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Hello
Being a complete and utter novice with Pensions im hoping other more experienced MSE'rs in this area with be able to give me some *advice* (constructive criticism)
Basically, im 23 years old and belive now is the time to start thinking of Pension/Retirement Investment.
Im thinking i have the following options - all with their pros and cons (although im not sure what these are ... help!)
So .. options
1 - Maximise Cash ISA - £3k per year for 41 years - I understand that this will net some £497k - however have been told as a result of inflation (should it continue at its current trend) that this will be closer to £75k in todays money (is this correct??)
2 - Join Company Partnership ShareScheme Invitation - Basically, I can purchase £125 /month of shares at Gross Wage (£83.75) and my company will give me £30 of shares free. From initial calculations, the share price would have to drop by 44% to be at a stage of parity (share value against Net Wage) however, i am yet to understand the benefits of 'Cost Averaging' (if the share price falls, i get more for my money) There are also no purchase fees so value does not start off in negative equity
3 - Purchase a number of properties over the forthcoming years and living off the rent recieved from Tenants (assuming mortgage paid in full)
4 - Invest in a Private/Company Pensions Scheme - I work for LloydsTSB but have absolutely no idea what they offer? Is this information available anywhere?
5 - A combination of 1, more or all of the above....
As i said, complete novice in this area but i hope i am on the right track with ideas. I know a lot of them (if not all) are outside of my control with reference to returns but I clearly have time on my side to change options latter in life. For reference, My Girlfriend and I will be in the position (in 4 1/2 years) of having near £1.2k /month spare cash (min) as our mortgage is due to be o/payed until completion by this date. Not sure if this opens of further options elsewhere, but am open to suggestions
Thankyou in advance....
Being a complete and utter novice with Pensions im hoping other more experienced MSE'rs in this area with be able to give me some *advice* (constructive criticism)
Basically, im 23 years old and belive now is the time to start thinking of Pension/Retirement Investment.
Im thinking i have the following options - all with their pros and cons (although im not sure what these are ... help!)
So .. options
1 - Maximise Cash ISA - £3k per year for 41 years - I understand that this will net some £497k - however have been told as a result of inflation (should it continue at its current trend) that this will be closer to £75k in todays money (is this correct??)
2 - Join Company Partnership ShareScheme Invitation - Basically, I can purchase £125 /month of shares at Gross Wage (£83.75) and my company will give me £30 of shares free. From initial calculations, the share price would have to drop by 44% to be at a stage of parity (share value against Net Wage) however, i am yet to understand the benefits of 'Cost Averaging' (if the share price falls, i get more for my money) There are also no purchase fees so value does not start off in negative equity
3 - Purchase a number of properties over the forthcoming years and living off the rent recieved from Tenants (assuming mortgage paid in full)
4 - Invest in a Private/Company Pensions Scheme - I work for LloydsTSB but have absolutely no idea what they offer? Is this information available anywhere?
5 - A combination of 1, more or all of the above....
As i said, complete novice in this area but i hope i am on the right track with ideas. I know a lot of them (if not all) are outside of my control with reference to returns but I clearly have time on my side to change options latter in life. For reference, My Girlfriend and I will be in the position (in 4 1/2 years) of having near £1.2k /month spare cash (min) as our mortgage is due to be o/payed until completion by this date. Not sure if this opens of further options elsewhere, but am open to suggestions
Thankyou in advance....
Proud To Be Dealing With My Debts - 1420 Days To Go!
LBM: £103,592.98 / Currently £78,500.08 - Down 24.22% / Mortgage: £92,800.00 / Loan: £17,284.21 / Overdraft: £450.09 / C/Card 0%(October 08): £5,601.54 / C/Card 0% (January 09): £1075.22 / Child Care: £137.80Share Investments: £51,390.74 / Money Owed From GS: £5,812.61
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Comments
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1 - Maximise Cash ISA - £3k per year for 41 years - I understand that this will net some £497k - however have been told as a result of inflation (should it continue at its current trend) that this will be closer to £75k in todays money (is this correct??)
