Can I invest in a different way?

cheesygrin2k

Hi there,
I wonder if someone may be able to offer me some advice?
Recently my mum, after paying into her pension for over 25 years, discovered that it actually wasn't even worth the paper it was written on, only expecting to receive £500 a year from her company pension.

This got me thinking about my own pensions and I sarted looking at annual statements etc of those I have. I currently have 2 pensions one with my current employer with not much in at all and a second from my old employer with about 13k in it that I do not pay into anymore. I noticed that the pension that I no longer pay into is currently losing around £200 a year because when the company take their £26 fee they take it in the form of shares rather than as the cash and so actually I am losing a lot. (Teach me not to read the fine print!) Anyway, if I carry on there will also be nothing in it by the time I retire.

My current company pension is not earning much of a return either although it is growing from where I pay into it and so does my employer. I was thinking about hiring a financial advisor to invest some savings in stocks and shares rather than in savings accounts for my retirement/future anyway and I wondered if it is an option to be able to take that 13k and ask someone to invest it with my savings not in a pension?

Is this possible or do I have to put it in another pension. I am just really wary that obviously after 25 years my mum has nothing and I do not want to be in the same boat. I always thought having a pension was a good thing and now I am thinking it isn't.

Any advice would be much appreciated.
Many Thanks

Linton

Your problem isnt pensions as such. Nowadays pensions can invest in anything an S&S ISA can if not rather more. Two things determine the value of a pension pot. One is how much you put into it - perhaps your mother just put a fixed small amount into hers and didnt increase the contribution with inflation. To get something worthwhile from a pension you need to put a reasonable amount of money into it.

The second driver of pension value is what you choose to invest in. I am surprised that your pensions havent increased in value significantly over the past few years as share prices have nearly doubled since the credit crunch crash in 2009. Perhaps you can let us know something about your current pension - what funds are you using? Can you gives us some idea of contributions, timescales, and values.

Your ex employer's pension sounds like an old scheme. Though just taking an annual £26 from a £13K pot wont have a major effect on the pension value. It may be worthwhile seeing if you can transfer it into your current pension. That would be dependent on the details of the two schemes. You cant take the £13K out of the pension, but you can put it into a better one.

dunstonh

My current company pension is not earning much of a return either

I doubt that is the case. If it is like most company money purchase schemes it wont have a large investment range but it will have most areas covered.

I noticed that the pension that I no longer pay into is currently losing around £200 a year because when the company take their £26 fee they take it in the form of shares rather than as the cash and so actually I am losing a lot.

How does a £26 fee cause a £200 loss? You say it is in shares. That is unlikely. It is more likely to be funds. Cancelling units to pay charges is one of the methods. Other ways include deducting charges within the fund. It doesnt change the end result though.

I was thinking about hiring a financial advisor to invest some savings in stocks and shares rather than in savings accounts for my retirement/future anyway

A pension can invest in stocks and shares. Funds are made up of stocks and shares as well. A pension is just a container for your investments. A pension doesnt make or lose money. The investments within it do that.

Recently my mum, after paying into her pension for over 25 years, discovered that it actually wasn't even worth the paper it was written on, only expecting to receive £500 a year from her company pension.

They are only as good as what you pay into them. A £500 a year payment would suggest she had the tiny pension pot of around £10,000. You say she paid for over 25 years. Lets say it was exactly 25 years. That means she was paying around £10pm. or £120 a year. So, a £500 a year income for 25-30 years after paying £120 a year for 25 years seems very good.

The problem is she paid in peanuts and she is getting back peanuts.

molerat

Strange how you say it has lost value. My small company pension (group defined contribution with Standard Life) which I have not contributed to since 2009 has doubled in value since then and considering my contributions were only about 15% net of that it is not too shabby.

atush

This got me thinking about my own pensions and I sarted looking at annual statements etc of those I have.

So why didn't your mother look at her pension statements? They would clearly have shown she wasn't paying in enough.

My current company pension is not earning much of a return either although it is growing from where I pay into it and so does my employer.

I suggest you look again and do tell us what exactly you are investing in. As our pensions have gone up substantially.

hiring someone at a cost to review your pensions and investment strategy might be an idea for you if you are not inclined to learn. but not outside the pension (although having some savings outside in cash and S&S isas is a good idea long term) as you woukld lose the tax relief portion paid into your pension (and your employer's contribution if you decided to leave the work pension).


The advisor would help you decide if moving your existing pensions to the work one or elsewhere is a good idea.

https://www.unbiased.co.uk