Pension Advice Sort

tony4147

I’m 49 y/o and have saved into private pensions most of my working life, even though the majority of my peers haven’t done a pension and have no intention of doing one.

At the moment I have 2 frozen pensions with Standard Life that are worth approximately a total pf £80,000. One is an old Executive pension from when I had my own Company and the other is where my contracted out contributions were paid.

About 60% of my SL money is in the ‘pension with profits’ fund, which has a GUARANTEED growth rate of 4% (this came about when SL floated), I don’t know if this is good or bad in the present climate. The rest is in the 'pension millennium with profits fund).
Also apparently with the Executive pension I’m not tied to the 25% lump sum, I can take 51%, bear in mind these are frozen pensions.

I have a pension that I started a couple of years ago with Scottish Widows that is worth £25,000 (in addition to the above) and I contribute £500 gross / month and intend to increase these contributions by 5% every year, this is via salary sacrifice.

I’m hoping to retire between 60-65 and was looking to have an income from my private pensions of something in the region of £1.5-2K/month and then the state pension on top at 66/67/68 whatever age is when I get there.

Using the calculators on the net it would appear that I’m looking at a substantial shortfall. Any ideas how I can make my money work better?

Unfortunately I don’t have a great deal of trust in private pension Companies so the £500/month (+5% increase) is about the limit I want to contribute into these Companies.

Over the years I’ve had 3 different financial advisers and they all seem to sit on the fence (which is understandable to a certain extent) but their idea is to just get the biggest pot I can with the lowest annual management charges.

richbeth

tony4147 wrote: »

Unfortunately I don’t have a great deal of trust in private pension Companies so the £500/month (+5% increase) is about the limit I want to contribute into these Companies.

Hi,
it looks like you need to be saving ca £1k pm gross to get the kind of income you're looking for, can you afford this ? are you a higher rate tax payer ? also do you know what charges you're paying at the moment ?

Re lack of trust private pension companies, times/laws have changed and your investments are ringfenced so you shouldn't worry about this. However you could alwyas have 2 pensions or move them all to a SIPP where you have more control, you could also look at using ISAs so put £500pm into a pension then what you can afford into a S&S ISA.

I'm sure someone will be along with some investment advice but it's likley to be something along the lines of go for low cost trackers that are globally dispersed to try and get the biggest pot you can with the lowest charges

good luck,
RB

Linton

I am afraid that primarily it isnt a matter of making your money work better but rather paying more into your pension. The pension calculators should help you gauge how much. I assume you are self employed otherwise an easy way of getting more money is to be part of your employers pension scheme.

You say that you have little faith in pension companies. But these days pension companies are purely handling the administration of you investing your money into funds which are usually managed by someone else. Pension companies arent very different to S&S ISA providers. The returns come from the funds you choose to invest in rather than the pension company. So I dont see what lack of faith in a pension company means.

The key to making your money work is the funds you invest in. The SL 4% guaranteed WP return of 4% is mediocre if the actual returns arent any better but it may come with a guaranteed annuity rate which could be very valuable. If not you could transfer elsewhere but for a WP fund this can be expensive. More investigation is needed here. What funds have you chosen for your Scot Wid pension?

dunstonh

At the moment I have 2 frozen pensions with Standard Life that are worth approximately a total pf £80,000. One is an old Executive pension from when I had my own Company and the other is where my contracted out contributions were paid.

They wont be frozen. They will be paid up. Frozen means something different.

Also apparently with the Executive pension I’m not tied to the 25% lump sum, I can take 51%, bear in mind these are frozen pensions.

EPPs have the ability to take a greater than 25% tax free cash. So, that does not surprise me.

Unfortunately I don’t have a great deal of trust in private pension Companies so the £500/month (+5% increase) is about the limit I want to contribute into these Companies.

Why dont you have trust? Most are just administrators in the investments you choose. The days of you actually investing in that provider have long gone (although still possible with a small number - indeed, Std Life is one where you are almost doing that)

Over the years I’ve had 3 different financial advisers and they all seem to sit on the fence (which is understandable to a certain extent) but their idea is to just get the biggest pot I can with the lowest annual management charges.

