Completely new to pensions

dhr90

Hi all. I've decided its time to set up a pension, but my current employer isn't legally obliged to provide one until 2017 (there is just 4 employees including the owner), so until then its up to me to sort one out and I have no idea what to do or look for. I've read Martins guide, and I'm wondering whether seeing an independent financial advisor would be a good idea or not.

My current situation is that I work full time, up to the end of november 2014 I also worked part time in Sainsburys and they provided a pension automatically through Legal and General, I have maybe 10 days left before my contributions get refunded. The total fund there is about £200-250 (it was set up so only 1% over £450/month earnings contributed and I only earned £700/month there), cash refunded to me is only £50 or so. Legal and General wrote to me stating I have to choose to take the cash, or transfer the pension elsewhere, I don't know if they could keep it open and I simply pay into it myself?

Living at home with my parents I'm very fortunate that almost all my earnings are mine, I pay a small amount of rent and have a small phone bill. I'm saving up for a rainy day/replacement car etc, but also for a deposit on a house/flat. My aim is to put £700/month aside into an ISA for that (although the 1.6% interest rate barely makes that worth while), leaving me with £300-£600/month to put into general savings or a pension depending on working days in the month and overtime.
I was thinking £150-£200/month which is about right given my age (I'm 25, Martin's guide advises half your age, so 12.5% contributions between me and an employer, I can cover all of that given my living arrangements however).

So really I guess I'm looking for advice on how to set one up? What is involved? Whether I pay it myself or through my employer and his accountant/HMRC? Should I go to an IFA? I'm not sure I have the effort or knowledge to manage a fund myself which sounds like it plays the stock market? I'd like low/zero risk really.

Any and all advice is appreciated!

xylophone

A stakeholder might suit for the time being http://www.cavendishonline.co.uk/pensions/stakeholder-and-personal-pensions/aviva/

Mojisola

dhr90 wrote: »

My aim is to put £700/month aside into an ISA for that (although the 1.6% interest rate barely makes that worth while), leaving me with £300-£600/month to put into general savings or a pension depending on working days in the month and overtime.

Why put it in a low interest ISA when you could make more from it in a current account?

kidmugsy

Is there time to open a stakeholder now, and transfer the Sainsbury's £200 into it? That would be much better than taking £50 in cash.

As for your other pension proposal, I recommend against. Wait and see whether the current 20% tax relief goes up to 30%: that would be the time to contribute. Meantime, with your surplus cash, wait until the new tax year (06/04/2015) and open some regular saver accounts that will pay interest on maturity in tax year 2016-17, when you will get up to £1k p.a. of interest tax-free. Also exploit the current wonderful, but presumably unsustainable, interest on current accounts at TSB, Nationwide, Lloyds, Santander, etc. See lots of threads on this in the savings and investments forum, and the current accounts forum.

dhr90

Mojisola wrote: »

Why put it in a low interest ISA when you could make more from it in a current account?

My current account doesn't seem to have any kind of interest rate and I haven't really been bothered enough to shift it and all the related hassles, but I'm working out the gains I may make which is quite tempting. Plus with £23k in the ISA already, I don't want to take it out to earn more interest elsewhere to then put it back in at a later date when rates rise, but not get to put it all back in.

xylophone wrote: »

A stakeholder might suit for the time being

Any reason I can't go directly to Aviva for that?

kidmugsy wrote: »

Is there time to open a stakeholder now, and transfer the Sainsbury's £200 into it? That would be much better than taking £50 in cash.

As for your other pension proposal, I recommend against. Wait and see whether the current 20% tax relief goes up to 30%: that would be the time to contribute. Meantime, with your surplus cash, wait until the new tax year (06/04/2015) and open some regular saver accounts that will pay interest on maturity in tax year 2016-17, when you will get up to £1k p.a. of interest tax-free. Also exploit the current wonderful, but presumably unsustainable, interest on current accounts at TSB, Nationwide, Lloyds, Santander, etc. See lots of threads on this in the savings and investments forum, and the current accounts forum.

No. I rang them up and Sainsbury's have already actioned the closure of it. I guess the letter meant 3 months from the end of my employment than the date on the letter. Very ambiguously written but never mind. The actual values were £42 cash or £120-£140 transfer, so whilst annoying, its not the end of the world.

When do we find out about that tax relief change?

The proposed Help To Buy ISA looks very interesting to me, but depending on the finer details I may at a later date go with something elsewhere depending on what I stand to gain (maximum transfer in hits me hard already). The only thing I haven't seen mentioned, is the government top up in those values basically a gift, or is it added to the mortgage to be repaid at a later date?

Thanks all!

kidmugsy

dhr90 wrote: »

When do we find out about that tax relief change?

When a future Chancellor of the Exchequer announces it. It'll be in all the papers. It might even be in some election manifestos.

Then again, it might never happen.

atush

dhr90 wrote: »

My current account doesn't seem to have any kind of interest rate and I haven't really been bothered enough to shift it and all the related hassles, but I'm working out the gains I may make which is quite tempting. Plus with £23k in the ISA already, I don't want to take it out to earn more interest elsewhere to then put it back in at a later date when rates rise, but not get to put it all back in.



Any reason I can't go directly to Aviva for that?



No. I rang them up and Sainsbury's have already actioned the closure of it. I guess the letter meant 3 months from the end of my employment than the date on the letter. Very ambiguously written but never mind. The actual values were £42 cash or £120-£140 transfer, so whilst annoying, its not the end of the world.


Thanks all!

The ambiguous nature and the delay in them replying as lost you money.

It is worth writing to them and starting a complaint process. As you dont get what you dont ask for and it will cost you nothing but a little time and a few stamps.