29 and no pension yet. Does this sound like a good plan?

SG27

Well I'm 29 and have been thinking about pensions for several years but always been a bit confused by them. I consider myself financially astute in all other areas of financial matters though.

The reason I've held of starting one is that I've been saving every spare penny into a deposit fund for my first house and I considered that a bigger deposit and therefore less interest to pay and lower payments on the mortgage outweighed the need to start a pension as i could make increased pension payments later on due to lower monthly mortgage payments. Anyway we have a considerable sum saved now and are looking at a very affordable mortgage when we actually come to buy. So I think now is the time to get the pension in place.

I don't want financial advice so I'm planning to go through cavendish online and use maybe Scottish widows stakeholder pension. Initially I will pay in 14% of my income into a medium risk fund which I made change to higher risk when I consider the economic outlook to be improving. This I will increase as my income improves and once I know what I can comfortably afford once I'm settled into paying the mortgage. Alongside this I would also like use an ISA for additional retirement savings. (I will have other savings accounts for short/medium term so won't need to touch this) this would be using the longest term highest fixed rate products available and be a safety net to offset the higher risk pension funds. Also I like the idea of something I have total control of but without the high fees that SIPPs have.

Does this sound like a good plan? Or even possible? I'm only just working my way through the ins and outs of pensions so if I made any major errors or stupid mistakes it would be great to have them pointed out!

Thanks

jem16

SG27 wrote: »

I don't want financial advice so I'm planning to go through cavendish online and use maybe Scottish widows stakeholder pension.

A stakeholder is a pretty basic pension. At your age and the level of contribution you are considering, you should be considering a personal pension and you will probably find that an IFA using a multi-charge personal pension can probably beat the terms offered by Cavendish on a stakeholder pension.

Perhaps you need to consider your options a bit more.

SG27

jem16 wrote: »

A stakeholder is a pretty basic pension. At your age and the level of contribution you are considering, you should be considering a personal pension and you will probably find that an IFA using a multi-charge personal pension can probably beat the terms offered by Cavendish on a stakeholder pension.

Perhaps you need to consider your options a bit more.

My understanding was the difference between stakeholders and personal pensions was that stakeholders are cheaper with a smaller range of funds to choose from. Looking at what's offered I'm quite happy with that unless I've missed something?

jem16

SG27 wrote: »

My understanding was the difference between stakeholders and personal pensions was that stakeholders are cheaper with a smaller range of funds to choose from.

That was the case but things have moved on now as have charges. With a contribution of over £100pm a multi-charged personal pension can work out cheaper.

SG27

jem16 wrote: »

That was the case but things have moved on now as have charges. With a contribution of over £100pm a multi-charged personal pension can work out cheaper.

Thanks I'll look into that.

dunstonh

In 2001 when stakeholder pensions came out, they were the cheapest option. Nowadays you tend to find personal pensions are cheaper in most cases. Stakeholders can still be useful for some people (small premiums or short timescale typically) but most seem to come out better for a personal pension.

Loughton_Monkey

SG27 wrote: »

Well I'm 29 and have been thinking about pensions for several years .........

......Does this sound like a good plan? Or even possible?

At risk of boring others, I'll give you my normal caveat that it's more about spending than saving.

OK, 14% into a pension is a good start, albeit several years later than ideal. But every person is different. One definition of a 'perfect' pension might be one that provides enough income to fund your required lifestyle when you retire. Only you can define what lifestyle you choose to live - for the rest of your working life. And what it costs.

[To be extreme, some people choose to have a huge brood of kids, some will bend over backwards to fund their kids for life.... to the extent that only 30% max of their gross income is spent on their personal lifestyle. Their retirement needs will be much smaller than those without kids/divorce etc. who ramp up to a lifestyle of exotic holidays, cars, etc.]

Financial retirement planning requires ongoing regular recording and analysis of your spending on lifestyle and other [temporary/one-off] things, plus ensuring that enough goes into appropriate retirement investments (of which pensions are the main, but no sole vehicle). And like a huge tanker, it requires 'steering' for a very long time (years) with minor adjustments all the time, to ensure you reach the target.

When you build a major long term retirement planning spreadsheet for the first time (and age 29 is not too early) it cannot fail to be extremely basic, simplistic, and full of untested assumptions. But believe me, once you have, say, 10 years of history and hard experience at managing your finances, it will become a useful roadmap for the future. Used properly, it could ultimately motivate you to save/invest even harder and allow you to answer the question "At what age can I retire and maintain my desired lifestyle as long as I live?"

TheMoneySavingator

I'm 25 and haven't got a pension!!!! Massively confused about what to go for especially because I hear people saying there is no point at the minute with the interest rates so low!!!!
Cant really afford much either at the minute as we have just moved into a new house with a new born so every bit of money we have goes on living costs!

JoeCrystal

TheMoneySavingator wrote: »

I'm 25 and haven't got a pension!!!! Massively confused about what to go for especially because I hear people saying there is no point at the minute with the interest rates so low!!!!
Cant really afford much either at the minute as we have just moved into a new house with a new born so every bit of money we have goes on living costs!

You still need to make an effort to save for a retirement one way or another. As you are still young comparably to these in their forties or fifties, you can get away with making lower contribution to your potential pension. For a start, do you have a pension scheme at work and if so (and it is important!), does your employer contribute to it?

As for interest rate, that does not really matter since virtually vast majority of pension funds are invested in various assets/sectors/regions. To be honest, the best thing is to stop listening to people making presumptions and start to read more about pensions.

Cheers

Joe

SG27

TheMoneySavingator wrote: »

I'm 25 and haven't got a pension!!!! Massively confused about what to go for especially because I hear people saying there is no point at the minute with the interest rates so low!!!!
Cant really afford much either at the minute as we have just moved into a new house with a new born so every bit of money we have goes on living costs!

You've still got 4 years on me!!

Definitely start looking into it now. I wish I had done years ago but better late than never. The pension section of this website is a good start and if you have any questions just post a thread on it, there are lots of very knowledgable people here!

TheMoneySavingator

JoeCrystal wrote: »

For a start, do you have a pension scheme at work and if so (and it is important!), does your employer contribute to it?

No, our work doesn't have a pension scheme, its just a small company so no real benefits as such.

How much do people typically put into a pension, I haven't got a clue. 'small contribution' is this £30 a month or more like £200??
AT A PUSH I might be able to save £80-£100 a month but then its deciding on what type of pension.

Looks like I need to do some research into it as I don't even know the different types of pensions. WOW I sound stupid!

Thanks all for your help!