Should I make pension contributions to my private pension?

worried_jim

I used to pay 3% and the company add 9% but they made some changes recently so I upped my contribution to the max (5%) so they give me the max 13% now. It is a very good scheme, I can choose how and where my money is invested, I put my contributions into a low risk fund and their contributions go to an Asian fund which has grown 24% this year. I monitor and review it every year and am in the process of transferring £22k in from a previous employer. I am now the office pension bore!

gadgetmind

worried_jim wrote: »

I put my contributions into a low risk fund and their contributions go to an Asian fund which has grown 24% this year.

While that's a great short-term result, it is a slightly odd strategy,

I am now the office pension bore!

If you *really* want to be able to bore for your country, and I do assure you that it will change your view of investing, get a copy of Smarter Investing by Tim Hale. £15 and a few hours of your time; very worthwhile IMO.

fairleads

Contributing 300/mth for 40 yrs should yield a far higher pension than £7,120. Suggest this figure might be based on the 75% of capital remaining after taking the 25% L/sum. However, even then its no great shakes.

fairleads

atush wrote: »

This makes absolutely no sense. I think you had your mind made up before you came here.

Its called diversification and makes perfect sense to me.

If the market falls, your ISAs will fall. And fall faster than the same would in a pension, as you don't have the tax relief on top.:eek:
20% fall is 20% across the board regardless of the wrapper.

You have just as much control over your pension as you do your ISA as you can choose what it is invested in.

On both counts most definitely not.

atush

Completely wrong.

It isn't diversification if you can do both. No one is saying pensions and ISas can't go hand in hand together and anyone who says you have to choose one or the other is stupid.

Or if both can be invested in the same assets, 8000 in an Isa and 10,000 invested in the same in a pension (after tax relief) are not going to be worth the same after a market fall of the same amt. I think you may haved failed your GCSE maths?

you can choose what your pension is invested in the same as an ISA.

Diversification is a great thing. In investments and wrappers. but you (and the OP here) are going to put all your eggs in the ISA basket. this is OK for Fairleads as he is not saying he is already retired. So not really in the same position as the OP.

Who has NO guarantee he will never be made redundant or bankrupt. In which case the OP would be worse off with Just ISAs, as they are subject to seizure against debt, and are taken into acct for benefits.

gadgetmind

atush wrote: »

No one is saying pensions and ISas can't go hand in hand together and anyone who says you have to choose one or the other is stupid.

I could not achieve my retirement goals just with pension income, nor just with ISA income. But have pros and cons, both have annual caps and limits, both have their tax advantages and disadvantages, so I'm using both.

Always have done, always will.

jem16

atush wrote: »

Or if both can be invested in the same assets, 8000 in an Isa and 10,000 invested in the same in a pension (after tax relief) are not going to be worth the same after a market fall of the same amt. I think you may haved failed your GCSE maths?

Sorry atush but no matter what the fall/rise, the only difference between the ISA and the pension will be the tax relief that the pension gains.

This of course can be an advantage if the tax paid in retirement is less than the tax relief gained but otherwise will be exactly the same in the end. That is after the tax-free lump sum taken.

That's why it's beneficial to have both pension and ISA as part of your planning as gadgetmind says.

gadgetmind

jem16 wrote: »

That's why it's beneficial to have both pension and ISA as part of your planning as gadgetmind says.

For me, ISAs have a few advantages.
1) Both myself and wife are at max on what we can do in pensions due to the £3.6k limit for non tax payers and other caps.
2) I can move approved share options directly into my ISA.
3) We can take ISA income at a greater rate than a pension to allow early retirement.
4) Said income is very tax efficient.

However, if (1) didn't apply, we'd be putting more into pensions even if it meant we'd have less going into ISAs. That tax relief is hard to beat.

fairleads

atush wrote: »

Completely wrong.

It isn't diversification if you can do both. No one is saying pensions and ISas can't go hand in hand together and anyone who says you have to choose one or the other is stupid.

Or if both can be invested in the same assets, 8000 in an Isa and 10,000 invested in the same in a pension (after tax relief) are not going to be worth the same after a market fall of the same amt. I think you may haved failed your GCSE maths?

you can choose what your pension is invested in the same as an ISA.
But one can't save for a house purchase ( before retirement day) by contributing to a pension fund but you can by investing with an Isa.

Diversification is a great thing. In investments and wrappers. but you (and the OP here) are going to put all your eggs in the ISA basket. this is OK for Fairleads as he is not saying he is already retired. So not really in the same position as the OP.

Who has NO guarantee he will never be made redundant or bankrupt. In which case the OP would be worse off with Just ISAs, as they are subject to seizure against debt, and are taken into acct for benefits.

This is what Alex p said

I think I won't contribute personally and just let the company contribute as I am concerned about this money going to waste since the growth of that money is out of my control. For me it makes sense to build up ISA as well as invest in property. Then a state pension + a limited private pension + interest + rental income should be more than sufficient during retirement.

Perhaps you should reread my comment again which was made in reply to the above and then ask yourself where did the op say they're putting all their eggs in the Isa? Neither the op nor I did.
All i did was agree with Alex p that the stategy above was a good one. Its called diversification.

webnibbler

worried_jim wrote: »

I pay 5% and the company adds 13%.

Goodness, that is a great deal! I wish the business I work for would consider a contribution even half that, currently it’s a fat zilch (I guess that’s what you get for working in retail right now where business is on a knife edge). To be fair they do pay in 100% of the NI savings on the salary sacrifice, but that is promptly swallowed up by the 1% AMC on the pension plan arrangement they made with SL !