IFA meeting next week. Will my IFA do this for me...?

sandsy

I think the IFA has taken a realistic view, given your circumstances over the forthcoming months.
I'm pleasantly surprised actually!

Nine_Lives

My understanding of NEST was as a minimum:

4% from the employee. I thought this was off the gross, so 4% of £18000 would be a yearly contribution of £720.
3% from the employer, so £540
1% tax relief (i think i read): £180

Making a yearly total of: £1,440

So based on what you've just said, i've TOTALLY misunderstood it all (surprise surprise).

dunstonh wrote: »

The position I have taken with my clients is that they start a pension with level premiums (rather than annually increasing) and will use NEST as the top up when it comes in for them but keep both running. Or alternatively, use S&S ISAs to ensure something is put aside but allows flexibility of movement if something different occurs or comes along. Doing nothing could end up being years wasted.

* What are level premiums vs annual increase? I don't know what a typical average inflation increase would be (in percentage termss) so i was looking at increasing annually based on this - such as 3%/4%/5% (whatever).Why do you suggest these over an annual increase?
* I'm sure i read that it was 8% (NEST). So you are advising (your clients) to go for a pension & then when NEST comes along, pay into this as well as? So they've got 2 running side-by-side?
* On that note ... could your employer pay into your personal pension that you've set up?


EDIT: Just looked up those level premiums. I would've thought as a late starter, annual increase would've been better for my case.

JoeCrystal

K_P83 wrote: »

My understanding of NEST was as a minimum:

4% from the employee. I thought this was off the gross, so 4% of £18000 would be a yearly contribution of £720.
3% from the employer, so £540
1% tax relief (i think i read): £180

Making a yearly total of: £1,440

So based on what you've just said, i've TOTALLY misunderstood it all (surprise surprise).

Or it could the case of my misunderstanding of the system and you are right. I am always happy to be corrected!

Cheers

Joe

Nine_Lives

JoeCrystal wrote: »

I am always happy to be corrected!

And i'm always getting corrected :rotfl:

My guess is either you're right or we're both wrong & nothing has been set in stone yet.

jem16

K_P83 wrote: »

My understanding of NEST was as a minimum:

4% from the employee. I thought this was off the gross, so 4% of £18000 would be a yearly contribution of £720.
3% from the employer, so £540
1% tax relief (i think i read): £180

Making a yearly total of: £1,440

So based on what you've just said, i've TOTALLY misunderstood it all (surprise surprise).

Joe is correct from the qualifying earnings point of view. Also the 8% will only be from 2017 onwards.

http://www.nestpensions.org.uk/schemeweb/NestWeb/public/NESTforSavers/contents/contribute-to-nest.html

* What are level premiums vs annual increase? I don't know what a typical average inflation increase would be (in percentage termss) so i was looking at increasing annually based on this - such as 3%/4%/5% (whatever).Why do you suggest these over an annual increase?

Level premiums are where it stays the same all the time with no increases. Annual increase would usually be in line with at least inflation but could be whatver you choose.

* I'm sure i read that it was 8% (NEST). So you are advising (your clients) to go for a pension & then when NEST comes along, pay into this as well as? So they've got 2 running side-by-side?

You can have as many pensions as you wish. The NEST to get the employer contribution and another to give you more choice.

* On that note ... could your employer pay into your personal pension that you've set up?

A few employers would do that but they are in the minority.

As to the IFA's advice - it seems sound.

S&S ISAs use exactly the same investments as a pension. The pension and ISA are simply tax wrappers with different rules.

Nine_Lives

See, as i said in the savings forum Jem, that it what i just don't get.

The IFA (the professional) says i should go for S&S ISAs. The experts (you guys (>I< consider you experts, so shush!)) agree with the professional.

I don't know my left from my right after all this so can't really form a suitable opinion right now.

I know that the ISA & the pension are just wrappers & can invest in the same...
So i question it like this:

I'm aware you can have your ISA money today, pensions you can't.
I'm aware you get taxed on your pension, on ISAs you don't.
I'm aware you get tax relief on pensions, on ISAs you don't.

