Pensions, what to do?

Autumnrust

Hi all,

Looking for a bit of kind advice on what to do in regards to a pension.

Few facts -

I am 27, and had been saving into a pension since I was 22. This was a company pension that was very good as for every contribution I made they matched.

I left the company in September and as a result my pension is currently on ice.

The total value of my pension is £9,557.56, and its fully managed and invested in medium risk companies.

My pension is with Friends Life (formally Friends Provident).

I currently earn between 60k-70k a year, varies due to commissions.

I want to start paying back into a pension, however my current company does not offer anything. Meaning I am now a little stuck with what I should do. I really know nothing about pensions, so the obvious thing for me to do would be start payments into my existing policy, but I am not sure if long term that is best.

What I am really looking for is some sound advice on what to do.

Anything you can contribute would be greatly appreciated.

Thanks a million

AutumnRust

nononsense_2

Very quickly, as you have left your previous employment your pension will remain preserved until retirement. As this is a company pension policy & you have now left their employment, you would not be able to continue paying into it.
As your new employment doesnt offer a company pension, if you wish to continue paying into a pension policy, you should investigate personal/stakeholder pensions.

dunstonh

Pensions are just like any retail product. They can go out of date compared to newer versions. However, some old versions can be gems that are worth keeping whilst others turn into Austin Allegros and betamax recorders as far as modern suitability is concerned.

So, you may be able to use the old FP contract but it may be better to look at modern versions. FP themselves changed their contract a few years back and the current one could be better (as could other providers).

You need to either DIY or use an IFA and look at the existing contract, how you want to invest and what you want in retirement and decide from there who is best to achieve that.

xylophone

http://www.which.co.uk/money/tax/guides/choosing-a-financial-adviser/choosing-a-specialist/
http://www.unbiased.co.uk/getting-advice-ifa
might be somewhere to look.

CannySaver_2

Hi

I'd agree with Dunstonh, you need to decide whether you are a DIY investor or you need advice. I guess this comes down to how much time you are prepared to commit to educating yourself about pensions v the cost of an IFA.

Whatever your choice I would spend some time reviewing the Friends Provident contract in terms of performance and charges, as well as looking at things like fund range. It might be a very cost effective contract with great performance and a range of other funds to choose from if the performance dips, on the other hand it might not!

You also need to factor into your decision auto enrolment, which will come in over the next few years, depending on the size of your employer. This means they will have to make pension contributions for you. Why not ask your employer what their plans are re auto enrolment, you never know they may be starting a scheme sooner than you think.

The Canny Saver

koike09

Concordo com o acima..

CannySaver_2

Neverland wrote: »

You need to start another pension and put all your income over the 40% tax bracket into it (your ability to do this might be limited by the budget next week)

You need to use low cost index trackers like Vanguard or Blackrock ishares to build your fund to keep the cost down

That's assuming that (a.) the OP doesn't need income above the 40% tax band to meet his or her day to day expenditure and (b.) that you believe trackers provide better returns than actively managed funds

I would suggest that charges, whether it is for the SIPP wrapper or the investment manager need to offer "value for money" as opposed to being "cheap", some actively managed funds have provided excellent returns, many of course do not. Whether you choose actively managed funds or trackers the key of course is to get the asset allocation right.

The Canny Saver

Autumnrust

Thanks all for your input, to be completely honest, I am not at all savvy with pensions and dont really have the apptitude to continually monitor one, therefore an IFA seems like the best idea.

I would also be intrested in looking at other long term investment options, would it be worth speaking to them about that aswell?

Neverland

CannySaver wrote: »

That's assuming that (a.) the OP doesn't need income above the 40% tax band to meet his or her day to day expenditure and (b.) that you believe trackers provide better returns than actively managed funds

I would suggest that charges, whether it is for the SIPP wrapper or the investment manager need to offer "value for money" as opposed to being "cheap", some actively managed funds have provided excellent returns, many of course do not. Whether you choose actively managed funds or trackers the key of course is to get the asset allocation right.

The Canny Saver

(a) Obviously. Or you could just manage your lifestyle to live on the income a basic rate tax payer gets

(b) the FSA uses a standard return of 6% per annum when doing projections on investment returns for equity funds (as an example), most actively managed unit trusts have total expenses at about 2% per annum (net return 4% per year), a cheap index tracker will have a TER of about 0.25% per annum (net return 5.7% per year). Therefore to justify his fat fee and six figure salary your active fund manager will have to outperform the index tracker by c. 50% EACH YEAR before fees. That ain't gonna happen for the average fund manager without taking out-landish risks

I'll stick with my trackers and cheap wraps thanks

The Cannier Saver

Autumnrust

Ok, thanks. Where do you suggest I start?

atush

IFAs are not all sharks as Neverland protests. You can use one, and you can ask for Fee basis over comission basis. There are some where who hate IFAs yet have never used them.

But I myself like to DIY most of my investments. You have to decide what is right for you. But if I were you, I'd jump on it and whack some money into a pension in the next few weeks so as to use this year's cintributions. As a HRTaxpayer you will get an immediate boost of 20%, plus you will get a further 20% off your taxes this year.

AS a side note, at a young age with such a high salary I would hope you are filling your cash and S&S limits each and every year. And if you haven't bought a home yet I would save for one.

You can start by going to www.unbiased.co.uk for a nearby IFA and take a meeting. In the meantime go to Cavendishonline and hargreeves lansdown websites and investigate the DIY method. If time is tight, I'd go ahead and opena DIY platform and deposit this years' cash. you don't have to invest it all immediately so could take some time to research. But you want it done by april 5th.