I'm 31, do a really need a pension?

bertpalmer

I'm 31, self employed. Bought a house a few years ago and am currently paying off the mortgage with my wife. Only about 20 years to go!

I do quite a bit of investing (currently have about £60K in ISA stocks and shares) and plan to maximise my allowance every year and keep on investing in low cost equity funds. Gradually moving to more stable funds as I get older.

Now I don't really know all that much about pensions, but what I've heard hasn't been particularly positive. Specifically their growth rate and buying an annuity at retirement. I plan on building up my ISA and maybe owning a buy to let property - is this enough? Should I really worry about opening a pension or a SIPP?

Thanks in advance. I guess it might be good to have another safety net, but am I missing a trick?

jem16

bertpalmer wrote: »

Now I don't really know all that much about pensions, but what I've heard hasn't been particularly positive. Specifically their growth rate and buying an annuity at retirement.

Pensions are only a tax wrapper just the same as an ISA. The exact same investments can be placed inside a pension as can be placed inside an ISA. So if you're happy with the growth rate on your ISA then you would be happy with the growth rate in the pension plus it would also gain from tax relief.

As to an annuity you don't have to buy an annuity. You can use drawdown to provide your income.

I plan on building up my ISA and maybe owning a buy to let property - is this enough?

Depends on how much you want in retirement. BTL can have its problems and you would probably be needing more than one to provide any meaningful income.

Should I really worry about opening a pension or a SIPP?

Thanks in advance. I guess it might be good to have another safety net, but am I missing a trick?

Are you a higher rate taxpayer? You also say you're self employed. A pension can be very advantageous from a tax point of view.

chucknorris

bertpalmer wrote: »

I'm 31, self employed. Bought a house a few years ago and am currently paying off the mortgage with my wife. Only about 20 years to go!

I do quite a bit of investing (currently have about £60K in ISA stocks and shares) and plan to maximise my allowance every year and keep on investing in low cost equity funds. Gradually moving to more stable funds as I get older.

Now I don't really know all that much about pensions, but what I've heard hasn't been particularly positive. Specifically their growth rate and buying an annuity at retirement. I plan on building up my ISA and maybe owning a buy to let property - is this enough? Should I really worry about opening a pension or a SIPP?

Thanks in advance. I guess it might be good to have another safety net, but am I missing a trick?

I've got a bit in shares too, the way I look at it is that on day one of investing in my SIPP it is like the ftse has gone up 67% (that is the 40% tax relief being applied, ok the higher rate 20% is only recovered later when I file my tax return, but I know that it is coming).

If I was you I would still aim for the btl (I've also got a few) but also invest in something in a SIPP.

You are rightly thinking about your future, so well done, there will be many that will not. Sorry I just noticed that you are self employed, are you entitled to 40% relief if you earn enough (I assume so, but don't actually know).

atush

You want a pension as well as S&S isas and property.

AS Jem said, pensions are just a tax wrapper and you can put your fav low cost funds into one. the difference is, each 100 into your ISA costs you 100. Each 100 into your pension will cost you between 60-80 dep on your rate of tax.

Isas are great, but won't use up your PA in retirement, Pensions will.

sandsy

A couple of questions:
a) what tax rate do you pay? Pensions are particularly advantageous compared to ISAs for higher rate taxpayers.
b) How disciplined are you? Can you trust yourself not to touch an ISA before retirement?

bertpalmer

Hi guys - thanks for your answers.

I'm below high rate, I'm a director and take quite a chunk of my income from dividends - but all in all I think I pay around 30% tax.

Yes, I'm very disciplined! Because I'm currently self employed I'm very aware of old age, and not being able to work so having something to fall on is a priority.

atush

Are you set up as a Limited company? Can be very advantageous to set up your PP thru your company