At a total loss!

Sscuba

I just don't understand pensions as I've never been exposed to them. I work for a small company so they do not run the government scheme.

I'm 28 and need to start paying into one...any advise who I need to be talking to?

Some people have said just open a savings account, I can be strict and not touch it but is that the right route to go down?

Any replies appreciated :beer:

[Deleted User]

Pensions provide value far beyond the restricted access; employer contributions, tax relief, not part of means tests. How small is your employer? I believe that as of 2017 almost every employer will be required to provide employees with pensions.

How much money do you earn and how much can you afford to save per month towards your retirement? Your tax status will have an impact on whether or not a personal pension may be the best choice for you over something like an ISA. More information is needed to help

Drp8713

Not really, a savings account will not keep up with inflation, so over the next 30 odd years you will be losing money in really terms.

With a pension, you get tax relief on your contributions, so even if you are a basic rate tax payer every £100 you pay in will become £125. The easy option is to invest in funds, that will go up and down in the short term but will grow nicely over the 30 year timeframe you are looking at.

Where to go depends on how much you are investing. If you are starting from £0 and paying a few hundred a month then I think a SIPP is cheaper than a personal pension up to around £20-50k.

If you look at the table on here http://langcatfinancial.co.uk/blog/

You will see you can get a SIPP for a management charge of less than £25 a year with 4 providers, and that's with a fund of £5k which yours will be less than for a year or so.

Then it's just a matter of choosing to invest, have a look there for a starting point http://monevator.com/vanguard-lifestrategy/

atush

It is good to have a savings account, but not for retirement. Over a period of time (ie years) cash performs poorly. Esp in today's environment.

Ask your employer when they plan to institute a pension scheme (they will have to in the next few years). Int he mean time, you can open your own personal pension. Every 80 you put in will be grossed up to 100 by tax relief. Put in as much as you can afford, bearing im mind other short term needs such as emergency cash pot, debts etc. At 28, incl tax relief, you should look to start putting in 14% of your salary if you can.

dunstonh

Some people have said just open a savings account, I can be strict and not touch it but is that the right route to go down?

That is quite a high risk option for a 28 year old. Whilst it would not suffer investment risk, it would suffer shortfall risk and inflation risk. You would have to contribute around 3-4 times more than you would in an investment backed contract (S&S ISA or pension).

Investments have investment risk but they have reduced shortfall risk and reduced inflation risk. Risk is diluted over time and you have 40 odd years ahead of you.

Triumph13

Sscuba wrote: »

I'm 28 and need to start paying into one...

To be more precise, you're 28 and need to start investing in equities / funds for your retirement. With no employer contributions available, whether that should be in a pension or not at this point in time is pretty much down to your tax situation. If you are a higher rate tax payer then worth it. If you are a basic rate payer now, but expect to be 40% in the future then definitely not (park it in a S&S ISA and contribute it later with HRT relief). If you don't ever expect to be a HRT payer then the choice is marginal

grey_gym_sock

Drp8713 wrote: »

If you are starting from £0 and paying a few hundred a month then I think a SIPP is cheaper than a personal pension up to around £20-50k.

If you look at the table on here http://langcatfinancial.co.uk/blog/

You will see you can get a SIPP for a management charge of less than £25 a year with 4 providers, and that's with a fund of £5k which yours will be less than for a year or so.

those SIPP charges are for the platform alone. once you add on fund charges, it will probably be more expensive than a stakeholder (which has a single charge, for funds + pension wrapper).

generally, a stakeholder is cheapest for the smallest pensions, or a personal pension for a slightly bigger 1. e.g. via cavendish online (a broker who are decent value for either stakeholder or PP), i think the cut-off point was a pot of £15k.

atush

If you are a basic rate payer now, but expect to be 40% in the future then definitely not (park it in a S&S ISA and contribute it later with HRT relief). If you don't ever expect to be a HRT payer then the choice is marginal

While this MIGHT be true, it isn't definite. Pensions do have advantages over ISAs as they capital cannot be spent on a whim, nor can it be taken in court judgments, nor is it taken into acct if means tested benefits are needed.

Also the earliest pension contributions have the longest to compound investment returns so are more valuable per pound than ones made 10-20 years down the road.

the best thing would be to have a pension (even if a BRT payer) and S&Sisas.

xylophone

Some people have said just open a savings account, I can be strict and not touch it but is that the right route to go down?

This is not the way to save for your retirement in forty years' time.
The inflation risk would be very high and apart from that, if you were to fall on hard times and need means tested benefits, while you might regard the money as "ring fenced" for your pension, the DWP would not.

I work for a small company so they do not run the government scheme.

Check when your employer is obliged to offer a pension.
https://www.gov.uk/auto-enrolled-into-workplace-pension

If not within the year, you might consider the offerings here
http://www.cavendishonline.co.uk/pensions/

It might be possible to transfer a PP into your employer's scheme in due course.

See here for information on the single tier state pension https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

You also need some cash savings of course - aim for up to six months' salary - do you use your cash isa allowance?

Do you have the most advantageous current account (s)?

http://www.moneysavingexpert.com/banking/compare-best-bank-accounts

Triumph13

atush wrote: »

Also the earliest pension contributions have the longest to compound investment returns so are more valuable per pound than ones made 10-20 years down the road.

If you're in the same funds with the same expenses then apart from some charges around opening and closing the ISA, stciking your contributions in a S&S ISA the moving it later to the pension gives the same result as having it in the pension for the whole time if the tax rates are constant. If your tax rate has increased then you're quids in.
As an example using £1000 of pre tax income as a basic tax payer:
Initial ISA investment £800. Add say 50% investment growth = £1200. Contribute this to pension with basic rate % tax relief you end up with £1500 in the pension - the same as if you put the £1000 in to begin with and got the same 50% growth.
If you are an HRT payer at the time you contribute then by using the S&S ISA as a holding account you end up with £2000 in the pension pot instead of £1500.

I do agree though about needing to consider possible impacts on means tested benefits, etc if you fall on hard times before getting to move it to the pension.

atush

There are other factors too like if un-crystalised the pension can be inherited outside an estate. Isas would be within.

Also Personal allowance- if all your savings are in ISAs, you don't use your PA to the fullest so it is best to have pension income if only to use it fully.