Should I have a pension

bilbo51

One way of working out is to think about how much you would need now to support your current lifestyle discounting expenses you would not have to pay in later years - such as mortgage, mortgage life insurance premiums, etc.

Let's say that's £50,000 per annum.

Multiply that figure by 20. That will give you an idea of how much of a pot a currently 65 year old man would have to have in order to produce the same income today.

So to produce an income of ~ £50K, you would need a pot of ~ £1M.

You are 30 so you have 35 years to go to being 65.

If you assume that any interest/growth in your savings will be wiped out by inflation (a pessimistic view perhaps, but let's err on the safe side) then you have 35 years to save a million. Do the sums and you will find you would need to save about £2,380 per month.

But because the nice government allows tax relief on pension contributions, and because you are a higher rate taxpayer, this would only cost you 60% of this from your pocket.

£1,428 per month. Bargain.

Now, who wants to be a millionaire?

bendix

smo wrote: »

Bendix - !!!! off you !!!! - dont be such a smart !!!! when you know jack about other peoples situations.

I'm asking for advice, its fairly normal for people not to know how much they will need or where to start otherwise everyone would have one already would they???

No, you're right. I know nothing about your situation. Neither do I care much.

However, anyone with a milligram of financial savvy knows that they need a pension, and the very fact of rousing yourself to post your question implies you know the answer already, but your replies to others' responses indicates an inclination to find excuses and reasons not to act, rather than a reason to act.

You talk about your majority shareholding in a company as a financial asset. It is a current financial asset - nothing more - and you have no way of being certain that the company will exist by the time you retire.

People simply CANNOT excuse themselves from financial discipline, no matter how hard they try.#

Richie(UK)

smo wrote: »

I draw dividends so I dont really pay tax!

atush wrote: »

Last i heard, dividends were taxable. Mine are taxed that's for sure.

Dividends are taxable. However, where the dividend income falls within an individual's basic rate band for Income Tax then the tax payable is matched by the notional tax credit that attaches to the dividend. In other words, if you are a basic-rate taxpayer then there is no further tax to pay on dividend income (unless the dividend income itself moves you into the higher-rate band).

As regards the original question, Should I have a pension?, then as the others have said it really depends on how much money you want to have to live off once you retire. Estimate that and then set about making sure that you have sufficient funds (be it pension or ISA) to finance the requirement.

PS: If you filter-out the tone and focus on the sentiment then bendix often makes a great deal of sense Ever watch Doc Martin on ITV? I tend to think of bendix as the financial equivalent

Rob_192

smo

Let's take it as read that you need a pension, or at least you need to make provision for your retirement.

The way you do this can be either contributions to a pension scheme or to a S&S Isa. They are just two different vehicles in which you can make more or less the same investments - the pros and cons of these two are debated in various other threads on this forum and I would suggest you spend some time familiarising yourself with the differences, but basically, pension contributions attract tax relief (very handy if you're a higher rate tax payer), but you are taxed on the pension when it is paid out (except you can take 25% tax free as a lump sum). With Isa's you don't get any tax relief but your investment grows tax free and there is no tax to pay on any gains.

Now, if you're a company director of a small company, you may well have the same problem as me. I only earn £6/year (enough to satisfy my Nat Ins contributions), the remainder is taken in dividends which are subject to tax but not NI. A highly efficient way of dealing with things, but you can only pay contributions into a pention scheme up to the value of your net earnings, which in my case means I can only pay £6k/annum or £500/month into a pension. I want to be paying a lot more than this, so I have to put the remainder into S&S Isas (and have both mine and my wife's allowances of £10,680 each available to do this, which is plenty for what I want.

I've never really been able to conclude whether pensions or Isas are the better bet, so actually doing a bit of both suits me very well.

Whatever you do, do it soon. The longer you leave these things the more you will have to set aside, although I dare say you haven't been wasting your money up to now and hopefully you have been sensibly paying down your mortgage etc.

Good luck

G

Lois_and_CK

A good starting point for general information on pensions is the directgov site: http://www.direct.gov.uk/en/Pensionsandretirementplanning/index.htm

Secondly, you could do with planning your current budget, then a budget in retirement, a guess at inflation, and then work out how you're going to achieve that, i.e. how you will save for it. A good book on retirement planning for beginners, which goes through all this in layperson's terms is 'Plan now, retire happy' by Alvin Hall.

From there, I recommend a book called 'Pensions explained', by Which? It's newly released, so all the information is up to date, and explains pensions nicely - again in layperson's language.

In your case, it's better late than never - you've got further already than a lot of people do, just by realising you need to start planning for your retirement. Unfortunately, with retirement planning it takes quite a bit of research and reading: it's not as easy as popping in a comparison search on the internet.

Finally, this board tends to be frequented in the mian by fairly experienced people and independent financial advisors (IFAs), so it's quite difficult for complete beginners to get their heads around the topics discussed. If you follow the steps I've outlined above, then reading this board will start becoming more useful to you.

Best of luck.