Turning 40, pension worry

Sellifant

I upped my pension contributions last year at work (Salary Sacrifice £260 a month AEGON scheme). My fund value and contributions are higher than last year, but projected annual income has dropped from 6k to 4.5k. I also have 20k in previous pensions. I would never cancel my pension, but I also invest in ISAs (£300 per month - half cash / half funds), utility stocks occasionally, and have a small amount in an inflation linked bond. I also try to overpay the mortgage (now at 70K). With a young family and a cautious outlook I am worried my pension is going to turn out to be a white elephant! What would you advise considering I have 20 years at least to go before retirement... am I doing the right thing but worrying needlessly, or should I change tact? Thanks

regprentice

I've also seen my estimated future income drop by a similar margin on my most recent statement. I think it a combination of recent continuing economic turmoil and equality changes to Annuities ?

Everyone I speak to says buy to let is the only way to go but I think that ship sailed 5 years ago?

stinktankcynic

Your right to question your investments and review things. A lot of people are paying down loans and debts. The thing about pensions is that they can be messed around with by the government and finance/insurance industries.
They want you to invest so that you are not a burden on the state when your older and pay lots of charges and fees. A £100,000.00 "pot" sounds a lot, but if you cannot get access to it then it's Limited, Compared to having £70k - £80k in cash or ISA's. The pension taking age could be increased 60/65/67. Annuities might make even the biggest pot poor value. My doubts are the government means testing the state pension, increasing pension taking ages, annuities becoming worse due to longevity, the lump sum being removed, a one off fee being taken from the pot to cover old age care etc.

I would join a final salary scheme if I could, I would join a defined contribution scheme if the firm paid a lot in and you could pay a small amount. I would probably pay more in if I was a higher rate taxpayer. Paying more into a stakeholder for me is a hard choice, since i could put the same cash into a stocks and cash isa, and have greater access and control over it. A great deal of uncertainty is removed. I have pensions growing now, final salary, avc's and stakeholder. I have stopped paying in for a while. The new pension, my current schemes and perhaps a decade or two in nest with employer contributions will perhaps take me above the tax free allowance. This will be complimented with cash/stocks ISA's', premium bonds etc.

You can also save in ISA's now, and if pensions and annuities are a good deal later on, perhaps invest then to get tax relief and a decent annuity.

There is no one answer on this. A range of investments and not having all your eggs in one basket perhaps.

stinktankcynic

regprentice wrote: »

I've also seen my estimated future income drop by a similar margin on my most recent statement. I think it a combination of recent continuing economic turmoil and equality changes to Annuities ?

Everyone I speak to says buy to let is the only way to go but I think that ship sailed 5 years ago?

Buy to let. Tax returns. Worry about non paying tenants, repairs, damage. Future government changes. What about forcing people to sell second homes to pay for their state pension.

bigadaj

OP in my opinion you are doing right by saving into pensions, isas and paying down your mortgage. The exact split is personal choice, I paid off mortgage after contributing to isas up to limit, and have more recently upped my pension contribution.

Diversification is key, but yo let isn't attractive to me currently as whilst yields are high ish, the way people have made money historically is through capital growth and I think house prices will be flat for years to come.

Pension contributions are particularly valuable where you get higher rate relief, have employer contribution and or can salary sacrifice, if these conditions don't apply then I wouldn't go mad on pension saving.

regprentice

stinktankcynic wrote: »

Buy to let. Tax returns. Worry about non paying tenants, repairs, damage. Future government changes. What about forcing people to sell second homes to pay for their state pension.

I wasn't suggesting that I agreed...but lots of people seem to think that btl is a cash cow without thinking it through. My boss..my father in law both told me I'm a mug for not getting into btl. In the last year 5 people I know have all said they are going to let their primary residence out as if it were the easiest thing in the world.

I used to do the accounts for someone with a portfolio of 120 flats so I know first hand that its not easy. They lost cash month in month out and were seen as being there for capital appreciation.

Being aware of the pitfalls and hardships - I'm simply expressing my frustration that so many people who are supposed to be intelligent will happily jump on the bandwagon and condescend to people who express any other opinion.

Sellifant

Thanks for your thoughts guys. I'll keep diversified and try and pay down mortgage more keenly. I guess that will give me more options, sooner!

atush

I agree that in having a pension, ISAs (both cash and S&S) and overpaying mtg are the way to go. And keep increasing all 3, as salary increases over time. Once the mtg is gone, then you can save into the other 2 even harder.

MGCP

"My fund value and contributions are higher than last year, but projected annual income has dropped from 6k to 4.5k."

Is the drop in projected income not due to a change in rules as to how optimistic pension providers are allowed to be in their forecasting. So it used to be that they would project an increase based on 5, 7 and 9% per year, but because recently the stock market has performed rather poorly (january excepted!) the forecast rates have been reduced to 2, 5 and 8%.

I think the change has to be made by 2014, but some providers were using the new growth rates already, with the result that their forecasts had suddenly dropped.

Jack_Griffin

5 to 9% is pie in the sky stuff, I think the FSA has now stopped the !!!!!!!! pension companies used to pump out, so that is why the projections are down.

http://www.thisismoney.co.uk/money/pensions/article-2059074/Millions-face-pension-shortfalls-wildly-exaggerated-official-forecasts-4-growth-norm.html

More realistic is that the fund will just about keep pace with inflation in the long term. I think that is all you can plan for and even that isn't guaranteed.

PS Hey the site has a bull excrement filter, hence the !!!!!!!, LOL

bigadaj

!!!!!!!!, yes it does