31, no pension and concerned

jamesd

adonis10 wrote: »

So, say I have £600 spare at the end of the month, £200 to a s&s isa, or as much as poss? Thing is, I have a Lloyds regular saver that I'm putting £400/month into at 4% so want to maximise that first.

Why do you want to maximise the use of the option that has the lower typical investment return?

adonis10 wrote: »

Next payment due in a few days so will keep the virgin one going and then do some research as to which to change to. Is the main difference the annual management charge?

No. Unless is exactly the same investment just available in versions with different charges. If you picked two UK stock market tracker funds each would in addition to price differences have differences in how closely they track the index, how often they allow trading and on trading days what time(s) of the day are involved. A lower charge fund that consistently tracks badly could be a worse choice than one that is a bit more expensive but tracks well.

If you were to pick managed funds rather than passive tracker funds you'd also have to consider possible performance differences between funds that can be much greater than the differences in tracking error of a passive fund.

adonis10 wrote: »

Should I be more up to speed with the unit price on a daily basis and make deposits sporadically, depending on price fluctuations, or, with something this small, stick with a monthly payment? Or both?

Stick to monthly buying but it's useful education for you for a while to track movements daily and see what the percentage differences are. You can do that in a spreadsheet. Longer term you might want to do it just monthly. Personally, I use daily tracking for my investments and have near-complete daily price histories for them.

The risk of even monthly looking at prices is that it might cause you to sell just because prices have dropped. The educational value of seeing that happening regularly and learning that it is normal are more significant, in my opinion.

atush

adonis10 wrote: »

So, say I have £600 spare at the end of the month, £200 to a s&s isa, or as much as poss? Thing is, I have a Lloyds regular saver that I'm putting £400/month into at 4% so want to maximise that first.

Next payment due in a few days so will keep the virgin one going and then do some research as to which to change to. Is the main difference the annual management charge? Should I be more up to speed with the unit price on a daily basis and make deposits sporadically, depending on price fluctuations, or, with something this small, stick with a monthly payment? Or both?

If you have 600 spare, 400 into pension, 200 into S&S isa. If you can't fund the reg saver as well, keep that going til it ends (when does it end and are there penalties if you stop?) and then move to S&S isas.

but stop finding reasons to not do a spending diary and cut back your frittering (this could fund your reg saver) and stop trying to find reasons to not start the pension?

Do not try to time investments, just whack it in each month.

as to S&S isas, on the savings board there will be threads about it, but there are 2 charges- the platform charge, and the fund charge. You want to find the lowest platform for the funds/amt you want to invest

adonis10

jamesd wrote: »

Why do you want to maximise the use of the option that has the lower typical investment return?
n.

Because I don't want to chuck all my eggs in one basket. When the financial markets tank again I don't want to be penniless. A 5k back up in a high (relatively) interest bank account gives some backup and moving forward I can put much more into funds that may yield higher returns.

The rest of your post is very informative, thanks. Will certainly do a lot of reading up on the subject:

edinburgher

Because I don't want to chuck all my eggs in one basket. When the financial markets tank again I don't want to be penniless

Money in your pension and ISA is going to be invested for a long time. As long as you choose well diversified funds that match your timelines and don't invest above your risk tolerance, you won't be penniless. The value of these accounts will go up again, then down, then up etc. It's no reason to avoid them, just be aware that it will happen. As you get closer to retirement, you'll be able to invest more in investments that aren't correlated to equities/shares, that will hopefully reduce volatility and potential falls.

Best of luck from a fellow 31 year old, I think you'll be fine. My wife earns about the same as you and if she was mortgage free, building up a pension would be pretty easy for her based on today's household budget

Do start tracking your spending as well, you should comfortably be able to afford far more than you currently think.

atush

adonis10 wrote: »

Because I don't want to chuck all my eggs in one basket. When the financial markets tank again I don't want to be penniless. A 5k back up in a high (relatively) interest bank account gives some backup and moving forward I can put much more into funds that may yield higher returns.

The rest of your post is very informative, thanks. Will certainly do a lot of reading up on the subject:

I think we all said you need an emergency savings pot. But it needs to be in excess of your 0% IF debt and you haven't given actual figures for either so TBF we are flying blind?

And markets tanking while you are starting or in the middle are not that important as you expect these things to happen. As long as you dont sell (and make sure of a loss) and keep money going in (buying shares/funds at a 'sale' price) then you will be fine in the end.

HardCoreProgrammer

I hope this reply does not come too late for you.

Currently you are on standard rate tax, so there is no material benefit paying into a pension without employer contribution. Although you can get standard rate tax relief, you will more than likely have to pay income tax (which is likely to be higher than 20%) when you come to withdraw money from it in the future.

If you want to make savings or investments, do it in an ISA. If your income is 24k before tax, the 15k annual ISA allowance will be more than adequate.

Now, please take time to find out about the pension schemes offered by your employer.
If it is defined contribution, find out how much they contribute. If it is as good as matching contributions (e.g. you put in £1, they put in £1) and you have money to spare, then consider investing in it.
If you are university staff, you may be eligible for the Universities Superannuation Scheme (USS). This is a defined benefits scheme (e.g. based on final salary), and definitely worth considering joining.

Remember, you cannot withdraw from your pension until at least 57 (and this is only going to increase due to government policy changes, etc.), so please only start making pension contributions when you have built up a safety net. Most people say 3 months, but I would go for more if you are in a specialised profession (where jobs are not abundant) or if you have a mortgage.

Thrugelmir

adonis10 wrote: »

Kinda accepted that given my original post, so not too sure what positive input your reply has had.

If you ask questions like this. Then you will receive such responses.

Is it even worth it?

No one else is going to provide for your latter years other than you.

atush

Currently you are on standard rate tax, so there is no material benefit paying into a pension without employer contribution. Although you can get standard rate tax relief, you will more than likely have to pay income tax (which is likely to be higher than 20%) when you come to withdraw money from it in the future.

I completely disagree with this. You are not taking into acct the 25% TFLS, nor are you taking into acct many retire early so access a pension pot before SPA therefore can use some/all of their PA to take more money out of the pot tax free.

HardCoreProgrammer

atush, regarding the 25% tax free lump sum, I would be wary of counting your chickens before they hatch. There have been speculation every year in the past few years that it may be scrapped. After all, policy can be changed by whoever is in power (either incumbent government, or Troika in the case of Greece).

You will look very silly if you advise people to invest in a pension on the basis that they can get some money tax free on the way out, and then policy gets changed.

To the OP, I would stick to the stock & share ISA if no employer contribution is forthcoming. That way, at least you have control over your money and can do something about it if government policy changes.

patanne

Even if they do remove the TFLS it is still a good deal. If you get in debt, which can happen to anyone if their circumstances change, they can't touch your pension but can any bank account/savings you may have.

Any Gov can raid your bank accounts for say 10%. Unless all parties agree then they are unlikely to get re-elected for some time and that seems to be their sole interest.

If they remove the TFLS then they will lose not only the grey vote but the nearly grey vote too - who do you think is most likely to vote. Certainly not the under 25s who seem to get knobbled by everything.

Politicians = self interest first, cynical, well yes I am and make no apologies for it.