Pension Advice Please

flashsnaps

Hi,


I currently work for a small business with around 12 members of staff. The company are not registered for work place pensions and probably wont have plans to until it becomes mandatory in 2018 I believe?


I am currently 27 and need to start paying into a pension pot. I began reading through the MSE 15 Pension Need to Know and will continue to as there is a lot to take in.


(1) I am just wondering if I need to go down the private pension route with companies like Aviva or Virgin, can someone advise please?


(2) Another general question, I used the pension calculator, say my gross income is 30k, I pay 4% which is £100/monthly, retire at 65 and have no employee contributions. Estimated value is £52,500 and I am only looking at estimated income of £2080 per year, this right?


(3) Will I get this £2080 every year till I die or will I stop receiving once the money in the pot runs out? this might seem like a silly question but I am not sure.


Thanks for your time.

Your_Hero

flashsnaps wrote: »

Hi,

I currently work for a small business with around 12 members of staff. The company are not registered for work place pensions and probably wont have plans to until it becomes mandatory in 2018 I believe?

Not necessarily as it depends on your company's PAYE ref number. Majority of firms are before 2018. Ask them to check their staging date with this on the government website.

(1) I am just wondering if I need to go down the private pension route with companies like Aviva or Virgin, can someone advise please?

There are many pension providers and no one can advise you of anything on these forums because it depends on your personal requirements and circumstances. If they recommend something that's wrong for you, no one is liable for the wrong advice. So you either DIY through your own research and due diligence, or you pay for advice through an IFA.

(2) Another general question, I used the pension calculator, say my gross income is 30k, I pay 4% which is £100/monthly, retire at 65 and have no employee contributions. Estimated value is £52,500 and I am only looking at estimated income of £2080 per year, this right?

Probably correct. But you haven't included pay increases on your £30k which the 4% contribution relies on.

(3) Will I get this £2080 every year till I die or will I stop receiving once the money in the pot runs out? this might seem like a silly question but I am not sure.

That's correct if you are buying an annuity when you retire and depends on the options you select. Don't focus too much on this part of the equation, just focus on putting away as much as you can afford. You will need to be paying in a lot more than 4%.

dunstonh

(1) I am just wondering if I need to go down the private pension route with companies like Aviva or Virgin, can someone advise please?

If your research is leading you to Virgin then see an IFA. Virgin is just about one of the worst pensions out there.

2) Another general question, I used the pension calculator, say my gross income is 30k, I pay 4% which is £100/monthly, retire at 65 and have no employee contributions. Estimated value is £52,500 and I am only looking at estimated income of £2080 per year, this right?

That looks like a real terms calculation. i.e. spending power today rather than the actual values. You have to remember that your contribution period is not going to that dissimilar to the drawdown period (in retirement). If you pay in £100pm you are getting back £173pm (in todays terms). Investments are not going to provide a miracle cure for starting late or making small contributions (£100 is small).

xylophone

https://www.gov.uk/workplace-pensions

https://www.moneyadviceservice.org.uk/en/articles/your-first-pension-the-options

http://www.thisismoney.co.uk/money/pensions/article-2391205/When-start-saving-pension.html

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/301563/Pensions_fact_sheet_v8.pdf

http://www.thepensionsregulator.gov.uk/docs/statement-dc-budget-2014.pdf

http://www.cavendishonline.co.uk/pensions/

https://www.gov.uk/new-state-pension/overview

Some reading.

kidmugsy

flashsnaps wrote: »

Hi,


I currently work for a small business with around 12 members of staff. The company are not registered for work place pensions and probably wont have plans to until it becomes mandatory in 2018 I believe?


I am currently 27 and need to start paying into a pension pot.

Why do you need to? You may well need to save, but why into a pension? It may be in your best interest to wait until either (i) your employer opens a workplace pension, or (ii) you become a higher rate taxpayer. Why, at 27, would you want such an inflexible asset as a pension? Consider waiting until you are given an incentive, i.e. (i) or (ii). Meantime, save in some other way, chosen to suit your likely purposes.

atush

If you are not savbing for anything specific, like a home, and you already have an emergency savings pot of 3-6 months spending, then go ahead and start a pension. But not at Virgin as said. Have a look at cavendish online.

100 a month is a start, but only if you aren't saving for something else like a home. Otherwise I would suggest saving 13-14% of salary, split between a pension and a S&S isa which can be used before the age of 55.

reeves100

Hi,
Your company may not need to provide a work pension until early 2018; you should ask your employer to confirm when their staging date will be.

In answer to your questions:

1) Yes. In the short term you can set up your own personal pension and pay into it. The market for personal pensions is very competitive and it would be worth shopping around or seeking independent advice.

2) A pension is an investment vehicle. When you retire you use have the option to buy an annuity or to drawdown the fund. Again this is an area where you would benefit from Independent advice although this could be in around 30 to 40 years’ time.

The income of £2,080 I suspect is the income that you would get from an standard annuity. This is only one of many options available to everyone at the time they choose to draw benefits.

This income is relative to the fund which in your example is around £52,500. This fund will be influenced by:

a) The level of contributions that you make.
b) The level of investment growth and the amount of risk taken/investment strategy.
c) Plan charges.

3) In your example I suspect that this is a standard level annuity. This is only one of the ways you could draw income and probably is representative of a level annuity. You could drawdown higher amounts under current rules and even draw out the whole sum as a lump sum.


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