There are over 60,000 investment options and an infinite number of variations available. Investing is about opinion. You will never get consensus on what is best as that would be impossible. However, their objectives seem fine.

The primary factor in anything you are putting money towards is that more you pay, the more you will get back. Investing in different ways will have an impact but not as much as the amount you pay. Also, if you use lower risk assets with lower rates of returns, you will need to pay more in to make up the shortfall. If you use higher risk assets with the potential for higher returns but the potential for lower than you may have a shortfall. Only way to address a shortfall is to pay in more.

tony4147

I am a higher rate tax payer, hence why I've gone the salary sacrifice for contributions.
The Scottish Widows is invested in Pens Portfolio Two, with an annual management charge of 1.25%, there's not a lot I can do with this pension as it is a group pension set up by the company I work through and they won't do salary sacrifice into any other scheme.

The SL pension concerns me a lot as 4% does seem poor even though it's guaranteed, there doesn't appear to be any guaranteed annuity rate tied in with this.
I'm nervous with doing anything with my SL pension as it is the vast majority of my pot but I have been thinking that 4% isn't good enough. Like I said before financial advisers haven't really said much about this pension.

I can't afford £1000/month, maybe another £100 or £200 into an ISA on top of the £500 I do for the Scottish Widows pension.

As for stocks and shares, pension funds etc, I don't really know whats a good one or average one.

somethingcorporate

The issue is fundamentally the options you choose are going to have minimal impact on your return, the far important issue is the amount you are putting in.

It's not enough to give you the level of income you require.

Linton

Just looked up the SW pens portfolio 2: It looks pretty average with performance very close to a FTSE Allshare tracker though it wasnt hit quite so badly during the credit crunch crash. So I would not see this as a major source of concern regarding potential poor perfomance. However it would be nicer if you could have spiced it up with a few riskier but higher potential return investments.

If you want to focus on putting together sufficient money to retire a bit early then putting spare money into an ISA is fine - as long as its an S&S ISA. A cash ISA wont help much.

Are you still a higher rate tax payer even after paying your pension? If yes, then paying more into the pension and gaining the 40% tax relief is very efficient, much more so than putting the after tax cash into an ISA.

tony4147

somethingcorporate wrote: »

The issue is fundamentally the options you choose are going to have minimal impact on your return, the far important issue is the amount you are putting in.

It's not enough to give you the level of income you require.

Agreed, but ARE my existing pensions doing ok from a performance point of view? especially the SL? or should I be moving into other funds etc?
Understanding different funds etc is not easy for the layman, even reading through yearly pension statements isn't made easy.

I can pay some more money but I don't want to be throwing good money after bad if the funds aren't performing.

SS ISA again, how do I know a good one from a bad one? I did have a Santander SS ISA a few years ago and after 4 years I made zero.

xylophone

their idea is to just get the biggest pot I can with the lowest annual management charges.

So what's not to like as the young people say nowadays?;)

To be serious however....

Does your employer provide a pension scheme? You mention salary sacrifice but do not make this point clear.

If there is no occupational pension scheme, then at some point there will have to be.

Nobody on this site can actually give you advice on your pension as this is a regulated activity.

If you do not understand your options then clearly you do need advice but it appears that you have not been very satisfied with what you have had so far.

Either you must do enough reading and research to "do-it yourself" or you try another IFA, making sure that you choose one with the highest possible qualifications and expertise in pensions?

You might start here? http://www.unbiased.co.uk/find-an-ifa-search

tony4147

The scheme provided by my employer is the Scottish Widows, the employer doesn't pay into this scheme, but he sorts all the salary sacrifice out.

The advice I've had so far I don't consider to be very good, as I see my SL pension growing by only 4% a year and I don't know if it should be doing better or not.

xylophone

the employer doesn't pay into this scheme,

http://www.moneysavingexpert.com/news/protect/2012/04/the-great-pensions-shake-up-what-you-need-to-know