Interest rates would see you just about keeping pace with inflation over the long run. 41 years in cash is extremely wasteful.2 - Join Company Partnership ShareScheme Invitation - Basically, I can purchase £125 /month of shares at Gross Wage (£83.75) and my company will give me £30 of shares free. From initial calculations, the share price would have to drop by 44% to be at a stage of parity (share value against Net Wage) however, i am yet to understand the benefits of 'Cost Averaging' (if the share price falls, i get more for my money) There are also no purchase fees so value does not start off in negative equity
Involves free money and providing employer has good prospects and potential then its useful for medium term purposes. You would need to keep an eye on CGT if doing it over the long term. Possibly utilising self select ISAs on each event.3 - Purchase a number of properties over the forthcoming years and living off the rent recieved from Tenants (assuming mortgage paid in full)
Involves borrowing money and the risk that goes with that. Also leaves you open to quite large tax bills later in life. An option certainly but is it the right time to consider that? Do you have experience enough in this area to pick the right property? do you have enough liquid reserves to cover interest rate increases when the rent does cover the mortgage or a property is trashed or goes without rental income for a period?4 - Invest in a Private/Company Pensions Scheme - I work for LloydsTSB but have absolutely no idea what they offer? Is this information available anywhere?
You no longer have the final salary scheme but LTSB pension does offer free money and if you are not in that already, then you are throwing money away. Human Resources will give you info on the scheme.
You havent mentioned stocks and shares ISAs which you should throw into the mix as well.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Firstly congratulations on thinking ahead at such a young age.
Secondly, do something. Start today if possible. If you're really unsure, do something thats not irreversible.
Thirdly, I'll address your ideas (btw these are just my suggestions / experience)1 - Maximise Cash ISA - £3k per year for 41 years - I understand that this will net some £497k - however have been told as a result of inflation (should it continue at its current trend) that this will be closer to £75k in todays money (is this correct??)2 - Join Company Partnership ShareScheme Invitation - Basically, I can purchase £125 /month of shares at Gross Wage (£83.75) and my company will give me £30 of shares free. From initial calculations, the share price would have to drop by 44% to be at a stage of parity (share value against Net Wage) however, i am yet to understand the benefits of 'Cost Averaging' (if the share price falls, i get more for my money) There are also no purchase fees so value does not start off in negative equity
This could be a good option if you are confident about the company, but I personally wouldn't put all my eggs (job and money) in one basket and would only use this in conjunction with other investments.3 - Purchase a number of properties over the forthcoming years and living off the rent recieved from Tenants (assuming mortgage paid in full)4 - Invest in a Private/Company Pensions Scheme - I work for LloydsTSB but have absolutely no idea what they offer? Is this information available anywhere?
I agree that you should consider stocks and shares ISAs.
If it were me and I had £1200 pcm to save and invest, I'd put money into things in the following order
1. Company pension to get free money
2. Cash - only until had savings equal to 6 mos expenditure
3. Company shares scheme
4. Stocks and Shares ISA
5. Additional SIPP/Private/Stakeholder Pension
but I'm not interested in being a landlord.thoughts on personal finance @ plonkee.com0 -
Hello
Thank you both for your replies.
I have decided, after a couple of days of consideration to ....
1 - ISA - Going to keep a few years worth of ISA reserves, but have dismissed idea for long term.
2 - Partnership Scheme - Have decided to purchase the full £125 allowed, starting this payday. My brother also works for Lloyds, so he is purchasing £50 worth on my behalf. I have to keep the Partnership Shares and Matching Shares for 5 years for them to be complete Tax + Ins Free. I have also decided to re-invest dividends, which have a 3 year holding period.
3 - Property Purchase - The plan is to comletely pay off our mortgage in 4 1/2 years (currently £93k) after which we are going to purchase a second property for sale/rental investment. This will give us enough time to see where the housing market is heading, and hopefully increase my understanding of either options (Rent/Sales) benefits.
4 - Am speaking to HR on monday to obtain all relevant documents for Pension Contributions. Going to start off with a small(ish) amount (need to look through our S.O.A to determine figure) however im hopefuly that an Internal Job Interview on thursday will be successful, meaning a £9k per year pay increase + associated benefits.
5 - Additional SIPP/Private/Stakeholder Pension - Havn't so far, but am going to look into these and the controls/costs associated.Proud To Be Dealing With My Debts - 1420 Days To Go!LBM: £103,592.98 / Currently £78,500.08 - Down 24.22% / Mortgage: £92,800.00 / Loan: £17,284.21 / Overdraft: £450.09 / C/Card 0%(October 08): £5,601.54 / C/Card 0% (January 09): £1075.22 / Child Care: £137.80
Share Investments: £51,390.74 / Money Owed From GS: £5,812.610
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