Yet i'm being advised S&S ISAs at the moment.

My question is WHY when i could approach a fund with an ISA & get £xyz in return. I could then access this money whenever i liked.
or
I could approach a fund with a pension & get £xyz in return PLUS tax relief, but not be able to touch it until i'm 55.

Key point here is i don't WANT to access this money until i'm 65. I know you never know what's round the corner, but even still.

Why go the ISA route when you will get bigger returns for the pension (tax relief)?



That is my main question now.

I would also ask:

1) Would your opinion change once i got my own house?
2) Would your opinion change if i upped the contribution to £200? (My gf is considering a £200 monthly contribution, yet her approach to risk is low-medium, whereas mine is medium-high).

bristol_pilot

K_P83 wrote: »

Why go the ISA route when you will get bigger returns for the pension (tax relief)?

Because the pension itself is taxable*. Pensions are all about higher-rate tax relief and significant employer contributions - without these, it is debatable whether a pension is worthwhile.

I too am pleasantly surprised that the IFA gave you sound advice. I'm kind of surprised they came to see you at all, as the prospects for selling you a product without mis-selling were so slim.

You are on a low wage. Between you, you and the future wife have a relatively low level of savings with which to buy a house and establish an emergency fund. Perhaps as you currently live at home you do not have a full appreciation of just how expensive it is to provide for a roof over your head and pay daily bills, travel to work etc. Start thinking about investing when you own a house and have £100k in the bank. Right now you need to be a saver.

*apart from the lump sum and your annual tax allowance

Linton

K_P83 wrote: »

So i question it like this:

I'm aware you can have your ISA money today, pensions you can't.
I'm aware you get taxed on your pension, on ISAs you don't.
I'm aware you get tax relief on pensions, on ISAs you don't.

Yet i'm being advised S&S ISAs at the moment.

My question is WHY when i could approach a fund with an ISA & get £xyz in return. I could then access this money whenever i liked.
or
I could approach a fund with a pension & get £xyz in return PLUS tax relief, but not be able to touch it until i'm 55.

Key point here is i don't WANT to access this money until i'm 65. I know you never know what's round the corner, but even still.

Why go the ISA route when you will get bigger returns for the pension (tax relief)?



That is my main question now.

I would also ask:

1) Would your opinion change once i got my own house?
2) Would your opinion change if i upped the contribution to £200? (My gf is considering a £200 monthly contribution, yet her approach to risk is low-medium, whereas mine is medium-high).

If you go for an ISA now, you can always move the proceeds into a Pension later without losing any tax relief. But you could also chose to put them into a house deposit. So it leaves your options open whilst you dont seem to have yet reached the boring stability of middle age.

If you had bought a house then IMHO it would be reasonable to have more money going into the pension. But you still dont want to forget the ISA. At stressful times, knowing that I had enough to live on for a year or two without being dependent on work certainly helped me, even though I didnt use it until I chose early retirement.

fairleads

K_P83 wrote: »

Why go the ISA route when you will get bigger returns for the pension (tax relief)?

Because the so called higher return of the pension fund (due to the taxrelief) does not of itself guarentee us a higher retirement income. Thats whats known as a bottom up approach to retirement investing - Investment decisions based on immediate gratification (contributions enhanced by taxrelief) - rather than looking at the bigger picture which is, amongst other things, maximising tax free income in retirement.

Nine_Lives

Thanks guys.

I hear what bristol pilot said all the time - i don't know what it's like to run a house (as far as costs go). That's very true, but at the same time, if the calculators are anything to go off, then i can cover the mortgage payment & the extra bills reasonably well (i think), unless i'm missing some bills (possibly). The difficult one will be getting the gf saving as well.

I looked at the moneysupermarket website & there were a choice of low-risk, medium-risk, high-risk funds for the S&S ISA.

The thing is, when i'm looking at 10x medium>high risk funds, it's a case of, well they all match my approach to risk, so WHICH do i select.

I hope the chaps in the ISA subforum are as helpful as you guys. There seems to be a quick turnover here in the pensions forum, which satisfies my barrage of questions I hope the ISA subforum is the same.

Thanks guys.