Where Do I Start With Pensions?!

ncfcstar

Hi Guys,

I've always found this forum to be a great place for advice, so thought I'd come back once again!

I'm currently 23 and working for a small company which does not have a pension scheme. After graduating from Uni I did work for my local council and had been paying into the LGPS, but obviously I can't pay into it anymore - or that is my understanding anyway.

So after investing money over the last 2 years, I know find myself with money which I previously didn't have in my pocket, so I want to make sure I continue with a pension.

This begs the question, where on earth do I put it? I'm willing to invest at least 10% of my income per month into a pension (I'm on roughly 16k p/a although this is subject to increase soon). Are the banks a safe haven for my money or not? And obviously there are more options in regards to exactly which pension scheme's you invest in!

A little guidance would be appreciated, I'm more than willing to put effort into finding the best scheme for me, but I literally don't know where to start.

dunstonh

Are the banks a safe haven for my money or not?

Do you mean you want to buy bank shares in the pension or do you mean you want to use cash savings or do you mean you want to buy a pension via the bank?

(none of those are attractive options)

You need to work backwards. When do you want to retire? how much do you want, how much will it cost you each month to achieve that, what level of indexation should be put in place, how do you want to invest and is the target growth rate used suitable for the type of investments you want, which providers offer the investments I want, how much will it cost to get it set up, how do you want to buy the pension (i.e. what distribution channel), what sort of review and rebalancing options do you want?

fairleads

ncfcstar wrote: »

Hi Guys,

I've always found this forum to be a great place for advice, so thought I'd come back once again!

I'm currently 23 and working for a small company which does not have a pension scheme. After graduating from Uni I did work for my local council and had been paying into the LGPS, but obviously I can't pay into it anymore - or that is my understanding anyway.

So after investing money over the last 2 years, I know find myself with money which I previously didn't have in my pocket, so I want to make sure I continue with a pension.

This begs the question, where on earth do I put it? I'm willing to invest at least 10% of my income per month into a pension (I'm on roughly 16k p/a although this is subject to increase soon). Are the banks a safe haven for my money or not? And obviously there are more options in regards to exactly which pension scheme's you invest in!

A little guidance would be appreciated, I'm more than willing to put effort into finding the best scheme for me, but I literally don't know where to start.

Not before you can make a decision based on your own research and judgement - otherwise wait until you're 85.

gadgetmind

fairleads wrote: »

Not before you can make a decision based on your own research and judgement - otherwise wait until you're 85.

Wow, that's harsh! It's good that a 23 yo is even thinking about this and we all start somewhere.

atush

For a start, on payday set up a DD to transfer your extra cash into an ISA.

Then build up 3-6 months salary sepnding in cash. This is for emergencies so you don'thave to take on debt. But don't touch it.

While you are doing the above, look at pensions- personal, stake-holder etc. Does your current employer have a pension scheme? Can you join? Do they contribute? How many employees are there? if they don'thave a pension scheme now they are going to have to offer one in the next few years.

ncfcstar

gadgetmind wrote: »

Wow, that's harsh! It's good that a 23 yo is even thinking about this and we all start somewhere.

Yeah not really helping me is it, hopefully I get to 85!

ncfcstar

dunstonh wrote: »

Do you mean you want to buy bank shares in the pension or do you mean you want to use cash savings or do you mean you want to buy a pension via the bank?

(none of those are attractive options)

Ok thanks for clearing that up for me, I'll leave the banks well alone then (I meant should I buy my pension through a bank).

I guess I'll have to think about what exactly I need, but obviously I aim to be earning a lot more money in the future so my payments would increase.

ncfcstar

atush wrote: »

Does your current employer have a pension scheme? Can you join? Do they contribute? How many employees are there? if they don'thave a pension scheme now they are going to have to offer one in the next few years.

Thanks for that, I do already move money into my ISA each month, but this is mainly for a deposit on a house which will need to be used this time next year.

As I explained, my current employer does not have a pension scheme, so that is why I'm looking to set something up myself, especially after paying into the LGPS over the last 2 years.

gadgetmind

ncfcstar wrote: »

As I explained, my current employer does not have a pension scheme, so that is why I'm looking to set something up myself, especially after paying into the LGPS over the last 2 years.

I opened a stakeholder with Aviva via Cavendish online for my wife. She paid in a £2880 lump sum (max for non tax payer) in year one and HMG made this up to £3600, which is nice. She now pays in £240pcm.

Up front fee was £35 and ongoing AMC (Annual Management Charge) is 0.55%

You could do similar and the advantage of a stakeholder is that that you can wind monthly payments right down to £16 a month (which HMG makes up to £20) for when you need every penny, and then crank it back up again later on.

I'm sure you realise that 10% of income won't give you a luxury retirement, but you're at the start of your career, so can hopefully start chipping in closer to 20% later on.

ncfcstar

gadgetmind wrote: »

I'm sure you realise that 10% of income won't give you a luxury retirement, but you're at the start of your career, so can hopefully start chipping in closer to 20% later on.

Thanks for that, I'll have a look into it. I definitely realise that I'll have to increase my payments in the future, and that is what I aim to do

gadgetmind

ncfcstar wrote: »

Thanks for that, I'll have a look into it. I definitely realise that I'll have to increase my payments in the future, and that is what I aim to do

Here is the usual pension calculator people here recommend.

http://www.hl.co.uk/pensions/interactive-calculators/pension-calculator

Note that everything is in gross terms and today's money. Starting where you are now, with 10% contributions, you'll be able to get roughly "same again" on the state pension, which is well short of comfortable never mind luxury.

Play with the advanced options if you like to pull down fees. Isn't that nice? Now close that box and look at the charts on the right at the effect of delaying for five years. Less nice.

Have fun!