Starting a pension

gadgetmind

Ante101 wrote: »

I was under the impression that it would be a separate pension plan in that situation, or is it common for employers to contribute to existing personal pensions?

Yes, you're right, employers rarely (never?) contribute to individual PPs as it's just too much admin hassle.

Being a higher rate tax payer and/or getting employer contributions make a pension more worthwhile, but it's still well worth doing even without these. However, you should consider also making a regular contribution to an ISA, cash if you prefer, but stocks and shares if you're in it for the long term.

If that 1% for the IFA on top of the normal fund charges or is that the total annual management charge. If it's total, then 1% is right on the edge of reasonable. Most of my PPs are low cost, so 0.5% to 0.75% pa. One was arranged via an IFA, and suffers from 5% going in (no more going in!) and high annual fees, so it's about to move.

dunstonh

if I were to go with something like that, and later on I decide that I wanted to manage the funds myself to avoid the management fee, is it usually straight-forward to do so?

you wont avoid management fees by not using the IFA. You will avoid or reduce the IFA fees.

The NS&I index linked certificates sound great, but I'm not 100% sure that I won't need the cash in the next year.

They have just been pulled so that option is now off the table.

Loughton_Monkey

Ante101 wrote: »

....I'm just looking to get the ball rolling really, so probably small payments initially. Say £100-£200 or so. Then re-evaluate my situation once I've got my house.......

That's about all it will do [get the ball rolling].

Remember that you have (say) 40 years of earning £32K + inflation/rises etc. and out of this, you must fund for 20 years or so of retirement.

Do some projections and you'll see that ideally you should be thinking in terms of £500+ rather than £100-£200. OK, we all accept this is not 'easy', but it's reality!

To put it another way, simplistic but basically true, you have a 'choice' of spending anything from £8K a year (subsistence) to £32K a year (your salary). Then say to yourself do you want to continue to have roughly the same lifestyle [spending] after retirement? If so, then there is a 'magic point' at which you can choose to set your spending to achieve that. It is simple mathematics. And it will equate, very roughly, to spending about 80% of what you earn - the other 20% (plus) needs to be invested for retirement [usually pension but can include other things].

There is a common tendency towards a form of 'retirement myopia'. This is where someone spend huge time/resources on "The Pension" - scrutinising charges, funds, risk, balancing.... - but fails to notice the 90% important thing that there is simply not enough going into it! It's excellent and vital to 'take care' with the investment itself, but all a bit disappointing if you have 'had it too good' for 40 years, leaving yourself stretched for the other 20+