Looking To Start A Private Pension...

dunstonh

jdw88rm wrote: »

Ok, reading into this... I didn't realise that not only do you have to pay to set a pension up but you also have to pay an annual fee for the management of the plan!? What management is needed exactly? lol
AND THEN the amount of cash put away over the life of the plan isn't always guaranteed to be as much as put in!!!!
I'm thinking of just having lots of ISAs instead

Do you think the ISA is free of charge? it actually has higher implicit charges than most pensions charge explicitly.

The ISA does not have investment risk but you increase your risk with inflation risk and shortfall risk. This will almost certainly result in either a lower value in retirement than the pension or you will have to pay around 3 times more than you would with the pension.

Management costs are required for the ongoing management of your investments (buying, selling, research, due diligence, rebalancing etc) and the administration and regulatory costs.

Using cash ISAs for retirement planning is a bad idea unless you are in the final few years towards your retirement age.

robatwork

What's your age and how much do you plan to pay in monthly?

Approx figures are OK.

(As a general rule if your employer offers a pension whether a govt. organisation or company, take it before starting a private one).

kidmugsy

jdw88rm wrote: »

Ok, reading into this... I didn't realise that not only do you have to pay to set a pension up but you also have to pay an annual fee for the management of the plan!?

Do you expect people to work for you without pay? Do you work without pay?

atush

ISas are fine, but they don't get tax relief like a pension.

So invest 80 in an isa, and it is 80 (less the costs as s&S isas have costs just like pensions). Put 80 into a pension and it becomes 100 immediately thru tax relief. So does that extra 20 make you feel better about paying a small cost?

jdw88rm

I'm 25 and can put away £100pm (at the moment).
I read that by the time you start wanting to take your pension it may be worth less than the amount you've put away over the x number of years??

zagfles

jdw88rm wrote: »

I'm 25 and can put away £100pm (at the moment).
I read that by the time you start wanting to take your pension it may be worth less than the amount you've put away over the x number of years??

Yes. That's true for any investment. You can hold the pension as cash if you want, then the amount of cash should be guaranteed to be more than you put in, but the value of the cash could be less due to inflation.

Most pensions are long term investments and so will invest in stuff like equities, and obviously equities can go down as well as up, but in general over the long term they go up. But that might not happen in the future. It's a risk. Generally it's a risk most people would consider worth taking for a long term investment.

There were some rip-off pension products sold a few decades ago where despite the reasonably good growth in the stockmarket, they produced rubbish returns because of rip-off charges (some took the first couple of years' premiums in charges :eek:).

These days providers are a lot more open with the charges, and there are a lot of good value ones. Have a look at Cavendish as suggested above for instance http://www.cavendishonline.co.uk/pensions/personal-pensions/

dunstonh

I read that by the time you start wanting to take your pension it may be worth less than the amount you've put away over the x number of years??

Have you a link to that please so we can deconstruct it.

Investments will have periods of gains and losses. However, these tend to be short term issues. Not long term. Effectively they zig zag in value but over time you would expect them to give growth that is greater than cash.

So, if you pay in for one year, your value in 12 months could be lower or higher. Same in 2, 3, 4 or even 5 years. However, the further you go on, the less likely it becomes until it ends up being statistically unlikely. However, technically it could still happen.

If you look at the last 10 years, which includes on the biggest financial crisis since the 30s and what is generally a one in a generation size market crash, most conventional mainstream investments have still beaten cash savings. Yet if you were to pick years in isolation you could have big losses and big gains. Neither of which are good indications towards a long term average figure. Drops in the early decades are actually good news for you. Not bad.

atush

jdw88rm wrote: »

I'm 25 and can put away £100pm (at the moment).
I read that by the time you start wanting to take your pension it may be worth less than the amount you've put away over the x number of years??

I too would like to knwo where you read this rubbish.

If you invest in year one, you could see losses in years 1-5. Statistically unlikely to see any losses by year 10. won't see losses in years 20-50.

I think you are not looking at the math, of tax relief and compounded investment returns.

jdw88rm

All investments should be held for the long term. They can go down in value as well as up, so you could get back less than you
invested. Any yield is variable and not guaranteed.

The above quote was taken from a Hargreaves Lansdown's website on the 'SIPP - Apply Now' page.

xylophone

All investments should be held for the long term. They can go down in value as well as up, so you could get back less than you
invested. Any yield is variable and not guaranteed.

Which is exactly what was said above?

And if you plan to invest in ISAs other than cash you will pay some sort of fund/platform fee. And the interest rate you receive on cash reflects market conditions/ expenses of the financial institution concerned.

Stay wholly in cash and you stand a very good chance of losing out to inflation.

"Yer pays yer money and yer takes yer choice...." as they say?