Personal Pension - Best choice for me?

dantheman213

Hi all,

I'm looking for some pension advice.

I've recently started a new position whereby my employers are only offering a Stakeholder pension, which I can join after 6 months of service - I don't currently have any information on the contributions allowed.

I've been thinking about pensions recently, having received a statement from a previous company pension which wasn't quite as good as expected, I have this pension, along with an NHS pension from many years ago where I only spent a few years working.

I'm currently looking at opening a Personal pension, with plans to put in at least 10/15% of my monthly salary. I'm 32yo, a higher rate tax payer, and have used my full ISA allowances for this year. My mortgage is reasonably small and has a very low interest rate, so I'm now focused on my pension which is the final financial piece for me.

Having done the math against my previous company pension, whereby my 4% contributions were matched, I could offset the fact I was missing out on any company payments by ensuring I was contributing enough to my Personal plan so that in effect I would gain back a greater value in tax than the 4% than company was putting in. Obviously, I don't currently have the option of a company pension, but was merely using the figures as a reference point.

I'll obviously look to speak an IFA with knowledge of pensions - But, from my perspective, a personal pension is looking the ideal route for me to take or am I missing something rather obvious?

Thought appreciated.

Many thanks.

jem16

dantheman213 wrote: »

I'll obviously look to speak an IFA with knowledge of pensions - But, from my perspective, a personal pension is looking the ideal route for me to take or am I missing something rather obvious?

Thought appreciated.

Many thanks.

I would agree with you on a personal pension. However only after you have taken advantage of any employer contributions, stakeholder or not. When you are eligible to join and if there is an employer contribution do both.

dantheman213

This may be where my pension knowledge falls down, but I thought a stakeholder pension was one that an employer didn't contribute too? It was merely based on a set of standards (management fee etc), and that employee contributions were taken at source?

jem16

dantheman213 wrote: »

This may be where my pension knowledge falls down, but I thought a stakeholder pension was one that an employer didn't contribute too?

Not necessarily. An employer doesn't have to contribute to the stakeholder but many do.

http://www.direct.gov.uk/en/Pensionsandretirementplanning/Companyandpersonalpensions/PersonalPensions/DG_10014842

dantheman213

Again, thanks. That's good to know.

I guess it really comes down to knowing how much they'd contribute, if indeed they would.

Loughton_Monkey

The word 'Stakeholder' will continue to lose its meaning. But it's just not important. It is a 'pension'. You can buy pensions in various 'flavours' just as you buy bread in white/brown or wholemeal and buy Hovis or Tesco own brand. They are all bread.

The important things to remember are (a) On average, over working life, you need something in the order of 20%/25% of gross income going into retirement investments one way or another, and (b) it is a golden rule that you you should try to avoid 40% tax completely by putting enough into a pension to negate it.

So think first and foremost about these principles. Adjust your savings (investment) and spending patterns to ensure that you have decent assets at retirement (or preferably early retirement). This is the key. After that, then the 'lesser' job (although very important) is to optimise the type of investments (pensions) you use, taking into account charges and funds. The IFA should be able to assist here.

dunstonh

The word 'Stakeholder' will continue to lose its meaning. But it's just not important.

As it stands, the stakeholder pension is not compliant with the RDR rule changes as the fee agreed with the IFA cannot be taken from the product. So, post RDR the stakeholder pension will be largely pointless. Plus, NEST will start coming through at that time.

atush

I think you need to speak to HR at your employer and find out now what the pension you can join in 6 months entails. Find out the employer contributions, how much you can put in, and if they take lump sums. If they do, you can put in a lump sum (which you save up from now) that may take you out of HRtax.

In any case as a higher rate taxpayer do open cash and S&S isas to save tax on interest and growth now and in the future.

dantheman213

I spoke with HR today, and the pension on offer is non-contributory from a company perspective, so, it looks like I'll be going down the personal pension route. I'm in the process of setting up an appointment with a local IFA who has pension knowledge.

atush wrote: »

In any case as a higher rate taxpayer do open cash and S&S isas to save tax on interest and growth now and in the future.

Thanks, got these in place.