.3% and the 0.5%. As james said part of that 0.5% is rebated back to you - but only if the value of your fund is more than £1000 as from August 1st. So you may end up paying an IFA fee but receiving no advice for it.

There is a possibility of a ban for bundled platforms in the near future and a move to unbundled platforms where all these fees are disclosed. If this happens HL will have to change its charging structure.

gadgetmind

12tonelizzie wrote: »

other provider. Recommending ETFs or direct share holdings to an H-L customer isn't really a way to help them save on charges!

ETFs and equities are OK with HL outside of ISAs and SIPPS. All of which just shows that you need to DYOR regards your underlying investments, providers and wrappers as there are pros and cons to them all. Your situation is different to mine is different to the next guys, so ask questions, ask some more, and proceed with your eyes open. And this applies to unwrapped investments, ISAs and pensions.

Does that mean I should get one or I shouldn't?

What do your own calculations and projections tell you? You *must* research this enough to be able to model your own situation and decide for yourself.

Btw, if I open e.g. a H-L SIPP and then decide it was a horrible mistake, can I just close it and give George Osborne [STRIKE]my[/STRIKE] his money back?

That you even ask this question suggest that your research is lacking and your planning insufficiently long term.

I have written and rewritten the following advice to you several times. In early versions it was a few hundred words, and then just a few bullet points, but I have now got it down to just two words.

Grow up.